Should financing choose IPO or RWA? This is a question worth considering.

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 financial markets, with different degrees of response and attempts made in places like Hong Kong, the United States, and Singapore. At the same time, traditional IPO (Initial Public Offering) remains an important way for companies to raise funds. So, what are the similarities and differences between RWA and IPO? What are their respective advantages? How should companies choose? The Sa Jie team will discuss the relationship between the two today, aiming to provide reference for companies with different needs when choosing financing paths.

01 A Brief Discussion on What RWA and IPO Are

RWA, or the tokenization of real-world assets, refers to the conversion of traditional financial assets such as debt rights, real estate, accounts receivable, fund shares, and notes 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 bundle and issue the income rights of its real estate projects as virtual currency on the blockchain, allowing investors worldwide to participate in transactions with a lower threshold.

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

02 Clearly Explained: The Main Differences Between RWA and IPO

03 Advantages and Characteristics of IPO and RWA

RWA and IPO have similarities to some extent, but due to the different financing logic of the two, they actually have their own advantages and characteristics.

RWA, as an emerging financing method utilizing Blockchain technology, 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) Increased liquidity: Assets that are traditionally hard to circulate, such as accounts receivable or real estate income rights, can be traded globally on the chain. (3) High issuance efficiency: It does not rely on traditional brokerage processes, eliminating long waiting periods; once the technology is mature, issuance can be rapid. (4) On-chain transparency: All transaction records can be traced on the chain, enhancing the trust mechanism.

IPO, as a traditional financing method for companies to enter the capital market, has the following advantages: (1) High financing amount: Once successfully listed, companies can usually achieve financing amounts in the hundreds of millions or even billions. (2) Enhanced brand credibility: Going public means passing strict regulatory reviews, which greatly benefits the company’s brand image. (3) Large capital operation space: Through subsequent issuance, mergers and acquisitions, equity incentives, and other tools, companies can leverage the capital market to enhance their performance. (4) Complete investor protection mechanisms: A relatively regulated environment, mature systems, and legal protections safeguard investor rights. (5) A broad base of investors: Covers various types of investors, including institutions and retail investors, with ample market liquidity.

04 Differences in Regulatory Preferences Between IPO and RWA - A Case Study of Hong Kong

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 as financing methods, Hong Kong demonstrates 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.

The Hong Kong IPO system has long adhered to a strict framework of the Securities and Futures Ordinance. The listing process is jointly regulated by the Hong Kong Stock Exchange and the Securities and Futures Commission (SFC), covering multiple aspects such as sponsorship, due diligence, audit review, information disclosure, and public shareholding ratio, ensuring that listed companies have stable financial performance, ongoing operational capability, and a sound governance structure. This strong regulation not only protects the rights of investors but also enhances the credibility of the Hong Kong market.

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

05 A Clear Explanation: Suitable Clientele 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 inclusion; while IPO remains a key pathway for companies to mature, embrace the public market, and global capital. For enterprises, it is important to reasonably choose or combine RWA and IPO based on their own development stage, financing needs, asset structure, and strategic layout. In the future, with the maturation of regulatory mechanisms, the lowering of technical thresholds, and the increase in market acceptance, RWA and IPO are expected to jointly build a more diverse, transparent, and efficient financing ecosystem.