Avalanche, an established cryptocurrency, is seeing a resurgence. On August 28, Hong Kong’s largest licensed crypto exchange, HashKey Exchange, introduced AVAX/USD and LINK/USD trading pairs. This marks the first time, since opening to retail investors in August 2023, that a new cryptocurrency besides Bitcoin and Ethereum has been made available for retail trading in Hong Kong. The significance of this move is evident.
It’s not just HashKey showing interest in AVAX. Over the past month, major institutions have been positioning themselves with AVAX, Avalanche’s native token, which has seen its price surge by nearly 50%. On August 22, Franklin Templeton, a global investment firm managing $1.6 trillion in assets, expanded its blockchain-based money market fund FOBXX to the Avalanche network. The same day, Grayscale launched the Grayscale Avalanche Trust, allowing investors to buy AVAX like they would stocks.
Avalanche, originally launched in 2018, is suddenly back in the spotlight. Why now? This renewed interest is likely linked to the rising trend of Real-World Assets (RWA), and Avalanche is proving to be a prime platform for RWA applications.
What is RWA?
Real-World Assets (RWA) refer to the process of bringing traditional assets such as real estate, bonds, and stocks onto the blockchain, allowing them to be traded like cryptocurrencies within decentralized finance (DeFi) ecosystems. This innovation not only bridges the gap between traditional finance and blockchain technology but also enhances the liquidity of these assets, making them more accessible to a broader market.
RWA serves as a bridge between traditional finance and blockchain. For blockchain, RWA introduces vast amounts of capital from traditional finance into DeFi. For traditional finance, RWA leverages blockchain to reduce transaction costs and tokenize hard-to-trade assets like real estate, making transactions more efficient.
In recent years, the interest in RWA has surged, attracting attention from major players. For instance, in 2022, asset management company BlockTower Capital collaborated with decentralized stablecoin leader MakerDAO to launch a $220 million RWA investment fund focused on asset tokenization. In 2023, Goldman Sachs introduced a digital asset platform that issued €100 million in two-year digital bonds in Europe, and Siemens issued €60 million in blockchain-based digital bonds.
According to a report by BCG, the global RWA market could reach $16 trillion by 2030, dwarfing the current $2 trillion valuation of the entire crypto industry.
The immense potential of RWA is drawing attention from major institutions, and Avalanche’s technical architecture makes it an ideal platform for RWA development.
Why Avalanche is Perfect for RWA
Different blockchains excel in different areas, and Avalanche’s strengths lie in reducing transaction costs and improving network scalability, making it highly suitable for RWA applications. Here are four key reasons why Avalanche stands out:
- Faster Transactions: Avalanche employs an innovative consensus mechanism, “Avalanche Consensus,” which achieves rapid transaction finality and high throughput. Compared to Ethereum, the largest blockchain, Avalanche can process transactions hundreds of times faster. Given that RWA transactions often involve complex asset flows, quick transaction confirmation is critical.
- Lower Costs: Avalanche offers significantly cheaper transaction fees compared to other blockchains. This is crucial for RWA, as one of its goals is to fractionalize large real-world assets for frequent trading. High transaction fees could otherwise inflate costs. For instance, a transaction on Avalanche costs around $0.01 to $0.10, while the same transaction on Ethereum could cost $20 or more—an enormous difference, especially for frequent RWA trades.
- Broad Interoperability: Avalanche is Ethereum Virtual Machine (EVM) compatible, meaning users can interact with Avalanche using their Ethereum wallets. This design accelerates the adoption of RWA by allowing assets to move easily across most blockchain networks, promoting broader accessibility.
- Regulatory Flexibility: Avalanche allows developers to create independent subnets, making it ideal for developing RWA projects that must comply with different regulatory requirements. Since RWAs are tied to the real world, they cannot avoid regulatory issues such as KYC, AML, and tax reporting. On Avalanche, RWA projects can create customized subnets that comply with local regulations—a flexibility that most other blockchain platforms can’t offer.
Given these advantages, Avalanche has already become home to several RWA projects. For instance, asset management firm Intain has launched its RWA platform IntainMarkets on an Avalanche subnet. Securitize, in collaboration with global asset manager KKR, has also tokenized KKR’s Healthcare Strategic Growth Fund II (HCSG II) on Avalanche.
RWA: The Next Big Thing for Hong Kong’s Financial Sector
Hong Kong, known for its financial innovation, is actively embracing blockchain technology. With its robust market foundation and flexible regulatory environment, Hong Kong is uniquely positioned to benefit from the growth of the RWA market. In turn, RWA can play a crucial role in advancing Hong Kong’s economy.
Traditional asset trading processes are complex and costly, particularly in cross-border transactions, where time and fees can be limiting factors—an issue that stands out in Hong Kong’s open economic environment. RWA can simplify these processes, enabling investors to trade with lower costs and greater transparency. For example, RWA tokenization of cross-border real estate can resolve issues like currency exchange and reliance on intermediaries.
Moreover, as a bridge between Mainland China and global markets, Hong Kong has a natural advantage in attracting international capital. Through RWA tokenization, international investors can more easily access Hong Kong’s market.
Hong Kong’s regulators, such as the Securities and Futures Commission (SFC), have maintained a positive attitude toward blockchain and cryptocurrencies. This year, Hong Kong introduced its first crypto ETFs, signaling a major step forward in financial innovation and digital assets.
Recent initiatives, such as Project Ensemble Sandbox, have also advanced RWA applications in Hong Kong. This project tests the tokenization of RWAs in a sandbox environment, particularly in areas like fixed income, investment funds, and supply chains. Additionally, JD.com’s issuance of the JD-HKD stablecoin, pegged to the Hong Kong Dollar, has drawn considerable market attention.
The Role of HashKey Exchange in Hong Kong’s RWA Development
As one of Hong Kong’s key licensed crypto exchanges, HashKey Exchange acts as a crucial bridge between crypto assets and real-world assets in the city’s RWA development. The listing of AVAX on HashKey Exchange—the first new token available for retail trading in Hong Kong after BTC and ETH—marks a significant step in expanding the use cases for cryptocurrencies in Hong Kong’s market.
By providing investors with diversified options, HashKey Exchange is driving the digital transformation of Hong Kong’s financial markets, potentially becoming a key player in the city’s RWA ecosystem.
Just as Coinbase and Grayscale have played crucial roles in the development of the global crypto industry, HashKey Exchange is set to play a pivotal role in the evolution of Hong Kong’s crypto and financial innovation landscape.
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