A Capital Provider’s Guide to Real-World Assets (RWA): Why and How RWAs are Changing Investment

RWAs have rapidly gained attention as a fresh and versatile investment category, presenting new possibilities for yield, diversification, and accessibility. Here’s a closer look at why RWAs draw interest and how various capital providers—traditional, retail crypto, and institutional crypto investors—can engage with this evolving space.

1. The Value of RWA: Yield and Portfolio Diversity

• RWAs encompass various asset types, such as real estate, loans, trade receivables, and commodities—often hard to access for everyday investors or even some institutions. These assets offer distinct advantages:

• Higher Yield: RWAs generally provide higher returns than standard financial markets, making them attractive to yield-seeking investors.

• Low Market Correlation: With performance often independent of traditional equities and bonds, RWAs stabilise portfolios, especially in volatile markets.

Yet, these advantages have historically come with hurdles like high costs, legal complexities, and limited liquidity, keeping RWAs beyond reach for many.

2. Blockchain as the Bridge to Broader Access

Blockchain is breaking down the barriers to RWAs, creating a more inclusive, efficient, and secure marketplace:

• Tokenisation: By converting real-world assets into blockchain tokens, investors can now access fractional ownership in assets like real estate or loans previously exclusive to high-net-worth individuals.

• Improved Liquidity: Decentralised markets make previously illiquid assets tradable. For example, tokenised properties or loan portfolios can now be bought and sold on secondary markets, offering investors quicker entry and exit options.

• Beyond accessibility, blockchain ensures transparency and security via smart contracts, reducing risks associated with traditional asset management.

3. The Growth of RWA Products and Investment Models

RWAs are still evolving, with varied models under development, from tokenised properties and decentralised lending to securitised pools of trade receivables. Blockchain supports these models with real-time auditing and verification, building investor confidence through transparent reporting.

However, this market is still defining itself. Not all projects are reliable; some ventures present risks common in early blockchain spaces. Regulatory frameworks are essential to ensuring investor protection and screening out disreputable projects.

Regulatory Momentum: As governments develop clearer rules around tokenised assets, compliant RWA projects are becoming safer for investors. Compliance with securities regulations, for example, boosts confidence, especially for institutions.

4. Who Should Consider RWAs?

Several types of investors are beginning to explore RWA opportunities, each with their own interests and risk profiles:

• Traditional Investors: Institutions like pension funds, hedge funds, and family offices see RWAs as a way to enhance returns and add diversity. Yet they are cautious, often awaiting clearer regulatory frameworks.

• Retail Crypto Investors: Many in the crypto space, willing to embrace newer technologies, view RWAs as a means to diversify their portfolios and generate real-world income. Tokenised real estate and revenue-sharing models are popular among these investors.

• Institutional Crypto Investors: For crypto-native institutions, RWAs offer fresh avenues for capital deployment beyond traditional DeFi products, aligning with their expertise in blockchain and DeFi.

Moving Forward with RWAs

RWAs offer a promising route for yield and diversification across both traditional and crypto markets, with blockchain as a powerful enabler. As regulatory clarity improves, RWA projects that are well-structured and transparent are likely to become enduring players.

Capital providers—whether traditional, retail crypto, or institutional—should weigh the opportunities and challenges in this market. While RWAs can enhance a portfolio’s resilience, fraud and regulatory uncertainty risks remain. With a carefully considered approach, capital providers can find substantial benefits in this emerging asset class.