Former Chairman of the China Securities Regulatory Commission Xiao Gang Discusses Web3: RWA is a Vivid Practice of Finance Returning to Its Essence

Author: Bao Yijun, Meta Universe

Yesterday afternoon, Xiao Gang, a member of the 13th National Committee of the Chinese People's Political Consultative Conference and former chairman of the China Securities Regulatory Commission, appeared as a guest speaker at the 2024 Bund Conference forum titled "Talking about the Future: Exploring the 'Physical' Realization of Web3 Digital Dreams." He stated that RWA is a vivid practice of finance returning to its essence and serving the high-quality development of the real economy.

He pointed out that the 20th National Congress of the Communist Party of China and the Central Financial Work Conference both proposed to do a good job in five major areas: technology finance, green finance, inclusive finance, pension finance, and digital finance, which provide direction for the development of financial technology. The development of Web3 can provide strong support for these five areas and promote financial services for the real economy.

He believes that RWA, through blockchain and other Web3 technologies, endows physical assets that already exist in the real world, as well as intangible assets such as intellectual property, carbon credits, and data elements, with a digital form, establishing a value mapping between the real world and the digital world.

He also proposed to adhere to the principle of technological neutrality and proactively strengthen regulation. "Virtual currencies like Bitcoin are not equivalent to Web3, and tokens, which we refer to as tokens, are not necessarily completely decentralized." Moreover, he stated that it is necessary to strengthen cross-border regulatory cooperation, coordinate policy formulation, and jointly explore regulatory frameworks that adapt to new technologies.

This forum was co-hosted by Ant Group and ForesightNews, aiming to discuss the latest developments and industrial practices of Web3 technology, listen to the innovative voices of Asian financial centers, and find successful paths for the tokenization of real-world assets from concept to implementation.

The organizers believe that with the advancement of new productive forces, technological development is seeking new intelligence. Cutting-edge technologies driven by technological innovation to serve industrial development and the intelligent era are beginning to unfold. Looking to the future, cutting-edge technologies represented by blockchain privacy computing and big data AI are becoming key forces in promoting the quality and efficiency of the digital economy.

Below is the full text of Xiao Gang's speech organized by Meta Universe:

Respected guests, ladies and gentlemen:

Good afternoon. It is a great honor to participate in the 2024 Bund Conference today and discuss the physical realization of Web3 digital dreams with all of you. I would like to express my warm congratulations on the successful convening of this forum and extend my sincere welcome to each guest and audience member present.

Every leap in information technology profoundly changes our ways of life and work. From the popularization of the internet to the rise of mobile internet, to breakthroughs in blockchain technology, as well as the rapid development of emerging technologies such as big data and artificial intelligence, the wheels of technology are rolling forward, leading us into a brand new digital era.

Today, our focus on Web3 is not just an iteration of a technical term, but also signifies a network ecosystem that is secure, transparent, and gives users more control. It paints a new vision of the internet's development, shifting from information interconnection to value interconnection.

The digital economy has become an important engine driving global economic growth. The 20th National Congress of the Communist Party of China and the Central Financial Work Conference both proposed to do a good job in five major areas: technology finance, green finance, inclusive finance, pension finance, and digital finance, which provide direction for the development of financial technology. The development of Web3 can provide strong support for these five areas and promote financial services for the real economy.

In terms of technology finance, the decentralized financial platforms brought by Web3 technology can provide global funding sources for innovative companies, increasing the flexibility and capital efficiency of entrepreneurs in fundraising. Smart contract technology can automate business logic, execution, and transaction transparency, reducing operational costs and risks.

In terms of green finance, Web3 technology can help establish a more transparent and trustworthy carbon footprint tracking and trading system, enhancing the traceability and credibility of green finance.

In terms of inclusive finance, Web3 helps lower the barriers to financial services, enabling more people, especially those in remote areas and low-income groups that the traditional financial system has struggled to cover, to access financial services at a lower cost.

In terms of pension finance, the transparency and security mechanisms provided by Web3 have potential value for building long-term stable pension management and investment platforms.

In terms of digital finance, Web3 has promoted the digitization of financial assets, such as through the tokenization of various assets, making the issuance and trading of assets more efficient and flexible, while strengthening users' control over digital assets, providing infrastructure and technical support for the in-depth development of digital finance.

In this transformation brought by Web3, the tokenization of real-world assets, which we abbreviate as RWA, serves as a bridge connecting the digital and physical worlds and is a vivid practice of finance returning to its essence and serving the high-quality development of the real economy.

Our traditional industries, especially manufacturing, have accumulated a large number of real assets, but often remain undervalued due to a lack of liquidity or low asset utilization due to poor operation, which restricts the release of economic growth potential.

RWA, through blockchain and other Web3 technologies, endows physical assets that already exist in the real world, as well as intangible assets such as intellectual property, carbon credits, and data elements, with a digital form, establishing a value mapping between the real world and the digital world.

This approach, on one hand, enhances the liquidity and tradability of real assets through its digital characteristics, allowing more investors to gain investment opportunities in quality assets and breaking through the financing bottlenecks of traditional industries. On the other hand, the use of blockchain smart contract technology can improve the transparency of asset operation management and transaction disposal, reduce moral hazards, and effectively enhance the efficiency of asset trading while lowering transaction costs.

Of course, as we embrace Web3 technology, we must also be clear that any technological advancement comes with risks and challenges. How to effectively manage risks while promoting technological innovation is an important issue before us.

First, we should closely follow the trends of industry innovation, mobilize the innovative momentum of market entities, and explore the development of innovative pilot projects.

Second, we need to proactively strengthen regulation. Virtual currencies like Bitcoin are not equivalent to Web3, and tokens, which we refer to as tokens, are not necessarily completely decentralized. We should adopt a principle of technological neutrality—focusing on external risks, particularly monitoring the authenticity, compliance, and volatility of RWA assets. We must strictly control risks on the off-chain asset side and also strictly control speculation on the on-chain trading side.

Third, we should strengthen risk management and education on technological ethics, enhance public risk awareness, and promote industry self-discipline. Finally, we should promote international cooperation, encouraging technologically strong market institutions to participate in international innovative projects and learn from international experiences.

At the same time, we should strengthen cross-border regulatory cooperation, coordinate policy formulation, and jointly explore regulatory frameworks that adapt to new technologies. For example, the World Bank is researching the use of Web3 and RWA in infrastructure investment, and Singapore and Hong Kong Special Administrative Region are also actively developing Web3. We should consider further cooperation with Singapore and Hong Kong in areas such as cross-border investment transactions of RWA to attract overseas funds, revitalize the physical assets of domestic traditional industries, and inject more liquidity into the domestic real economy.

Dear guests and friends, Web3 is not only a technological revolution but also a transformation of thinking. Let us take this forum as an opportunity to seek paths for development, build a foundation for safety, and create a future together, hand in hand, in the wave of deep integration between the real economy and the digital economy.

Once again, thank you all for your participation, and I look forward to hearing the insights of all the guests in the upcoming agenda. I wish this conference and forum great success. Thank you all.