RWAs are the Next Big Catalyst of Growth in the Crypto Industry; Here’s How

By
Raj BagadiRaj Bagadi”>


Raj
Bagadi,
Founder
and
CEO
of
E Money NetworkE Money Network”>


E
Money
Network

The
world
can
be
categorised
into
two
groups
–
the
crypto
community
and
crypto
sceptics.
Unfortunately,
despite
crypto
having
stood
the
test
of
time,
crypto
sceptics
far
outnumber
crypto
advocates.

Their
criticism
of
crypto
investments
focuses
on
the
risky,
volatile
and
unregulated
nature
of
these
investments.
They
would
rather
contend
with
the
comfortable
familiarity
of
traditional
investments
as
these
are
recognised
as
legal
and
operate
within
what
are
perceived
to
be
safer
regulatory
frameworks.

However,
the
crypto
industry
is
at
the
cusp
of
a
revolution
which
might
just
close
the
divide
between
the
crypto
and
non-crypto
communities. 

At
the
heart
of
the
crypto
industry’s
next
phase
of
evolution
are
real
world
assets
(RWAs)
such
as
real
estate,
commodities
like
gold
and
oil,
art
and
luxury
goods.
By
allowing
the
tokenisation
of
RWAs,
we
are
enabling
these
assets
to
be
transferred
into
the
crypto
realm.
This
is
achieved
by
creating
digital
representations
of
physical
assets
on
a
blockchain.
In
essence,
RWA
tokenisation
marries
the
security
and
efficiency
of
crypto
with
the
reliability
and
stability
of
traditional
physical
assets. 

Tokenisation
of
assets
overcomes
several
problems
that
traditional
finance
faces
when
dealing
with
real
world
assets.
For
instance,
traditional
high-value
assets
that
are
difficult
to
liquidate
as
a
single
entity
can
be
split
into
smaller
manageable
portions
and
tokenised.
This
makes
it
easier
for
these
smaller
fractionalised
entities
to
be
sold.

These
RWAs
can
be
held
as
investments,
traded
freely
on
RWA
marketplaces,
or
deployed
in
DeFi
protocols
for
earning
interest
or
availing
loans.
Furthermore,
blockchain
brings
efficiency
gains
and
enhanced
security
of
transactions
in
managing
traditional
physical
assets.
Thus,
by
solving
real
world
problems
and
empowering
users
with
greater
flexibility
in
managing
their
assets,
RWA
tokenisation
incentivises
traditional
investors
to
embrace
crypto.

By
bringing
more
users
to
crypto,
RWA
tokenisation
also
enhances
the
liquidity
of
crypto
which
currently
is
significantly
lower
than
that
of
the
traditional
financial
industry.
Take
Ethereum,
for
example.
Among
ETH’s
most
significant
use
is
in
DeFi
protocols
in
the
Ethereum
ecosystem
as
native
asset
and
default
collateral.
So,
ETH
primarily
derives
its
value
from
its
use
in
DeFi
platforms
by
crypto
users.
However,
RWA
tokenisation
is
poised
to
transform
DeFi
by
enabling
users
to
deploy
their
RWAs
such
as
real
estate
and
commodities
as
collateral
in
lending
and
borrowing
protocols.
In
doing
so,
it
will
increase
the
demand
and
liquidity
of
ETH
by
expanding
DeFi
user
base
and
transactions. 

Though
the
RWAs
sector
is
still
in
its
nascent
stages,
it
is
already
experiencing
rapid
growth
and
adoption
by
financial
giants.
The
current
TVL
of
the
RWA
market
is
over
$6 billion$6 billion”>

$6
billion,
led
by
tokenised
US
treasury
products
from
BlackRock
and
Franklin
Templeton.
New
projects
across
other
real
world
assets
such
as
real
estate,
intellectual
property
and
data
are
emerging
with
the
promise
of
expanding
and
accelerating
the
growth
of
the
RWAs
sector. 

A
crucial
point
to
note
is
that
this
new
wave
of
growth
led
by
RWAs
is
happening
at
a
very
opportune
time
as
regulatory
compliance
is
becoming
mandatory
for
the
crypto
industry.
In
Europe,
the
first
phase
of
Markets in Crypto Assets (MiCA) regulationsMarkets in Crypto Assets (MiCA) regulations”>

Markets
in
Crypto
Assets
(MiCA)
regulations

was
implemented
recently.
Several other countriesSeveral other countries”>

Several
other
countries

including
the
USA,
the
UK,
Singapore
and
Japan
also
have
measures
in
place
for
crypto-specific
taxation,
AML/CFT,
consumer
protection
and
licensing
policies
in
place. 

Let
me
explain
why
compliance
is
crucial
to
RWAs.
RWAs
fundamentally
require
the
implementation
of
compliance
measures
as
in
the
real
world,
linking
real
identities
to
assets
is
imperative.
In
the
mainstream
economy,
there
are
government
agencies
and
well-established
mechanisms
that
maintain
records
of
ownership
of
real
world
assets
such
as
real
estate
and
vehicles.
When
it
comes
to
RWA
tokenisation,
it
is
important
to
ensure
that
the
practice
of
recording
ownership
data
accurately
is
also
upheld
in
the
realm
of
crypto
for
ensuring
the
legitimacy
and
trustworthiness
of
tokenised
assets. 

So,
if
the
RWA
tokenisation
wave
had
emerged
in
the
pre-regulations
era,
it
is
likely
that
it
would
have
faced
significant
challenges
in
gaining
the
trust
of
the
community.
Without
regulatory
frameworks
for
safeguarding
users
and
ensuring
market
integrity
the
credibility
of
tokenised
assets
would
have
been
weak,
leading
to
scepticism
from
individual
investors
and
financial
institutions.
However,
with
the
rise
of
regulations,
all
RWA-centric
developments
will
fall
under
the
ambit
of
law,
giving
peace
of
mind
to
investors. 

Another
thing
to
be
noted
about
the
RWAs
sector
is
that
most
of
the
existing
blockchain
infrastructure
is
deficient
when
it
comes
to
facilitating
regulatory
compliance
in
RWA
projects.
Using
public
blockchains
like
Ethereum
will
pose
regulatory
and
compliance
challenges
for
RWA
projects
as
they
do
not
have
a
comprehensive
compliance
layer
in
place
to
meet
the
regulatory
requirements
of
real
world
assets.
For
example,
a
global
commodity
ETF
like
Global X Silver Miners ETFGlobal X Silver Miners ETF”>

Global
X
Silver
Miners
ETF

(SIL)
needs
a
regulated
blockchain
for
transactions
to
be
settled
in
a
compliant
manner.
The
use
of
blockchain
in
trading
the
global
silver
ETF
will
enable
real-time-settlement
in
a
market
which
is
open
24X7,
leading
to
enhanced
liquidity
and
better
price
discovery.
Thus,
to
facilitate
compliance-driven
growth
of
RWA
projects,
the
industry
is
also
witnessing
the
development
of
RWA-centric
infrastructure.
E Money NetworkE Money Network”>

E
Money
Network,
for
example,
is
a
blockchain
with
in-built
compliance
modules
to
ensure
that
every
transaction
and
process
is
compliant
by
default. 

It
is
safe
to
say
that
RWA
tokenisation
nurtures
a
symbiotic
relationship
between
real
world
assets
and
crypto
from
which
both
traditional
investors
and
crypto
stand
to
benefit.
I
believe
that
settling
real
world
assets
on
blockchain
rails
will
become
a
standard
practice
in
the
next
5
years,
with
RWAs-on-blockchain
becoming
a
5
to
10
trillion
dollar
market. 
Emerging
RWA
projects
need
to
bear
in
mind
that
they
should
have
a
strong
use
case
and
a
user-friendly
product
geared
towards
both
seasoned
crypto
enthusiasts
and
newcomers
alike
for
achieving
product-market
fit.
More
people
using
the
product
will
validate
its
success
and
lead
to
higher
adoption
of
crypto.

About
Raj
Bagadi 

Founder
&
CEO
of
E Money NetworkE Money Network”>


E
Money
Network,
10+
years
exp
in
Global
Fintech
&
Banking. 

Raj
Bagadi
is
an
accomplished
entrepreneur
with
a
diverse
background.
He
holds
a
postgraduate
degree
in
Business
Development
and
Management,
and
a
Postgraduate
Certificate
in
Economic
Development
from
the
University
of
Oxford. 

Raj
is
also
a
certified
specialist
in
anti-money
laundering
in
the
UK
and
has
extensive
experience
in
the
finance
sector,
including
providing
technical
and
software
solutions
to
blockchain
and
cryptocurrency
start-ups
as
an
advisor.
He
is
the
founder
and
CEO
of
E
Money
Network,
a
modular
RWA
blockchain.

Additionally,
he
holds
a
Bachelor’s
degree
in
Aeronautical
Engineering
and
a
Master’s
degree
in
Aerospace
Technology.