The Financial Supervisory Commission (FSC) has organized the “Real World Asset Tokenization Group” with the cooperation of the Financial Technology Co-creation Platform’s “Regulatory Technology and Research Application Group,” the Taiwan Depository & Clearing Corporation (TDCC), and six financial institutions. The group was established to explore the preparations required for promoting “Real World Asset Tokenization” in Taiwan, and an inaugural meeting was held on June 13, 2024.
What is “Real World Asset Tokenization”?
“Real World Asset Tokenization” (RWA) has been one of the most discussed blockchain applications since 2023. RWA refers to the tokenization of tangible and intangible assets in the real world, such as watches, real estate, wine, trading cards, stocks, and bonds. It creates a virtual counterpart in the online world, with its value linked to the original asset.
Traditional financial transactions have many limitations. For example, in the case of investment funds, retail investors usually need to transact within specific time frames on each trading day, and they may face minimum investment thresholds. RWA unlocks these restrictions and provides greater flexibility, making it the fastest-growing area in the financial sector.
Internationally, tokenized real-world assets are widely recognized for their potential advantages, such as 24/7 trading, cross-border and cross-time zone transactions, reduced investment thresholds, improved operational efficiency, real-time settlement, increased liquidity, and transparency. However, challenges related to regulation, law, and interoperability also exist.
To explore the preparations required for promoting RWA tokenization in Taiwan and to develop financial technology in a more forward-looking and comprehensive manner, the FSC, in collaboration with the TDCC and six willing financial institutions (including Taiwan Cooperative Bank, Taipei Fubon Bank, CTBC Bank, Cathay Securities, Cathay Securities Investment Trust, and Yuanta Financial Holdings), has established the “RWA Tokenization Group” to jointly discuss relevant promotion matters.
Further reading:
Creating Virtual Counterparts for Rolex and Bonds! Will “Tokenization” Transform Asset Trading? A Comprehensive Analysis of the RWA Wave
The “RWA Tokenization Group” will delve deep into professional knowledge and practical operations
The FSC stated that, to facilitate the smooth progress of the various tasks of the “RWA Tokenization Group,” it has invited representatives from relevant departments, in addition to the Innovation Center, to attend and understand the professional knowledge and practical operations of RWA tokenization. They will also discuss policies, regulations, and other related matters. The aforementioned units have reached a consensus on the operational methods of the “RWA Tokenization Group” and plan to select two assets as targets for tokenization, with meetings held every 3 to 4 weeks.
In addition to discussing the tokenization methods, the group will also analyze asset custody, transactions, and other aspects. The ultimate goal is for participating financial institutions to propose conceptual verification (Proof of Concept; POC), business trials, or applications for innovative experiments.
The FSC emphasized its focus on the development of financial technology, particularly with the rapid development of Web3 and related applications such as tokenization and decentralized finance. International organizations and other countries have already put forward relevant regulatory recommendations and development projects.
Multiple RWA cases have emerged internationally
Currently, there are already numerous cases of financial RWA products internationally.
For example, the well-known “Franklin OnChain US Government Money Market Fund” (FOBXX) is currently ranked in the top three in the US Treasury RWA category in terms of market value on the data analysis website rwa.xyz.
FOBXX was launched on the Stellar blockchain in 2021, making it the first mutual fund registered in the United States that uses a public chain for transactions and records equity. This tokenized government money market fund invests at least 99.5% of its total assets in US government securities and cash, with fully secured repurchase agreements. The transfer agent for FOBXX, Franklin Templeton Investor Services, maintains the official records of equity through its proprietary blockchain integration system.
Transactions on the blockchain are available 24/7, allowing FOBXX to be traded at any time. Users can purchase it through the Franklin’s Benji Investments application.
In addition, BlackRock, the asset management giant and the world’s largest ETF issuer, entered the RWA field in March this year by launching the “BlackRock Institutional Digital Asset Liquidity Fund” on Ethereum. The fund uses a token called BUIDL as its representative.
The underlying assets of this fund come from cash, US bonds, and repurchase agreements, representing funds that will be invested in these asset categories to ensure value stability and growth. At the same time, the fund will use blockchain technology to track asset holdings and transactions.
The fund also pays returns to token holders daily through the blockchain, providing investors with a faster and more convenient way to obtain returns.