Take RWA Tokenization Offshore First

Key Takeaways

• The RWA market is growing rapidly, but many jurisdictions still lack adequate regulation. Financial institutions in those jurisdictions must make a strategic choice among waiting for domestic legislation, using a regulatory sandbox, or entering a foreign market.

• International RWA operations demand a high degree of precision. Thorough preparation is required across six core areas before entry, covering jurisdiction selection, licensing, asset definition, investor scope, and the design of settlement and operational arrangements.

• The central objective is to build real operational experience by choosing the path that fits the situation. The two main options are direct entry into a jurisdiction with established regulation and a technical route using on-chain native platforms.

1. Wait, Experiment, or Go Abroad

As of the first half of 2026, the real-world asset (RWA) tokenization market has grown to roughly $25 billion to $36 billion. It has drawn the attention of institutional investors by demonstrating clear efficiency gains through tokenization, including automated interest payments and redemptions, shorter settlement periods, and a broader customer base.

Financial institutions nonetheless face a practical obstacle in the regulatory vacuum. Although nothing explicitly prohibits tokenization, the legal framework needed to give distributed-ledger records binding legal effect remains underdeveloped, leaving investor rights without adequate protection. In response, financial institutions have converged on three broad strategies.

• Waiting for domestic legislation: This is favorable for risk management but carries a significant risk of losing the chance to secure an early market position.

• Using a regulatory sandbox: This allows limited experimentation but is confined to areas such as fractional investment and does not scale to the issuance of standardized securities.

• Entering foreign markets first: This means issuing digital bonds in jurisdictions where regulation is already in place, demonstrating results there, and building a track record offshore early to establish a competitive position.

Because the RWA market is inherently a global business, building operational capability across varied regulatory environments is essential. International expansion involves real practical constraints, but financial institutions in jurisdictions that still lack regulation have all the more reason to begin accumulating hands-on experience in foreign markets ahead of their peers.

2. Tokenization Is Not Magic

International RWA operations are not the product of isolated decisions. The choices involved form a chain, where the outcome of each step determines the path available at the next. Tokenization is not magic: it is a process of migrating existing financial instruments onto new infrastructure, and that process demands a higher degree of precision than traditional issuance, not a lower one.

Before committing to entry, institutions should assess their own readiness honestly against the following six requirements.

• Establishing an offshore base: The institution must determine how it will use key jurisdictions such as Hong Kong, Singapore, or the United States, and whether it will work through an existing entity, establish a new one, or partner with a local firm. A new entity offers greater control but requires significant resource investment; a partnership allows faster entry but limits how deeply the institution can internalize core capabilities.

• Licensing: The institution must satisfy the licensing requirements of the jurisdictions where it intends to sell. The choice is between direct acquisition, which takes time and capital, and leveraging the license of an existing platform, which is faster but requires structuring the issuance to fit that platform’s specifications.

• Defining the asset: The choice of what to tokenize determines the height of the entry barrier. Standardized securities such as bonds have well-established structures and are relatively straightforward to bring to market, while non-standard assets such as real estate or trade receivables require considerably more time for legal review and structuring.

• Defining the target investor: The typical approach is to target all jurisdictions except the United States. Selling to non-US investors allows the issuer to rely on Regulation S for an offshore exemption, but including US investors triggers separate requirements such as Regulation D, adding structural complexity. Beyond this, many STO and RWA platforms restrict sales to accredited or institutional investors, so the sales strategy must be set at the same time as the investor perimeter.

• Settlement currency and payment flow: The institution must decide whether to accept settlement in local currency, US dollars, stablecoins, or wholesale CBDC. This is not simply a choice of currency: it determines investor accessibility, custody structure, and ultimately revenue. Accepting stablecoins, for instance, introduces conversion requirements and the potential for additional costs.

• Other operational requirements: Depending on the structure, a wide range of additional considerations apply, including blockchain selection, custody, on-chain operations, and post-issuance governance. In particular, the institution must confirm who controls interest payments and redemptions, registry management, and the ability to force-transfer or freeze tokens in the event of an incident, all of which parallel the operational requirements of traditional financial instruments.

Tokenization is not magic. Even after a structure is complete, the work is not finished until the securities are sold and investors are found.

3. Where to Operate

Jurisdiction selection is a strategic decision that requires weighing regulatory fit and operational efficiency at the same time.

For institutions that already have an offshore presence, however, the most efficient starting point is to assess that existing jurisdiction first. If the primary objective of an offshore tokenization strategy is to accumulate hands-on experience early, establishing a foothold in an entirely new jurisdiction imposes a high threshold in terms of time and capital.

• Hong Kong: Regulatory completeness and enforceability
  Hong Kong is the most advanced first-mover market in terms of implementation. Security tokens are regulated within the existing Securities and Futures Ordinance framework, and an April 2026 SFC circular permitted secondary trading on licensed virtual asset exchanges, completing the link between issuance and distribution. Infrastructure such as HSBC Orion is already operational, and policy support is strong, including HKMA subsidies for issuance costs. Institutions should note, however, that if legislation introducing new virtual asset dealer and custody licenses proceeds as planned during 2026, compliance with any transitional provisions will require attention.

• Singapore: Precise framework and regulatory clarity
  Singapore applies the Securities and Futures Act strictly under the principle of “same activity, same risk, same regulation.” MAS revised its tokenization guidelines in December 2025 to provide clearer guidance, and the Variable Capital Company (VCC) structure makes asset segregation straightforward, making Singapore well suited for fund structuring. The jurisdiction does, however, impose stringent licensing requirements even for services directed at offshore customers, and the entry threshold is high.

• United States: Regulatory clarity and an efficient path to market
  The joint SEC-CFTC interpretation issued in 2026 has clarified the asset classification framework. Obtaining licenses directly as an issuer remains costly, but working through a vertically integrated platform such as Securitize allows efficient issuance under the Regulation D exemption for US accredited investors and the Regulation S exemption for offshore investors. BlackRock’s BUIDL fund is the most prominent example of this approach.

Each jurisdiction has established platforms that can accelerate local entry. These are licensed operators that provide integrated access to regulatory coordination, investor networks for fundraising within the platform, and the operational infrastructure covering the full lifecycle from issuance through settlement.

When assessing entry into a specific jurisdiction, meeting with the leading local platforms to test business feasibility is strategically more efficient than working through extensive regulatory documentation first.

4. Bypassing the Jurisdiction

Where the previous section covered the direct approach of establishing a legal and physical presence in a specific jurisdiction and obtaining the necessary licenses, this section addresses a fundamentally different method. The on-chain native approach designs issuance and distribution from the outset around an on-chain environment.

Rather than investing the time and capital required to secure a physical base, it works with or borrows the structural logic of on-chain platforms that already have regulatory compliance built in, using that infrastructure to reduce the barriers to market entry. Where the jurisdiction-based approach in the previous section asks “where will we operate,” the on-chain native approach asks “how will we structure the deal.”

Representative examples are as follows.

• Ondo Global: Ondo tokenizes US securities through a bankruptcy-remote special purpose vehicle (SPV) incorporated in the British Virgin Islands, using the Regulation S offshore exemption to minimize friction with US securities regulation. It also operates its own secondary market, Ondo Global Markets, to handle trading of its issued tokens directly.

• Plume Nest: Plume’s Bermuda subsidiary, KDAB (Kimber Digital Assets Bermuda), holds a Class M DABA license from the Bermuda Monetary Authority and operates a regulated on-chain vault. Access to the Plume Nest platform is restricted to investors who have passed KYB and KYC screening, and a separate affiliate’s registration as an SEC transfer agent provides a second layer of coverage for ownership registry management and distribution. Tokenization outside the licensed structure is also possible given the platform’s decentralized design, though that path is not well suited to regulated financial institutions.

The structure of an on-chain native strategy closely resembles jurisdiction-based tokenization in substance, but the difference in execution is clear. The primary advantage is speed of entry and breadth of reach: rather than being tied to a specific base, an institution can use already-proven infrastructure to move to market sooner. A further advantage, particularly in contrast to jurisdiction-based platforms whose closed ecosystems can constrain secondary market liquidity, is that on-chain native platforms built around scalability connect organically with DeFi liquidity pools.

The complexity of the structural design, however, is a risk worth considering. The open nature of these platforms allows for a wider range of products, but the established regulatory guidelines that exist for the direct jurisdiction-based approach are absent when it comes to core structural decisions such as issuance design. Because these platforms also operate under structures that differ by platform rather than by jurisdiction, they can create operational burdens for traditional financial institutions, and it is worth assessing whether a local point of contact for the relevant platform is available in the target region.

5. Do Not Wait for Regulation. The Market Will Not Wait.

Large US financial institutions are already leading the market, either by building proprietary platforms or by accumulating direct experience on Canton, Solana, and Ethereum.

For financial institutions in jurisdictions that still lack regulation, launching an offshore RWA business requires redesigning the entire value chain locally, from establishing a base through to distribution. The preparation period typically runs from six months to over a year. The following example traces that process through a mid-sized securities firm, “Firm A,” with an existing Hong Kong entity, tokenizing short-duration investment-grade bonds for sale to offshore institutional investors.

• Step 1: Assessing the existing base and licensing position. The firm uses its existing entity, in this case its Hong Kong subsidiary, to avoid the time and cost of incorporating a new one. Whether the existing license covers tokenization activities is a separate question. Local legal counsel reviews the scope of the current authorization, and where necessary the firm makes a preliminary inquiry to the regulator, here the SFC, to confirm whether a license condition change or additional filing is required.

• Step 2: Selecting a platform and infrastructure. To reduce the time that direct licensing would require, the firm considers working through an established platform such as DigiFT. Vendor due diligence covers the platform’s license validity, the range of supported assets, custody partners, and investor restrictions. At the contract stage, legal review addresses issuance structure design to fit the platform’s specifications, allocation of liability, and governing law.

• Step 3: Regulatory compliance and product design. This step finalizes the product structure of the bond to be tokenized, covering the underlying asset, investor rights, and governing law. The standard approach targets offshore institutional investors outside the United States using the Regulation S exemption. A legal opinion on compliance with local securities law must be obtained for each target jurisdiction. The firm also verifies that its logic for excluding domestic residents is sound under securities law before moving into drafting and approval of the offering documents.

• Step 4: Designing the custody structure and on-chain operations. The firm establishes a dual custody arrangement combining a global custodian bank for the physical asset and specialized infrastructure for the on-chain token. Legal opinions are obtained through external counsel. The firm also finalizes the operational details, including interest payment schedule, settlement currency (US dollars or stablecoins), and redemption mechanics.

• Step 5: Issuance, execution, and verification. The firm executes the actual issuance and sale in accordance with the finalized structure, then confirms that operational procedures such as interest payments and redemptions function as designed. Structural design is the starting point; the business is not complete until investors are secured and the sale is closed.

An offshore tokenization strategy of this kind is not limited to the direct approach of building a base in a specific jurisdiction. Routes such as the on-chain native approach, which navigates around jurisdictional boundaries with greater flexibility, mean that the range of viable paths is effectively open.

Legal review will be the single most time-consuming and costly threshold in any approach taken. Waiting for a complete regulatory framework is not, however, the only answer. The ability to map viable paths quickly and build experience through execution matters more than anything else, because the substance of a tokenization business lies not in technical design but in completing the full sales process.

No one can predict when regulation will be finalized, and the market will not wait. The time to act is now.

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