The Ultimate Playbook for RWA - Navigating Regulatory and Financial Waters
Big mistake for a lot of RWA projects.
Everyone's hyped about the tech, but we're sleeping on the regulatory, legal and financial stuff.
RWA global market value has been up only since late 2022 with a whopping $11B today.
My thoughts on the perfect RWA playbook 👇
The legal and financial structuring of RWA tokenization is often an afterthought, often clouded when we have to think about the finance gains However, many projects are neglecting these aspects, which can lead to significant consequences.
Think about SEC claming down in securities. RWA is no exception. Regulation is the end game and no matter how there is no escape.
Here is you perfect for RWA receipe to to navigate this complex landscape👇
1️⃣ Understand Regulatory Restrictions
First up, know the rules about investing in RWAs off-chain. Some places only let local entities own real estate, for example. Also, make sure you understand the limits for your target investors, like retail folks, in their countries.
2️⃣ Select an Offshore Hub
Next, pick a good offshore hub for your Special Purpose Vehicle (SPV). This hub should let the SPV buy the RWA as a local investor and offer some tax benefits. Make sure the hub’s credit rating is solid – at least AA – so it doesn’t mess up your structure.
3️⃣ Incorporate the SPV
When setting up the SPV, form a limited liability company or rent a cell, and give its shares to an orphan trust. This way, the SPV stays out of the sponsor’s bankruptcy estate. Don’t forget to set up bank and custodial accounts too.
4️⃣ Acquire and Tokenize the RWA
For acquiring the RWA, get a forward agreement to match the incoming cash flow from investors. Then, issue tokenized financial instruments with a full recourse legal pledge on the RWA. Follow the laws for issuing financial instruments, like registering an offering prospectus with the right regulatory body.
5️⃣ Handle Investor Funds
If you’re not using stablecoins, convert investor funds and use them to buy the RWA into the SPV. After that, distribute ownership tokens to investors through Delivery Versus Payment (DVP).
6️⃣ Distribute Ownership Tokens
Once this is completed, execute Delivery Versus Payment (DVP) to distribute ownership tokens to investors.
7️⃣ Manage Cashflows and Reporting
Throughout the RWA’s life, manage all cashflows based on the terms in the ownership token. Regularly report and provide valuations to investors and regulators to keep everything transparent and compliant.
Some RWA projects I am bullish on:
@inkfinance
@IxSwap
@plumenetwork
@ChintaiNexus
@landxfinance
@StoboxCompany
Like to hear what you guys think too! 👇
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