Written by: Xiao Za Legal Team

In recent years, with the development of blockchain technology and the continuous improvement of regulatory frameworks, the tokenization of RWA (Real World Assets) has gradually become the focus of attention in the financial market, with varying degrees of responses and attempts made in places like Hong Kong, the United States, and Singapore. At the same time, traditional IPOs (Initial Public Offerings) remain an important means of financing for enterprises. So, what are the similarities and differences between RWA and IPO? What are their respective advantages? How should enterprises choose? The Sa Jie team will discuss the relationship between the two today, aiming to provide reference for enterprises with different needs when selecting financing paths.

01 A Brief Discussion on What RWA and IPO Are

RWA, or the tokenization of Real World Assets, refers to the process of converting traditional financial assets such as debts, real estate, accounts receivable, fund shares, and bills into digital assets that can circulate on the blockchain using blockchain technology. This process not only enhances the liquidity of assets but also reduces transaction costs and increases transparency. For example, a fund company can package the income rights of its real estate projects and issue them as virtual currency on the blockchain, allowing global investors to participate in transactions with a lower threshold.

IPO, or Initial Public Offering, is the act of a company issuing stocks to public investors for the first time and listing on a stock exchange. It is the most formal, long-standing, and maturely regulated method of financing in the capital market, requiring the participation of accounting firms, law firms, and brokerage firms as intermediaries. It must undergo strict financial audits, legal compliance reviews, and the preparation of prospectus documents, marking the company's entry into the public market.

02 A Table to Clarify: Main Differences Between RWA and IPO

03 Advantages and Characteristics of IPO and RWA

RWA and IPO share certain similarities, but due to their different financing logics, they each have their own advantages.

As an emerging financing method leveraging blockchain technology, RWA has the following advantages: (1) Low threshold and high efficiency: RWA can split investment amounts as needed, allowing participation with hundreds or even tens of yuan, suitable for a broader range of investors. (2) Enhanced liquidity: Assets that are traditionally hard to circulate, such as accounts receivable or real estate income rights, can be traded globally on the blockchain. (3) High issuance efficiency: It does not rely on traditional brokerage processes, eliminating long waiting periods, and can be issued quickly once the technology is established. (4) On-chain transparency: All transaction records are traceable on the blockchain, enhancing trust mechanisms.

As a traditional financing method for companies entering the capital market, IPO has the following advantages: (1) High financing amounts: Once successfully listed, companies can typically achieve financing amounts in the hundreds of millions or even billions. (2) Enhanced brand reputation: Going public signifies passing strict regulatory reviews, greatly benefiting the company's brand image. (3) Greater capital operation space: Through subsequent issuance, mergers and acquisitions, equity incentives, and other tools, companies can leverage the capital market to enhance their growth. (4) Well-established investor protection mechanisms: A relatively regulated environment, mature systems, and legal protections safeguard investor rights. (5) A broad base of investors: Covering various types of investors, including institutions and retail investors, ensuring ample market liquidity.

04 Differences in Regulatory Preferences Between IPO and RWA — Taking Hong Kong as an Example

As an international financial center where East meets West, Hong Kong has always sought a balance between traditional finance and emerging finance. In terms of regulation for RWA and IPO financing methods, Hong Kong exhibits a clear "differentiated regulatory approach": emphasizing rigorous compliance, information disclosure, and investor protection for IPOs; while adopting a relatively open, innovation-encouraging, but gradually regulated attitude towards RWA.

Hong Kong's IPO system has long adhered to a strict framework under the Securities and Futures Ordinance, with the listing process jointly regulated by the Hong Kong Stock Exchange and the Securities and Futures Commission (SFC), covering various aspects such as sponsorship, due diligence, audit review, information disclosure, and public shareholding ratios, ensuring that listed companies have stable financial performance, sustainable operational capabilities, and good governance structures. This strong regulation not only protects investor rights but also enhances the credibility of the Hong Kong market.

In contrast, Hong Kong's regulation of RWA demonstrates an "inclusive and prudent" experimental mindset. The SFC has frequently issued regulatory circulars regarding tokenized assets in recent years, gradually establishing a regulatory sandbox, a licensing system for virtual asset service providers, and including RWA-type tokens in the category of qualified investment products for regulatory experimentation. For example, the circular issued in 2023 regarding tokenized SFC-recognized investment products explicitly states that product providers must be responsible for the management and operational reliability of tokenized arrangements, ensure compatibility with service providers, and disclose the reliability of related arrangements as required by the SFC, obtaining third-party review verification and legal opinions when necessary, indicating Hong Kong's effort to balance financial advancement with investor protection.

05 A Table to Clarify: Suitable Client Groups for IPO and RWA

06 In Conclusion: IPO and RWA — Complementary Rather Than Substitutes

We should recognize that RWA is not a substitute for IPO but rather a complement and reshaping of the traditional financing system. It provides unprecedented financing channels for small and medium-sized enterprises and asset holders, enhancing financial inclusivity; while IPO remains a key path for companies to mature and embrace the public market and global capital. For enterprises, it is essential to choose or combine RWA and IPO based on their development stage, financing needs, asset structure, and strategic layout. In the future, with the maturation of regulatory mechanisms, the lowering of technological thresholds, and the increase in market acceptance, RWA and IPO are expected to jointly build a more diverse, transparent, and efficient financing ecosystem.

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