Introduction:
RWA Is Becoming a Strategic Layer in Global Finance
In recent years, Real-World Assets (RWA) have become a strategic keyword in global fintech. As a framework that connects decentralized finance (DeFi) and traditional finance (TradFi), RWA reflects the deep integration of blockchain with real-world assets, including real estate, receivables, bonds, commodities, and loans.
RWA is not a new financial instrument. Rather, it is a technology-driven evolution of asset representation, a way to digitize and tokenize tangible assets on-chain, making them verifiable, programmable, and tradable through smart contracts. The core value of RWA lies in its ability to enhance transparency, liquidity, and accessibility within a new capital infrastructure.
RWA and ABS Share Common Structural Logic
Structurally, RWA closely resembles Asset-Backed Securities (ABS). Both are based on packaging income-generating assets and redistributing them through legal and financial frameworks. ABS uses Special Purpose Vehicles (SPVs) to isolate risk and issue securities, thereby achieving liquidity and financing. RWA shares the same foundational logic in asset selection, credit structuring, cash flow modelling but diverges in execution:
- ABS operates within centralized financial systems, relying on underwriters, law firms, and rating agencies. The process is often lengthy and high-cost.
- RWA uses decentralized protocols and smart contracts, enabling programmable assets and reducing friction. Tokenisation breaks down barriers to entry and makes transactions globally accessible.
RWA is not a replacement for ABS. It is an extension of its logic into the digital era offering new possibilities for liquidity, cost reduction, and real-time execution without heavy reliance on intermediaries.
RMBS: A Key Use Case for RWA in the Next Phase
Among various ABS categories, Residential Mortgage-Backed Securities (RMBS) may emerge as the next major entry point for RWA application.
- Residential Mortgages Are High-Quality, Predictable Assets
In traditional finance, residential mortgage loans are widely viewed as low-risk, high-compliance, and structurally predictable. They have stable default rates, defined payment schedules, and are backed by real collateral. These features make them naturally suitable for tokenisation.
On-chain RMBS can provide stable yield, low volatility, and high transparency, offering institutional investors a credible, low-risk tokenised product class.
- The RMBS Market Is Massive and Mostly Untokenised
The global RMBS market is significant. In the US alone, the RMBS market exceeds $9 trillion, with daily trading volumes nearing $300 billion, second only to Treasuries and corporate bonds. However, the on-chain penetration remains nearly zero. As institutions seek off-balance-sheet flexibility and new funding paths, RMBS tokenisation presents a new route to unlock liquidity at scale.
- Banks Face Structural Constraints on High-Quality Assets
Traditional institutions hold large portfolios of quality mortgage loans. However, due to capital adequacy requirements and accounting constraints, these assets often remain illiquid.
Tokenising RMBS can offer a compliant, transparent circulation channel to free capital without compromising asset integrity. It improves balance sheet efficiency while maintaining regulatory discipline.
RMBS Market Snapshots
United States
- Total RMBS market: ~$9 trillion (total MBS ~$11 trillion)
- Daily trading volume: ~$300 billion
- Insurance companies held $451.2 billion in RMBS at the end of 2024, up 17% YoY
- The non-agency RMBS segment alone exceeds $1.7 trillion
These figures show the scale and liquidity potential for future tokenisation initiatives.
European Union
- 2021 EU RMBS loan balance: ~$500 billion (60–70% of total ABS market)
- 2024 new issuance: ~$50 billion
While smaller than the US, the EU market still presents clear structural potential, especially with regulatory clarity improving under MiCA and local digital securities frameworks.
China
- Early 2024: RMB 363 billion (~$51 billion) in outstanding MBS, down ~65% YoY
- Early repayments were a key driver of contraction
- However, total mortgage loan volume exceeds RMB 30 trillion (~$3.8 trillion), leaving a vast reserve for future securitisation
Despite recent contraction, China’s mortgage loan base remains large and is likely to be tapped as tokenisation infrastructure matures.
Conclusion:
RMBS Can Be a Practical Bridge for RWA Growth
As a structured, high-value asset class, RMBS offers credible potential as a next-phase application for RWA. Its scale, predictability, and asset-backed nature make it an ideal candidate for on-chain issuance, provided that legal structuring, asset mapping, and smart contract architecture are handled with institutional rigor.
RWA, at this stage, is no longer a concept; it is becoming a modular financial system. RMBS may be the most strategic asset class to unlock its value.