From South Korea to the World via Hong Kong: How RWA is Connecting Globally?

Author: Tiger Research

Compiled by: Shenchao TechFlow

Senchao Guide: The market for tokenized real assets has surged 26 times in just one year, but the real challenge lies in whether issuance, sales, and redemption can form a closed loop. This article breaks down the complete path of South Korean assets reaching overseas professional investors through Hong Kong, providing a rare practical dissection for those concerned with compliance structures and cross-border distribution.

Key Points

The market for tokenized real assets is growing rapidly. The real question is: how are tokenized products issued, sold, and redeemed in practice?

In the model dissected in this article, offshore entities issue products backed by underlying assets, while licensed intermediaries in Hong Kong sell to overseas professional investors. Investors are buying the issuer's products, not the underlying assets themselves.

Selling the products does not equate to being able to repay the money. The issuer must have enforceable rights over the asset's cash flow, and funds must be in place on time to cover their obligations to investors.

The real test comes after the first issuance: can the same structure support the next product? A sustainable market requires stable asset supply and investors willing to repurchase.

1. The Market for Tokenized Real Assets Has Grown, Now Comes the Key

According to data from RWA.xyz, the market for tokenized real assets has grown from approximately $1.5 billion in August 2023 to about $38.86 billion by September 13, 2026, a growth of about 26 times. More types of assets are being tokenized, and governments around the world are establishing rules for issuance and sales.

The growth is evident. The real question now is: how can an asset be turned into a product that investors can actually buy and ultimately get their money back?

2. Where to Tokenize?

Various jurisdictions are introducing rules for tokenized assets, but the requirements and pace vary. Therefore, where the product is issued will directly affect how quickly it can enter the market.

Hong Kong has a mature securities regulatory framework, international investor channels, and experience in issuing tokenized bonds (including government bonds). Its licensing system and investor protection requirements provide a framework for issuers and intermediaries to bring products to market.

Hong Kong has established rules for key aspects of tokenization, from SFC licensing and virtual asset service provider regulation to technical safeguards. This clarity helps institutions plan their issuance and gives institutional investors a basis for assessing their level of protection. This is also one of the reasons why Hong Kong is gaining attention as a hub for the issuance and distribution of tokenized real assets.

So, how do assets from another country reach overseas investors via Hong Kong? We take South Korean assets as an example to dissect the entire process.

3. How the South Korea-Hong Kong Structure Works

The structure diagram is divided into left and right sides. The left side is South Korea, where the underlying assets originate. The right side is Hong Kong and the British Virgin Islands, where products are issued and sold.

The black arrows represent the product structure.

South Korean securities firms: provide channels for purchasing underlying assets, such as listed stocks, fund shares, and notes.

British Virgin Islands special purpose companies: buy and hold these assets through the brokerage accounts of South Korean securities firms in Hong Kong, and then issue notes backed by these assets.

Tokenization platforms: create tokens representing the notes issued by special purpose companies and record issuance and ownership.

Distributors: sell products to overseas professional investors through licensed intermediaries and compliant trading venues.

The orange arrows represent the flow of subscription funds.

Overseas professional investors subscribe using fiat currency or stablecoins. Funds reach the special purpose company through intermediaries. If subscribed with stablecoins, the special purpose company will convert them into fiat currency through centralized exchanges. Subsequently, the funds are transferred from the Hong Kong entity to the South Korean securities firm, which completes the purchase of the underlying assets.

Hong Kong fintech company Finloop refers to this model as the "dual-engine model." One end is responsible for asset supply, while the other end is responsible for issuance and distribution. Three points are crucial.

Asset sources can be interchangeable. Securities firms from other countries and their Hong Kong entities can replace South Korean institutions. Thus, Hong Kong can become a distribution channel for products backed by assets from multiple markets.

The special purpose company is at the center. It receives subscription funds, purchases or holds assets, and issues notes. Investors assert their rights against the special purpose company based on the product terms, so the special purpose company's rights over the assets and its ability to distribute returns are crucial.

The special purpose company connects on-chain payments with traditional finance. Investors can subscribe with stablecoins and hold tokenized notes, while the underlying assets are purchased and held through brokerage and custody arrangements.

This structure can only operate if all parts are established. This requires suitable underlying assets, a robust issuance structure, and a compliant path to investors.

3.1. How to Select Underlying Assets

Before issuing products, the special purpose company must have clear legal rights to the cash generated by the underlying assets.

For government bonds or fund shares, the question may be whether the special purpose company can directly purchase and hold them. For export receivables or music royalties, the situation is more complex. The rights to collect future payments may need to be transferred to the special purpose company, or the asset holder must have binding obligations to collect and remit to the special purpose company.

In either case, contracts must clearly specify who has the right to receive cash, who is responsible for collection, and how funds reach the special purpose company. Without a clear repayment path, the assets cannot stably support payments to investors.

3.2. What Does the Offshore Issuer Create?

In this model, the core of tokenization lies with the special purpose company. Even with selected South Korean underlying assets, an independent entity is still needed to issue tokens and distribute the returns to overseas investors.

Finloop's dual-engine model assigns this role to a special purpose company registered in the British Virgin Islands. This company serves as the connection point between South Korean asset holders and overseas investors.

The special purpose company issues tokenized notes or securities backed by the rights to income from South Korean assets. Therefore, overseas investors are buying financial products issued by the special purpose company, not the South Korean government bonds or export receivables themselves. According to the product terms, the special purpose company pays returns to investors and repays the principal at maturity.

To ensure this structure operates reliably, the timing of cash inflows to the special purpose company must match its payment obligations to investors. The issuer must first confirm the repayment timing for each underlying asset: interest and principal of government bonds, dividends and redemption amounts of funds, or settlement amounts of export receivables and royalties.

If investors need to receive payments before the SPV receives funds, the product may face liquidity shortages or delayed repayments.

Establishing an SPV offshore does not automatically grant it the cash generated by South Korean assets. Contracts must clarify the SPV's legal rights to the underlying assets, who collects the cash, and who is responsible for remitting funds to the SPV. Meanwhile, the tokenization platform will transparently record the issuance quantity, token holding status, and destruction quantity.

The core task during the offshore issuance phase is to ensure that the cash the SPV can actually receive is sufficient and arrives on time to fulfill the payment terms promised to investors.

3.3. What is the Potential Market for Products Sold in Hong Kong?

Creating products through offshore SPVs is just the first step. To sell to overseas investors, issuers also need a financial institution responsible for distribution. Finloop proposes using licensed Hong Kong intermediaries, which can review products according to Hong Kong securities rules, sell to professional investors, and reach investors outside Hong Kong.

Intermediaries will review the terms and risks of SPV products and confirm that each investor is qualified to purchase. If the issuance is limited to professional investors, token transfers must also remain restricted after issuance. Therefore, product terms will limit transfers to buyers whose qualifications have been verified. This is Finloop's vision for its private placement product structure; this restriction does not apply to every type of tokenized security in Hong Kong.

Finloop also proposes that products first sold in Hong Kong be offered through intermediaries and trading venues in other regions. However, the initial sale in Hong Kong does not automatically permit sales or trading elsewhere. The rules of each market need to be assessed separately. Investors wishing to sell before maturity will also need willing buyers and a method to determine the price. Using products as collateral will require institutions willing to accept them.

In this structure, Hong Kong provides the channel for initial sales and investor qualification verification. Sales and trading in other regions, as well as using products as collateral, require separate arrangements.

4. Three Major Risks That Could Disrupt Payments from Korean Assets to Investors

Tokenized products may be successfully sold in Hong Kong but still fail to make promised payments to investors. The cash generated by the underlying assets must reach investors through offshore issuance tools (SPVs). The following three major risks could disrupt this cash flow.

Unclear rights and collection arrangements: For assets like export receivables, contracts must clearly specify where buyers make payments and who has the right to collect. Unless collection obligations and settlement processes are legally binding, cash generated by the assets may never reach the SPV.

Timing differences between cash recovery and payments: If investors must receive payments before the underlying assets settle, the SPV may face liquidity shortages and delayed repayments. When Korean assets support dollar-denominated products, exchange rate fluctuations and conversion costs may also reduce returns.

Cross-border transfer and tax bottlenecks: The fact that Hong Kong intermediaries are authorized to sell the product does not resolve how funds are transferred from South Korean asset holders to offshore SPVs, nor does it address how payments are made to overseas investors. These transfer and tax procedures must be practically feasible.

This model ultimately depends on whether the cash generated by South Korean assets can be fully and timely delivered to overseas investors through the SPV as promised in the contracts.

5. The Second Issuance is More Important than the First

Selling a product backed by South Korean assets in Hong Kong is just the starting point. The first issuance takes a long time: all parties need to review the assets, finalize contracts, and decide on the sales method for the product.

If every new product requires repeating this work from scratch, scaling the business will be difficult. From the second issuance onwards, they need to be able to reuse the structure established for the first transaction.

Dollar-denominated export receivables provide a way to test whether this model is viable. Issuers and intermediaries can apply the debtor assessment criteria and product disclosure methods established for the first transaction to subsequent receivables, thereby reducing the design workload for each product. However, using the same standards does not mean that the risks of each receivable are the same.

To determine whether this model can support a sustainable market, attention must be paid to progress in three areas:

Has the time required for asset review decreased with each issuance?

Are existing investors returning to purchase new products?

Do asset holders have reasons to continue supplying assets?

As experience with export receivables accumulates, this model can be extended to other South Korean assets. Its success depends not only on a one-time issuance. Asset holders must continuously supply suitable assets, investors must be willing to reinvest, and intermediaries must see the value in bringing new products to market.

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