Original Title: "Dr. Xiao Feng Dialogue (Part 2): Chinese Will Become the Main Characters of RWA Innovation, But Cannot Walk the Old Path in New Shoes"

Original Source: Meng Yan's Blockchain Thinking

Foreword

With the U.S. Senate voting motion on the U.S. Dollar Stablecoin Act and the Hong Kong Legislative Council passing the Hong Kong Dollar Stablecoin Bill, stablecoins have quickly become the hottest industry topic, attracting broader attention. It is widely expected that with the passage of the U.S. Dollar Stablecoin Act, the blockchain digital economy will usher in a very exciting explosion. Around this U.S. Dollar stablecoin and Real World Assets (RWA), a new entrepreneurial window is expected to emerge. Dr. Xiao Feng is a leading figure in Chinese blockchain research and practice, with a deep understanding of blockchain, stablecoins, and RWA. To fully grasp this era of opportunity, I had the honor of conducting a deep exchange with Dr. Xiao Feng via video conference and text, which I have organized into an article for publication to explore together with peers. Due to the length of the original text, it is published in two parts. The first part has been published, focusing on the interpretation of the significance of the U.S. Dollar stablecoin. This article is the second part, focusing on the outlook for the stablecoin economy and the opportunities it brings to Chinese entrepreneurs with regards to RWAs. The views in this article are just one opinion, and feedback from readers is welcome. First part: "Dr. Xiao Feng Dialogue (Part 1): The U.S. Dollar Stablecoin Legislation is a Victory for Technological Innovation, But Its Impact Will Be Very Complex"

4. The Stablecoin Economy is in the Primary Stage of RWA and Will Drive Blockchain Application Across the Chasm

Meng Yan: In any case, with the legislation of the U.S. Dollar stablecoin and the Hong Kong stablecoin, the big event of stablecoins is coming. What does this mean for entrepreneurs?

Xiao Feng: Over the next few years, stablecoins will drive a major explosion in blockchain and RWA applications. On the demand side, billions of users will go on-chain to open encrypted accounts and hold stablecoins, with the user base growing several times in a short period. At the same time, on the supply side, millions of platforms, enterprises, Internet merchants, self-media, and creators will start accepting stablecoin payments, and a large number of assets will be tokenized, going on-chain as RWA. "How to earn stablecoins" will become one of the most important topics for all businesses in the coming years.

Various application demands around stablecoins and RWA will rapidly explode, and truly capable entrepreneurs will flock without hesitation and reserve. Stablecoins and blockchain will become the most attractive race track in the coming years, nurturing the most successful stories. Here, I would like to use a model from a classic business work to explain this phenomenon: Geoffrey Moore's "Technology Adoption Life Cycle." He divides users into five categories: Innovators, Early Adopters, Early Majority, Late Majority, and Laggards. Most high-tech products die in the "Chasm" between "Early Adopters" and the "Early Majority." Technology must transition from vision to reality, solve specific problems, bring real value to cross the chasm; otherwise, it will remain silent.

I believe that stablecoins are becoming the bridge for the blockchain industry to cross this "chasm." Previously, when we talked about encryption and Web3, we always stayed within the small circle of "believers" and "technology enthusiasts." Many people agreed with the idea, but once large-scale usage was needed, issues such as "lack of use cases," "user misunderstanding," and "high compliance risks" emerged. However, stablecoins will become the first blockchain product truly adopted on a large scale by "pragmatists." Cross-border e-commerce, freelancers, platform settlements, global payments—everyone is starting to use it. It allows blockchain to exist not just as a narrative for the first time but to be integrated into the real economic system as infrastructure.

For users to use stablecoins, they need to open a digital currency account, which introduces them to and teaches them about wallets. Therefore, stablecoins are not just a product; they are the pass for the entire blockchain industry to cross the market chasm. And after crossing this chasm lies a huge blue ocean market, composed of the "early adopters" and the "conservative mainstream." Once across, "mass adoption" is no longer a dream but an achievable reality.

Recently, I have been quoting Nobel laureate John Hicks at many events: "Behind every industrial revolution is a financial revolution." Now, we stand at the next part of that statement—every outbreak of a financial revolution requires a product at a universal level to break through user barriers. Stablecoins are becoming such a product. I want to emphasize that such outbreaks occur only once in an industry, and once it's gone, it's gone. So entrepreneurs, it seems, should not hesitate any longer. Those who have experienced the internet and mobile internet know that missing this window will significantly increase the challenges ahead.

5. RWA Innovation Can't Walk Old Paths in New Shoes

Meng Yan: Earlier, you mentioned RWA, which is a very hot topic recently following stablecoins. It is said that in first-tier cities in China, many entrepreneurs are discussing how to seize RWA opportunities. However, I have my doubts about this. The so-called RWA is the tokenization of real-world assets after they are put on-chain. Many people now fantasize about putting unsellable assets they hold on-chain to become RWAs, and they immediately become popular. I think this is illogical. You must have had more exposure to this; I believe you have a deeper understanding. What is your opinion?

Xiao Feng: I almost receive entrepreneurs every day to discuss RWA, and I have encountered all these asset types you mentioned. However, in 90% of cases, I would advise them to give up. It is technically straightforward to put these assets on-chain and turn them into RWAs, but the question is, would you buy such an RWA? I definitely would not. RWA is the trend, and it will undoubtedly grow very large in the future. Not long ago, the Boston Consulting Group had a report predicting that by 2033, the total scale of on-chain RWA assets would reach $18.9 trillion, which means that within the next 8 years, the annualized growth rate of RWAs will reach 53%. Any entrepreneur does not want to miss the opportunity to board this rocket.

However, this does not mean that you can simply slap an RWA label on something and expect miracles to happen. Based on over a decade of development in the crypto industry, the lesson we have learned is that development must follow objective laws and be based on value. Objectively speaking, a bubble is inevitable, but if the bubble is too large, it will always burst, dragging down the industry's progress. I have told many people this, and now many people have a serious cognitive mismatch when it comes to RWAs. RWAs cannot magically transform an asset just by slapping a label on the blockchain and adding a layer of technical "gold foil." It cannot change the fundamental properties of an asset. If the assets you hold originally lack liquidity, have opaque prices, and high transaction costs, then putting them on the chain will not skyrocket their value. RWAs are not magicians; they cannot turn a crow into a phoenix.

RWA is a digital mapping of real-world assets, and the key is what you are mapping. If the underlying asset is not good, lacks clear ownership, and is not standardized, no amount of packaging will help. It is neither financial alchemy nor a cure-all for the blockchain. Therefore, I believe that the development of RWAs must also follow an objective law. What is this law? It is to start with high-quality assets, move on to standardized assets, start with top-tier assets, and gradually expand to long-tail and non-standard assets. What are high-quality assets? They are sovereign debt, large-cap blue-chip stocks—assets that are highly standardized, globally accepted, and have a highly transparent pricing mechanism. Next in line are top-tier corporate bonds, high-quality notes, accounts receivable, and even real estate mortgage loans in high-growth areas. These types of assets truly have the potential to be tokenized because their underlying value is solid, both buyers and sellers have a symmetrical understanding of the price, and only after being put on the chain can liquidity be enhanced rather than creating illusions.

You are absolutely right; many people are now approaching RWAs with a speculative mindset, trying to find a shell on the chain to "cash out" worthless offline assets, even engaging in some quasi-Ponzi schemes. I am not optimistic about this "putting new shoes on an old road" approach. RWA is not a tool to evade regulation, nor is it a dumpster for bad assets. If you have not truly addressed trust, circulation, and pricing issues, then going on-chain is meaningless. We must be realistic. Objectively speaking, high-quality assets are currently mainly concentrated in the United States. The real opportunity for Chinese people is not to rush to tokenize any assets but to first stabilize in the "stablecoin economy" phase. What does this mean? It means to first go global, sell products online and on-chain, provide services, earn stablecoins—that is our current advantage. In short, when it comes to RWAs, start by earning stablecoins.

Why? Because we have the world's strongest supply chain, engineering and manufacturing capabilities, and internet operation capabilities. Cross-border e-commerce has already achieved scale, and e-commerce bosses are adept at traffic and efficiency. Once stablecoins are used, transaction costs immediately decrease, and settlement speeds increase significantly. This is the true starting point of the integration with the blockchain, the Chinese solution in the stablecoin economy phase.

This is not my imagination, but a reality that is happening right now. In the past few years, some small and medium-sized cross-border e-commerce enterprises, as well as some foreign trade enterprises, duty-bound export merchants, are now accepting stablecoins at a very fast pace. Some of them have scaled up significantly, and their ability to earn stablecoins is much stronger than many blockchain projects. This is just the beginning. I am sure that once the GENIUS Act is passed, platforms like Amazon will immediately support stablecoin payments, and tens of thousands, even hundreds of thousands, of e-commerce merchants will soon become key players in the stablecoin economy.

Therefore, I believe that now is the time for Chinese Internet elites to embrace blockchain and the stablecoin economy. As long as you stand firm, bringing together users, merchants, and cash flow, a naturally high-quality batch of Real World Assets (RWA) will be incubated. For example, cross-border order receivables, supply chain debt based on real logistics, these are all natural on-chain assets. By that time, you won't need to tell a story; investors will naturally come to trade your RWA. So I recommend taking the first step solidly. The stablecoin economy is the initial stage of RWA, it is the gateway for blockchain to truly enter the industry and cash flow. Whoever stands firm in this stage will naturally own the RWA high ground in the next stage.

Meng Yan: Some people think that the RWA concept is trending, and it's time to issue tokens again. Start an RWA project and then launch an ICO. Is this scenario possible?

Xiao Feng: This question needs to be looked at from two perspectives. On the one hand, the era of telling a blockchain story, creating a protocol, issuing a token, and getting rich quick has passed; the window of opportunity has closed. Over the past decade, we have experienced the first growth curve of the blockchain industry, which was dominated by infrastructure development and token fundraising. At that stage, indeed, it was "Narrative-Driven Capital," issuing a token could drive a whole round of fundraising. But looking at it today, the marginal effect of token fundraising is rapidly decreasing. Investors in the crypto world are becoming more rational, the market is becoming more turbulent, and users have seen through dazzling whitepapers. The key now is to have a real application scenario, to be able to acquire users and cash flow. So I say, the energy of the first curve is diminishing; what we need is the second growth curve — an explosive stage centered on applications.

On the other hand, the United States did not make a blanket ban on token fundraising; instead, the U.S. is creating a new legal framework for token fundraising through two paths. The first is the FIT21 Act, and the second is the "Token Safe Harbor" regulatory exemption mechanism. Together, these form the embryo of a new compliant token fundraising system.

If you have a bit of knowledge about the history of U.S. securities laws, you will know that FIT21's status is similar to the 1933 Investment Company Act. It is structural legislation for an economic entity and lays the legal foundation for a century of prosperity in the U.S. capital markets alongside the 1933 Securities Act and the 1934 Exchange Act. Now we see the SEC, CFTC continuously issuing guidance documents to define whether a token is a security, commodity, or virtual commodity, while also delineating regulatory responsibilities. This is the gradual clarification of the entire framework.

I believe that if these two efforts can continue and come together, today's U.S. legislation has the potential to set an example for global token financing and token market regulation. If the development goes smoothly, this may lay the foundation for a new century of digital financial prosperity. In the past, we talked about stocks and bonds; now we talk about RWAs and Tokens. The form is changing, but the underlying logic of finance remains the same — which is risk pricing, information transparency, and rule of law.

As I always say: don't rush to issue a coin now, first focus on building a stablecoin ecosystem, develop applications, and establish a solid foundation. Once your model is market-proven, cash flow is established, then you can conduct coin financing based on U.S. regulations. Why worry about not being able to efficiently raise funds? Why worry about not succeeding in listing? First, create a good product, a good application, the rule of law path is being paved, and naturally, the bridge of capital will come to meet you. In the future, tokens can be traded on Nasdaq and NYSE, and conversely, trading platforms like HashKey can also trade stocks. Recently, the U.S. cryptocurrency exchange Kraken has already announced its support for trading some U.S. stock tokens. As the U.S. SEC Chairman Atkins recently mentioned, in the future, there will be some "super apps" where all types of assets — stocks, bonds, tokens, stablecoins, RWAs — can be traded on a single platform. That day is not far away.

6. Chinese Will Definitely Be the Main Force of RWA Innovation

Meng Yan: But from my conversations with many Chinese blockchain entrepreneurs, I feel that their overall confidence is lacking. The main question is, in this wave of stablecoins and RWAs, the center is in the U.S., and due to the current overall strategic competition between China and the U.S., the idea of "decoupling and breaking chains" is widely discussed. Both sides' nationalist sentiments are high, will Chinese entrepreneurs be treated differently? Will they have a fair chance to compete?

Xiao Feng: If I were to say that this issue does not exist, that would definitely be biased. The geopolitical competition between China and the U.S. will indeed affect the entrepreneurial environment, especially in highly sensitive areas such as technology and finance. However, history has never been a single linear progression, and reality is often more complex and tense than public opinion. Despite the friction, I still confidently say that Chinese entrepreneurs have not only the opportunity but also unique advantages in this wave of stablecoin economy and RWA.

The first reason is the enormous existing advantages. Even in the most difficult times in recent years, China has remained one of the regions with the most blockchain developers globally, with the highest quality of innovation and engineering, and the most active community activities. We must not be fooled by surface appearances; behind many top global projects lies the code, algorithms, and infrastructure of Chinese engineers. In one interview, I candidly advised the Ethereum Foundation: "Ethereum has fallen to its current state because you lost China." From 2014 to 2016, China was a solid foundation for Ethereum developers and users. Later, for various reasons, Ethereum was absent from China, which is a significant reason it lost momentum. This applies to Ethereum and any global blockchain project; success in the Chinese market is crucial, and no one can ignore Chinese developers and communities.

The second reason is highly aligned real interests. The stablecoin economy and RWA are actually a brand-new global channel in the digital economic era. What does it mean for China? It means we can bypass the traditional dollar settlement system and centralized platforms, and use new ways to export China's goods, services, and content. This can not only create jobs, drive growth, and stimulate innovation, but more importantly, it can establish China's own competitiveness in the Web3 world. In other words, this is a new form of "digital globalization."

The third reason is that the new system itself is inherently diverse. The future stablecoin economy will not be a single structure, but a multi-layered, multi-regional, global network with a spectrum and granularity. We will see onshore dollar stablecoin economies, as well as offshore dollar stablecoin economies, similar to today's Eurodollar system, with vast opportunities in Asia, Africa, and Latin America. These regions have great innovation space and more flexible rules. With the entrepreneurial spirit and boldness of Chinese entrepreneurs venturing abroad, these markets will become our home turf.

The fourth reason is that the trend is irreversible. Once the U.S. breaks through, other major economies will inevitably follow suit. Look at Hong Kong, which has already taken the lead by passing the "Stablecoin Ordinance." I believe we will sooner or later start discussing whether to develop an offshore RMB stablecoin. I think this is a strategic issue that is very worthy of serious discussion. If this can be promoted, Chinese entrepreneurs will have greater dominance and say in these non-dollar stablecoin ecosystems.

The fifth reason is my consistent long-term prediction—that China will sooner or later embrace the trend of blockchain and digital assets. We are a country known for pragmatism. As long as something can drive development, serve the real economy, and create benefits, it will eventually be accepted. Once opened, with China's market size and entrepreneurial density, coupled with the diligent and practical nature of the Chinese people, blockchain in China will definitely experience explosive development, becoming the most prosperous innovation hub globally.

Therefore, for Chinese entrepreneurs, you must not be short-sighted and miss the entire era due to local obstacles. What you see today with stablecoins and RWAs is a once-in-a-decade wave. If you don't get on board, you are voluntarily giving up your voice. If you dare to step up, even in rough waters and strong winds, you have the opportunity to carve out a space in this new world. I believe Chinese entrepreneurs will succeed. Five years from now, eight years from now, the stablecoin economy may be in the range of two to three trillion dollars, and I believe that among the industry leaders at that time, a significant proportion will be Chinese faces.

7. The most important innovation is the innovation of order

Meng Yan: The ability of Chinese entrepreneurs to create high-quality products is now unquestionable, and market concerns are focused on trust. As a blockchain entrepreneur myself, I am very dissatisfied with the order that has emerged in this industry. When I decided to join this industry, I was inspired by the spirit of Satoshi Nakamoto, believing that with blockchain, an open and transparent infrastructure, we could construct a more inclusive and fair large-scale collaboration mechanism outside the realm of commercial companies. However, looking back over this decade, the order established by this industry could be described as "sowing the dragon seed and reaping the fleas," which might not be an exaggeration. Our original ideal was to oppose excessive centralization and regulation, but the current order in the crypto market is even worse than the order we originally sought to replace, filled with fraud, distrust, bullying, secret dealings, and ruthless mutual harm. To be honest, if it were ten years ago and the United States proposed legislative regulation of stablecoins and crypto projects, I would probably have opposed it. But now, I feel that since this industry cannot spontaneously generate a benign order, it can only be introduced from external sources.

Xiao Feng: Order is also a product, and it is the most important product. You just said "sowing the dragon seed and reaping the fleas," and I do not refute that. Over this decade, we have indeed experienced the gap between ideals and reality. Starting from a technological idealism, we once hoped that blockchain could spontaneously form an open, transparent, and fair economic order that did not rely on traditional regulatory structures. However, reality has shown that a market without basic rules is difficult to operate stably. This is similar to the U.S. stock market in the 19th century. Human nature hasn't changed, so the outcome will not be different.

However, the problem is not just our own fault. Over the past decade, the financial regulatory authorities in the main jurisdictions faced with the rapid development of blockchain mostly resorted to a "one-size-fits-all" approach, failing to provide a clear compliance path. This has actually led to a reverse selection process in the market. Many entrepreneurs who were originally willing to innovate honestly and had the ability to do good projects could not see the rules clearly or see any hope, so they exited. Many more radical and speculative people were left behind.

Now, the FIT21 Act and the Token Safe Harbor proposal proposed by the United States are positive signals that we have been waiting for for many years. It is not about completely banning tokens but about "setting rules and leaving room for maneuver." For example, the Token Safe Harbor allows project teams, after registering with the SEC, to fundraise with tokens. Three years later, regulatory agencies will assess the project's degree of decentralization: if it meets the standard, it can continue to operate without being treated as a security; if it does not meet the standard, it will be legally brought under securities regulation. This is the dynamic balance between regulation and innovation. It acknowledges the efficiency of token fundraising while establishing the regulatory bottom line and an exit mechanism. In my opinion, this is the process of establishing order. It is not about cutting off tokens completely but about using a system to integrate them into a sustainable development track.

More importantly, the establishment of this order is not only meaningful to the crypto industry. In the future, entrepreneurs in emerging industries such as AI, robotics, biomedicine, new energy, and carbon assets can also completely finance and govern through tokens. This is not just a Web3 matter but rather a new infrastructure issue for the entire innovation ecosystem. So I am optimistic. The right people are willing to come in, willing to act according to the rules, as long as there is a clear order, they will definitely succeed in the end. The market is not afraid of regulation; it is afraid of the absence of rules. When it comes to order, as long as it can be established, innovation will naturally follow.

Meng Yan: Do you have any advice for Chinese entrepreneurs who have the courage to participate in this stablecoin and RWA wave?

Xiao Feng: I have been asked this question quite a lot recently. I want to say that entrepreneurs who step forward today indeed need more courage than in previous years. But precisely because the barrier to entry has been raised, it also indicates that this industry is entering a true construction period. Some of my advice is relatively simple, summarized into five points for everyone's reference.

First is going global. This wave is global; you must go out, step into the eye of the storm of the times. Go to the United States, come to Hong Kong, go to Singapore, go to Dubai—these places are becoming the global innovation forefront of stablecoins and RWAs. If you want to participate, you cannot hesitate, you must fight in the storm, seize your position where the rules are being established.

Second is integrity. The rules of the industry have changed; the path of issuing a token and getting rich overnight is no longer viable. Now is an era of competing real user value and application capabilities. For every product you make, every model you design, you should ask: Can it truly solve the user's problem? Can it create new efficiency? Only projects that truly create value for users will survive in this era.

Third is learning. Not only learn technology and compliance but also learn new ideas and institutional frameworks. You cannot do Web3 things with a Web2 mindset, nor can you speculate in the stablecoin and RWA era with a mindset of issuing tokens to rug pull. Behind this is a whole new set of paradigms; you need to keep learning, constantly break through yourself.

Fourth is grouping together. In this new stage, Chinese entrepreneurs must cooperate, not just for self-protection but for resource integration, mutual learning, and even mutual supervision. This is also the beginning of constructing a new industry order. We have suffered from the "chaos of the token circle" in the past; those lessons must not be repeated. Now is the starting point for rebuilding order, and everyone needs to come together to shape a healthy ecosystem.

Finally, it's about being open. The essence of blockchain is an open, transparent, and fair collaborative network, which is the soul of blockchain. To participate in the stablecoin economy and RWA with the spirit of blockchain, and to innovate with blockchain. That's all, not a profound truth, hopefully it will inspire entrepreneurs who are still considering whether to enter this industry.

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