Wall Street’s Securities Chain Game: The Hidden Capital Race on the RWA Track

Original title: “Wall Street’s Securities Chain Game: The Hidden Capital Race on the RWA Track”

Original author: Ac-Core, YBB Capital Research

 

1. Foreword: Can RWA become the next watershed in the market

 

With the launch of the Bitcoin Spot ETF, the encryption field is ushering in a new development turning point. Policy trends during the Trump administration laid the foundation for this area, and now the entry of traditional financial giants such as BlackRock has further promoted the development of the RWA (Real World Assets) track. More and more financial institutions are beginning to explore how to realize on-chain transactions and management of traditional assets such as stocks and bonds through blockchain technology. This trend is reshaping the landscape of financial markets.

 

A series of initiatives such as Ondo Global Markets and Ondo Chain recently launched by Ondo Finance mark that the RWA track is gradually moving towards the mainstream. This change has also triggered a new round of games on Wall Street, which is quietly changing the rules of the game between the crypto market and traditional finance.

 

2. Differences and commonality of RWA track events

 

Source: Ondo official website

 

2.1 Relying on Ondo Finance, BlackRock’s representative project

 

Recently, Ondo Finance has made frequent moves. On February 5, they launched the Ondo Global Markets platform, which mainly provides blockchain access services for stocks, bonds and ETFs. Immediately afterwards, Ondo Finance announced their new Layer 1 public chain Ondo Chain, with the goal of creating a stronger financial infrastructure and promoting the tokenization of RWA.

 

Ondo Chain is the infrastructure of Ondo Global Markets (Ondo GM), focusing on the combination of RWA tokenization and blockchain. Ondo Chain supports global investors to obtain on-chain access to U.S. listed securities (such as stocks, bonds, ETFs) through blockchain platforms, breaks geographical restrictions and provides 24/7 uninterrupted trading services.

 

Ondo Chain has launched a solution to embed organization-level compliance into the public chain architecture. It attempts to overcome the pain points of existing RWA chains in terms of technology and system through innovative means such as license verification node mechanisms and native cross-chain protocols. Ondo Chain ensures network security by using traditional financial assets as collateral and interoperates with traditional clearing systems to further open up liquidity on and off the chain.

 

2.2 Ondo Finance’s competitiveness and limitations in same-track events

 

This is not only related to its unique architectural design and powerful institutional resources, but also reflects the game of power and interests between blockchain and traditional finance.

 

·Competitiveness

 

By working with top financial institutions such as BlackRock, a blockchain financial infrastructure that can support large-scale tokenization of real-world assets has been built, ensuring a balance between compliance and decentralization.

 

1. Tokenization and free transfer of RWA: By pairing stocks, bonds, ETFs and other assets with tokens 1:1, investors can freely transfer these tokenized assets outside the United States, integrate with DeFi, and participate in lending, income, etc. Financial activities.

 

2. Combination of openness and compliance: Ondo Chain combines the openness of public blockchain with the compliance of licensing chains. The verifier is licensed and reviewed to ensure compliance, and any developer and user can issue tokens and develop applications on the chain to ensure innovation vitality.

 

3. Institutional participation and ecological construction: Ondo Chain’s design consulting team includes financial institutions such as Franklin Templeton, Wellington Management, and WisdomTree, promoting its institutional applications in the fields of TradFi and DeFi.

 

4. Oracle mechanism and data security: The built-in oracle system ensures the accuracy and real-time data on the chain and reduces the risk of data manipulation. This design enhances the credibility of key data such as asset prices, interest rates, and market indices.

 

5. Cross-chain functions and security: Ondo Bridge enables cross-chain asset transfer, provides security for the decentralized verification network (DVN), supports institutional asset and liquidity management, and adapts to large-scale transactions.

 

·Limitations

 

High reliance on institutions limits the participation of ordinary users and decentralized communities, and the centralization element is high, and the main power is still in the hands of a few institutions.

 

1. Highly reliant on institutions and lack community driving force

Ondo Finance’s structure strongly relies on the participation of traditional financial institutions, and the credibility and liquidity of its tokenized assets mainly come from the endorsements of these institutions. Although this model ensures the quality and compliance of tokenized assets, it also brings a core issue: its ecosystem is mainly designed for institutions, with low participation from ordinary users. Compared with a fully decentralized RWA project, Ondo is more like an extension of the traditional financial world. The circulation and trading of tokenized assets are more between institutions, and the influence of ordinary investors and decentralized communities is weakened.

 

2. The issue of power distribution under centralized control

Although Ondo Chain retains some openness, its validators are licensed, which means core power is concentrated in the hands of a few agencies. This is in sharp contrast to some completely decentralized RWA projects, which emphasize that any participant can become a key node in the network. Ondo’s design reflects to some extent the power landscape of traditional finance, in which most control is still in the hands of a few large financial institutions. This concentration of power may spark conflicts in future governance and resource allocation, especially when token holders conflict with institutional interests.

 

3. The speed of innovation may be limited by compliance and traditional institutions

Since Ondo Finance’s core pillars are compliance and institutional engagement, this may also limit its innovation speed. Compared to a fully decentralized project, Ondo may require complex compliance processes and institutional approvals when introducing new financial products or technologies. This puts it at risk of being slow to respond in the fast-changing crypto landscape, especially as it competes with the more flexible DeFi projects, where its compliance and institution-oriented architecture can become a burden.

 

3. Practical obstacles faced by RWA projects

 

Although blockchain technology provides the technical foundation for RWA’s listing, the current public chain is still difficult to meet the needs of traditional finance in terms of high-frequency trading and real-time settlement. At the same time, the fragmentation of cross-chain ecosystems and security issues have further made it difficult for organizations to deploy RWA. The application of RWA in decentralized finance (DeFi) faces several practical obstacles:

 

First of all, the issue of trust and consistency between assets and data on the chain has become the core challenge for RWA to launch the chain. The key to RWA’s launch is to ensure the consistency of real-world assets and the data on the chain. For example, after the property is tokenized, the ownership, value and other information recorded on the chain must completely match the actual legal documents and asset status. However, this involves two key issues: one is the authenticity of the data on the chain, that is, how to ensure that the source of the data on the chain is trustworthy and cannot be tampered with; the other is the synchronous update of data, that is, how to ensure that the information on the chain can reflect the status of real assets in real time. Change. Solving these issues often requires the introduction of trusted third parties or authorities (such as governments or certification authorities), but this conflicts with the decentralized nature of blockchain, and trust issues remain an unavoidable core challenge for RWA.

 

Insufficient cybersecurity is also an important issue. The security of blockchain networks usually relies on the economic incentive mechanism of local tokens, but RWAs are usually less volatile than cryptocurrencies, especially in market downturns, which may lead to cybersecurity decline. In addition, the complexity of RWA requires higher security standards, and existing blockchain systems may not fully meet these needs.

 

The compatibility issue between RWA and DeFi architecture has also not yet been resolved. DeFi was originally designed to serve crypto-native assets rather than traditional securities assets. RWA listing involves complex financial actions (such as stock splits and dividend distributions) that are difficult to effectively manage through the existing DeFi system. What is particularly important is that the oracle system also has obvious shortcomings in real-time and security in processing large-scale traditional financial data.

 

The issue of cross-chain liquidity dispersion and security further increases the difficulty of RWA launching. The cross-chain issuance of RWA leads to decentralization of liquidity and increases the complexity of asset management. Although the cross-chain bridging mechanism provides a solution, it also introduces new security risks, such as double flower attacks and protocol vulnerabilities.

 

Institutional supervision and compliance issues are the biggest non-technical obstacles to RWA’s listing. Many regulated financial institutions are unable to conduct transactions on public blockchains. The main reasons include anonymity, lack of compliance frameworks, and differences in global regulatory standards. Compliance requirements such as KYC and anti-money laundering further increase the complexity of RWA’s listing, which restricts the inflow of capital to a certain extent.

 

Liquidity and institutional participation restrictions on the market side have also restricted the development of RWA. Currently, the overall market value of RWA is mainly concentrated in low-risk assets (such as treasury bonds and funds), while the listing of large categories of assets such as stocks and real estate is progressing slowly. RWA’s liquidity still relies on crypto-native protocols, and the overall market is still in its early stages of development.

 

Finally, the conflict between DeFi and traditional financial trust mechanisms is also an issue that must be solved by RWA. DeFi relies on code and cryptography to build trust, while traditional finance relies on legal contracts and centralized institutions. This difference in trust mechanisms has led traditional financial institutions to be cautious about blockchain technology, especially in key aspects such as custody and risk control.

 

Although blockchain technology provides the possibility for RWA to link up, it still faces many challenges in practical applications. However, from data consistency, network security, compatibility, mobility, compliance to the matching of technology and economic models, and the conflict of trust mechanisms, these issues need to be gradually resolved in the course of development to promote RWA’s widespread use in DeFi.

 

4. If RWA is successful, Ondo Chain may become a “Wall Street game” of redistribution of power between the old and new financial systems

 

Source: Occupy Wall Street

 

When analyzing the core Wall Street interests behind Ondo Chain, I personally believe that it is necessary to go beyond the phenomenon of blockchain and real asset tokenization, and focus on the logic of financial operations and the driving factors behind the competition for interests. As mentioned above, the core difficulty at the non-technical level of RWA lies in how to achieve compliance, and compliance relies on the recognition of a strong centralized rights organization.

 

BlackRock, the world’s largest asset management company, participated in the investment and construction of RWA after completing the promotion of the Bitcoin ETF. This is essentially the first to strive for power redistribution between the traditional financial system and emerging decentralized technologies relying on blockchain. This struggle is not only a competition for technological change or financial innovation, but also a competition for global financial rulemaking rights, capital control rights, and future wealth distribution mechanisms.

 

Although blockchain technology brings hope for decentralization, in the face of the reality of a high concentration of capital and power, Wall Street is trying to bring this technological revolution within its control, through new forms of market manipulation and asset securitization, continuing its dominant position in the global financial system.

 

4.1 Rebalancing of power in the global financial system

 

Wall Street has always dominated the global financial system, controlling key nodes in capital flows, asset management and financial services. Traditional financial institutions control global capital by monopolizing financial infrastructure (banks, stock exchanges, clearing systems, etc.). However, the rise of blockchain technology has broken this situation:

 

Decentralized finance (DeFi) weakens traditional financial infrastructure that Wall Street has long controlled through disintermediation. DeFi allows key functions such as capital flow and asset management to run on a decentralized platform. For example, users can directly conduct asset management, lending, and transactions on the blockchain without intermediaries such as banks and investment banks. But this poses a huge threat to Wall Street, and this transfer of power means that Wall Street may lose its dominance of the global financial system.

 

4.2 Asset tokenization: Who can control the new financial infrastructure

 

RWA tokenization promoted by platforms such as Ondo Chain, while aiming to enhance asset liquidity, hides a battle for control of new financial infrastructure. The blockchain network is a candidate platform for a new generation of global financial infrastructure. Whoever can dominate this infrastructure will be able to dominate the future blockchain linking real-world assets.

 

Wall Street’s interests are reflected in its intention to control these decentralized networks. They may not directly deny blockchain, but control these emerging blockchain platforms through investment, mergers and acquisitions or cooperation to allow capital concentration to reappear. Although blockchain is intended to be decentralized, large amounts of capital and liquidity are still easily concentrated in the hands of a few large financial institutions or hedge funds. In the end, key resources on the blockchain platform (liquidity, agreement governance rights, etc.) will still return to the hands of a few players, resulting in a decentralized asset market that completely needs to be driven by the huge power of centralization.

 

4.3 Regulatory arbitrage and extra-legal power

 

According to February 6, Cointelegraph reported that JPMorgan Chase’s latest electronic trading survey of institutional traders showed that 29% of institutional traders are about to trade or are trading cryptocurrencies this year, an increase of 7 percentage points over last year.

 

Arbitrage has always been a trading strategy that Wall Street elites are good at using. Faced with the uncertain regulatory environment of the decentralized nature of blockchain, in the future, Wall Street institutions may take advantage of the regulatory differences in different countries and regions to circumvent stricter regulation by setting up operating entities in jurisdictions with looser regulations. For example:

 

In projects such as Ondo Chain, tokenization of certain RWAs may bypass traditional securities regulations or financial market regulations. Manipulate asset flows and capital structures in different regulatory environments to further strengthen control over emerging markets. The operation of this “gray area” cannot be ruled out as one of the means for Wall Street to obtain higher returns on benefits through blockchain.

 

4.4 Market liquidity and price manipulation: The struggle for implicit dominance

 

Liquidity is the core of market manipulation, realizing hidden price manipulation in seemingly “decentralized” markets. Ondo Chain provides new investment opportunities for global investors through RWA’s tokens, but its liquidity and trading depth are still highly dependent on the injection of large capital, and liquidity control will continue to be the core weapon of Wall Street players. Even in a decentralized blockchain environment, institutions with more capital, trading technology and market insight can still dominate market trends.

 

4.5 RWA Hedge Funds: Restructuring the Asset Securitization Game

 

Wall Street has historically achieved huge gains through asset securitization (such as subprime mortgage securitization). RWA tokenization on the blockchain provides an opportunity for a new generation of asset securitization. For example, Wall Street could issue new financial products through a combination of tokenized assets to attract global investors. These products can be generated based on RWA, such as real estate trust fund tokens and corporate bond tokens, providing more choices for the market.

 

At the same time, the derivatives market may also be expanded through blockchain. Wall Street can once again package and sell risk to global investors by designing complex financial derivatives (such as options, futures, swaps). The game of risk transfer and profit gain will continue to be played out in the era of RWA tokenization.

 

5. As the encryption world advances, the development of the industry is forced to press the acceleration button

 

We take Bitcoin’s ETF trading in crypto-assets, Trump-related events and future RWAs as examples to analyze. They are all accelerating the development process of the industry to varying degrees, and the direct impact of this is to increase the difficulty of industry profitability. These factors affect the crypto industry through complex market dynamics, regulatory pressures and the gradual penetration of traditional financial ecosystems.

 

5.1 Market maturity brought about by the introduction of ETFs

 

The launch of the ETF marks that the crypto industry is gradually accepted by mainstream financial institutions and investors, but it is not necessarily beneficial to the overall growth of the crypto industry. It is like gold has brought a long increase after passing through the ETF:

 

·Declining market liquidity and volatility

The introduction of ETFs means that crypto assets have entered traditional financial markets, attracting institutions with more conservative investment styles. At the same time, the addition of more financial derivatives has also led to a reduction in the volatility of crypto assets. For traders who rely on high volatility (such as retail investors and crypto hedge funds), this means fewer opportunities for arbitrage and high-frequency trading, which in turn reduces profit margins.

 

·Concentration of capital flows

ETFs make the flow of funds in the crypto market more concentrated, mainly in several large assets such as Bitcoin. This may expose small and medium-sized crypto assets to the risk of liquidity depletion and price decline, affecting the development opportunities of more small projects. As a result, profit opportunities for more emerging projects have been reduced, and the overall difficulty of making profits for the industry has increased.

 

·Competitive pressure from traditional finance

The launch of ETFs means that crypto assets are converted into traditional financial products, bringing greater market transparency and competition. This also means that the crypto industry will compete more fiercely with traditional financial instruments such as stocks, bonds and commodities, diverting funds and investors ‘attention.

 

5.2 Market uncertainty caused by the Trump effect

 

The actions of politicians such as Trump may affect the crypto market through their policies, regulatory attitudes, and international relations, increasing uncertainty and complexity in the industry:

 

·Increased policy uncertainty

Trump’s policy stance and governing style are often full of uncertainty, especially when it comes to economic and financial regulation. During his and his government’s tenure, regulatory policies that may be implemented (such as suppression or deregulation of digital currencies) will directly affect market sentiment and increase instability in the crypto market. This uncertainty will expose the crypto industry to greater policy risks and affect the stability of long-term earnings.

 

·Strengthening anti-money laundering and KYC requirements

As politicians such as Trump may implement stricter anti-money laundering and KYC regulations in the future, exchanges and crypto projects will face higher compliance costs. This will significantly increase operating costs and compress profit margins, especially for crypto companies that lack compliance experience.

 

·The presidential concept coin “TRUMP” causes a “siphon effect” in the market

High volatility attracts more speculative funds.”TRUMP” has a natural marketing effect and can attract a large amount of funds to gather in this single asset. The limited liquidity and capital in the market are easily “siphoned” by Meme coins in the short term, forming a “capital concentration effect”. However, as prices fall later, it is difficult for liquidity to be dispersed.

 

5.3 The development of RWA will bring traditional financial penetration

 

The development of RWA in the crypto field represents the gradual integration of the crypto market with traditional financial assets, but this integration has also brought about an increase in the difficulty of making profits:

 

·Cost structure and introduction of competition in traditional finance

When the RWA project is launched on a large scale, traditional financial assets such as bonds, stocks, real estate, etc. will compete with crypto assets in the same ecosystem. The maturity, cost-efficiency and low-risk characteristics of traditional financial products will attract a large number of institutional investors, which means that crypto assets need to compete with these mature financial products.

 

·The contradiction between decentralization and compliance

RWA’s listing involves complex regulatory requirements, especially in terms of compliance and legal liability. Compared with today’s decentralized crypto assets, the introduction of RWA may force more crypto projects to comply, causing more projects to exit the market due to failure to meet regulatory requirements, thereby reducing profit opportunities.

 

·Funds tend to flock to low-risk assets

The launch of real-world assets, such as low-risk assets such as treasury bonds and corporate bonds, will attract a large number of conservative investors to enter the on-chain market. As more money flows into low-risk RWAs, high-risk, high-return projects in the crypto market, such as the DeFi protocol or emerging Tokens, may lose some financial support. This transfer of funds to low-risk assets will further compress the profit margins of the crypto market.

 

6. Conclusion: Is RWA narrative bubble or market change

 

Summarizing the above personal views, ETFs, the Trump effect and the rise of future RWAs will increase the difficulty of making profits in the crypto industry in different ways and intensities. Market maturity and institutionalization brought by ETFs have reduced market volatility and high-profit opportunities; Trump’s policies may increase market uncertainty and bring policy risks to the industry; and the introduction of RWA means that the crypto market will compete with traditional financial markets. In this ever-complex evolution process, the more “regular” crypto assets become, the more “bottleneck” the market will become, and the future crypto market will bring more severe new challenges.

 

Therefore, whether RWA is a “narrative bubble” or a “market change” depends on the maturity of its technical foundation, market demand and implementation path. If we only look at the progress and challenges in the current early stage, RWA has a certain “narrative bubble” element, but relying on the deep participation of well-known institutions, RWA is expected to become a new catalyst for changes in the crypto market.

 

This article is from a submission and does not represent the views of BlockBeats.