Core analysis of the RWA ecological capital framework, how to design real RWA Liquidity?

Authored by: Ye Kai

The topic of RWA liquidity was supposed to be discussed earlier, but because the Spring Festival came earlier this year, and the Consensus Conference in Hong Kong is coming soon after the holiday, it was delayed. Many RWA institutions and project parties have visited in the past two weeks, especially many RWA projects, most of which do not conform to the compliant RWA model in Hong Kong. The majority are offshore token models based on the concept of RWA assets, some of which are not even considering professional RWA design, but are issuing tokens and boosting market value. Some projects are borrowing from the Ondo model, using secondary tokens on top of RWA underlying assets, hoping that the secondary tokens will continue to rise based on the returns of the underlying assets. However, in reality, Ondo was an early high-control project, and the secondary token model cannot achieve the so-called one-day candlestick.

Why is RWA liquidity key?

In the wave of global asset tokenization, RWA (Real World Assets) bridges the gap between traditional finance and the cryptocurrency market. However, true RWA liquidity is not just about assets being tokenized and funds coming in. It involves dynamic matching between the fund side and the asset side, efficient turnover of capital, as well as arbitrage design across borders and domains.

The core issue is: how to find a balance between the long-term nature of traditional assets and the high turnover demand of the digital currency market?

Pain points for enterprises: Why is liquidity difficult to achieve?

1. The capital cycle of traditional assets is long

Medium and long-term assets (such as bonds, real estate) lock up capital, making it difficult to turn over quickly and weakening the liquidity of funds.

2. The high volatility and high profitability of the cryptocurrency market

Old Man wants to participate in the cryptocurrency market arbitrage, but is constrained by the compliance and investment rules of traditional capital.

3. Capital Cross-Border Barriers

Old Money cannot directly enter the digital currency market, it needs a bridge to ensure high efficiency and compliance of liquidity.

What is the real RWA liquidity?

From traditional assets to tokenized stablecoins

Mode: Hong Kong RWA is currently only issuing bonds. The key is to ‘accept, transform, and release’ based on the RWA bonds. ‘Accept’ refers to accepting debt collateral, ‘transform’ refers to transforming Layer 2 protocol tokens, and ‘release’ refers to releasing liquidity.

RWA liquidity aims to tokenize medium- to long-term traditional assets or financial products into short-term cash flow crypto tools (such as stablecoins or tokens), supporting rapid turnover. By achieving rapid turnover, it obtains income such as arbitrage or rolling fees, thus stabilizing the income of traditional medium- to long-term products.

Example: By tokenizing traditional assets such as U.S. bonds, pledging to generate Ondo-like protocol tokens or stablecoins, conducting high-turnover arbitrage in the cryptocurrency market, providing stable income funding coverage for medium- to long-term asset returns.

Cross-domain arbitrage and capital bridge

Mode: Funds enter the cryptocurrency field from traditional capital markets, obtain digital currency liquidity through staking pledge, and participate in high-yield operations such as lending and market making.

Mismatch of short-term and long-term funds, cross-chain operations, cross-border arbitrage, form a complete capital flow path, from fiat currency to synthetic asset protocol tokens, stablecoins, to efficient turnover of liquidity pools.

Example: Cheap money in traditional funds is converted into U (usdt/usdc), earning high returns in the field of digital currency (usdt returns fluctuate around 10-20%), which is very similar to traditional internal and external loans, long and short mismatches, and cross-domain arbitrage.

Example: Traditional funds or family office funds that want to invest in trading digital currencies, but cannot directly hold digital currencies, so they allocate traditional financial market products such as US Treasury bonds, and then pledge these financial assets through RWA to provide liquidity for USDT, which can also be placed in USDT asset management or exchange earn to earn interest and lend, with a timely reserve/margin and position dynamic Oracle mechanism.

Efficient liquidity pool design

Mode: The core of the liquidity pool is the dual drive of traditional funds and Crypto funds, with both market value management and traffic attractiveness. Through efficient liquidity pool design, it can provide a high turnover short-term fund pool, support reinvestment, rapid withdrawal, and achieve continuous liquidity through dynamic asset pricing.

Example: Liquidity Yield Token LYT, in the XTP exchange liquidity pool or a common fund pool, design an actively managed open-end fund RWA, tokenizing the liquidity investment yield into yield token LYT.

Example: AI Agent arbitrage, where there is arbitrage, there is liquidity. RWA not only has buyers and sellers, but also liquidity providers, arbitrage investors, and cross-domain arbitrage funds. Through AI Agent arbitrage robots, RWA assets issuance and liquidity arbitrage trading are realized, and automatic compounding investment, etc.

Core reference of RWA ecological capital framework

One of the key factors in the liquidity of RWA is the construction of the RWA ecological capital, to make RWA the best exit channel for industrial capital to “raise, invest, manage, and withdraw” in the world of encrypted assets.

The benchmark of industrial ecological capital is the model of Keppel Land. Keppel has strong industrial brand operation and management capabilities in commercial real estate, while Prologis has the same capabilities in logistics and warehousing. They realize fundraising and management withdrawal through the industrial capital investment bank model, and their phased layout includes: private equity funds + industrial management operation + IPO + REITs, ultimately forming an industrial capital cycle. For example, Keppel has dozens of private equity funds (Funds) corresponding to different stages of asset packages, and releases part of the equity/shares to insurance funds, pension funds, etc.; there are 2 Singapore listed companies: Keppel Corporation and Keppel Investment; there are 6 Singapore REITs publicly listed and traded. Both listed companies and REITs can increase issuance for mergers and acquisitions, as one of the asset package exit channels, or the asset package can be listed separately. Even in asset allocation strategy adjustments, there are very flexible operational methods, such as in 2021, Keppel packaged 6 VivoCity projects in China, released part of the equity to Ping An Insurance to realize a cash inflow of over 30 billion RMB, and then made large-scale acquisitions of new types of digital economic assets such as data centers in first-tier cities.

RWA is the core of industrial capital entering the world of crypto assets, and RWA assets and models at different stages, from RWA underlying assets to RWA funds, RWA trusts, R-share linkage capital markets, etc., will also form an RWA ecological capital framework (as shown in the figure). At present, RWA is still relatively early, and a mature RWA ecological capital with a mature fundraising and management withdrawal will provide ample and diversified liquidity for RWA assets.

(RWA ecological capital framework diagram)

Ecological Capital Framework: The Core Level of RWA Liquidity

Layer One: Asset side

The underlying asset pool includes bonds, real estate, commodities, etc., which are tokenized in the form of RWA assets and put on the chain, providing a controllable and trustworthy asset foundation, supporting dynamic pricing and distributed asset pool management.

Second Layer: Funding Side

Traditional funds: raise funds through primary markets (such as Hong Kong, Singapore), and allocate RWA tokenized assets.

Crypto funds: liquidity from the digital currency market, participating in lending and trading by pledging BTC or stablecoins.

Different funds need to form a fund pool to see if they are incremental funds or incremental users?

Layer Three: Liquidity and Arbitrage

Design logic: focusing on high liquidity short-term products, supporting rolling reinvestment and quick withdrawal, increasing the turnover rate of converted funds.

Cross-border liquidity: from the primary market in Hong Kong or Singapore, to the secondary market in Dubai or the US ATS, and then entering the DeFi liquidity pool, forming a global fund flow closed loop.

Fourth Layer: Industrial Scenarios and Upgrades

Stablecoin for Industry: Backed by RWA assets, issuing stablecoins for industrial payments and industrial financial scenarios, promoting the liquidity of industry stablecoins.

Scenario-driven: Introduce industrial scenarios such as payment, settlement, and financing applications on the industrial chain, achieve deep integration of RWA and industrial upgrading, and realize the industrial upgrading framework. Traditional supply chains and procurement tenders in the industrial chain can be transformed into the subscription and active participation of industrial RWA.

So, let’s summarize the key opportunities for RWA liquidity

1. Fund Bridge: Integration of Traditional and Crypto

By tokenizing RWA, traditional funds can enter the Crypto market, while ensuring the compliance and controllability of funds.

2. High-yield arbitrage: Opportunities across borders and chains

Capture arbitrage opportunities across different regions, markets, and asset classes to optimize capital returns.

3. Dynamic liquidity: the combination of short-term products and long-term stability

Through short-term capital turnover, support the return coverage of medium and long-term assets, and realize the efficient use of funds. Dynamic liquidity comes from turnover rate: short-term products, rolling reinvestment, quick exit.

Key points of RWA liquidity project practice

A successful RWA token project must combine the liquidity of traditional capital markets and the liquidity of the Crypto capital market, relying on the synergy of Fund+ market makers. The liquidity of traditional capital markets relies on market value management and R-share linkage, while the Crypto market can introduce more active funds through memecoin flow. To maximize the project’s revenue, priority and inferiority structures can be designed, clearly define the fund realization channels and exit mechanisms, and through an experienced team, build a secondary market + market maker + community operational model to achieve the perfect combination of liquidity and market depth on leading exchanges.

The pledging and lending model of RWA assets need to ensure the rationality of Staking and margin trading models. BTC is preferred as the collateral for pledging, which not only provides stable annual returns on RWA assets (such as 6-8%), but also allows the pledged collateral tokens to be used for Defi lending, bringing higher turnover returns, possibly reaching 8-10%. Through a reasonable priority and subordination structure, the overall yield may even exceed 18-20%, bringing high returns to investors.

Platform tokens and community incentives need to be closely integrated with the market narrative of vertical tracks and leverage the power of community retail investors to increase activity. By increasing mining incentives, deep liquidity pools, and leveraging the operation of community leaders and meme culture, community participation is guided. At the same time, combined with the operation of the secondary market and trading teams, effectively enhance market liquidity and participation, ensuring continuous project growth.

RWA aims to achieve ‘from primary to secondary, from secondary to protocol’, that is, converting primary private placement subscriptions into secondary market transactions (volume brushing), then converting secondary market transactions into second-layer protocol token transactions, thereby driving the valuation of the protocol platform and token market value, ultimately incentivizing and covering the returns of primary market participants through the premium of platform tokens and protocol tokens.

Summary: From liquidity to ecological closed loop

The true liquidity of RWA lies not only in the efficient turnover of funds, but also in the construction of bridges connecting traditional finance with the Crypto market, as well as the asset side and the fund side. Through asset tokenization, fund pool design, cross-domain arbitrage, and industrial upgrading, RWA liquidity injects new vitality into the global capital market, creating multi-dimensional revenue growth for enterprises and investors. Want to seize this wave? Take action and let RWA help you usher in a new era of efficient capital operation!