RWA Utility Tokens, Stop Kidding Yourselves

Original Author: Lawyer Shao Jiadian

Introduction

Many RWA projects, during their first consultation with a lawyer, will almost always say the exact same thing:

"Ours is not a security, it's a utility RWA token."

"We are just putting real assets on-chain, there's no financing attribute."

"We are a utility token, not a security token."

To be honest, I'm numb to hearing this kind of talk.

But the problem is—regulation is never determined by "what you call yourself," but by "what you are actually doing."

And one very important point is:

The grey buffer zone of the "RWA utility token" is being squeezed out bit by bit by real regulatory precedents in major jurisdictions worldwide.

In today's article, I will do just one thing:

Without using abstract legal clauses or empty theories, I will use real regulatory cases to show you—how "RWA utility tokens" have been step-by-step classified as "security tokens."

What you think you are doing vs. What regulators see you doing

Let's be blunt. The real structure of the vast majority of so-called "RWA utility tokens" is this:

• Project Team:

"I am putting real-world assets like mining rigs, computing power, power stations, charging piles, real estate, accounts receivable on-chain."

• User:

"I buy your token."

• Actual Economic Relationship:
• Money enters an asset pool controlled by the project team;
• The project team purchases and operates the RWA assets;
• Profits are distributed proportionally to token holders;
• You also give them a bit of "governance rights," "usage rights," "ecosystem benefits."

What you package it as externally:

Utility, governance, ecosystem, on-chain credential.

But what regulators see are four standard elements of a security:

1. Investment of money (paying money to buy the token)
2. Into a common enterprise (you are collectively operating the RWA)
3. With an expectation of profits (dividends, interest, yield distribution)
4. Derived from the efforts of others (you are operating the assets)

Once these four points are established, in all mature jurisdictions like the US, EU, Switzerland, Hong Kong, etc., it will be directly labeled with one term: Investment Contract = Security

Whether you call it RWA, Token, or NFT, it does not change the conclusion that "legally, it is a security."

Real Case Study One:

"RWA + Governance Token" directly penalized by the SEC as a "Securities Offering"

This is a name you must remember:

DeFiMoney Market (DMM)

What did the project say externally?

• This is a "DeFi + Real World Asset Yield Protocol"
• Underlying assets are: real-world debt like auto loans (standard RWA)
• Offers users two types of tokens:
• One is a "fixed-yield token" (promising 6.25% APY)
• One is a "governance token DMG," claimed to be "governance + ecosystem utility"

The project said:

One is a yield instrument, one is a utility governance token.

What did the SEC (U.S. Securities and Exchange Commission) say?

One sentence to定性 (determine the nature):

Both of these tokens are securities.

The reasoning was very direct:

• Funds entered a unified RWA asset pool;
• Profits came from the project team's operation of the real-world assets;
• Investors were passive recipients of distributions;
• The so-called "governance rights" did not change its "investment nature."

Final outcome:

• Unregistered securities offering established;
• The project team was fined;
• Investors entered a restitution process.

The most brutal part of such cases is:

Even if you actually have real assets, and you actually generate yields, and you actually put it on-chain,

As long as your structure is "you manage the assets, users get the yields," you cannot escape securities law.

Real Case Study Two:

"Asset-Backed RWA Token" directly认定为 (recognized as) Security + Fraud

Let's look at another project closer to the "asset-backed RWA" projects you see on the market now:

Unicoin Case (SEC lawsuit in 2025)

This project's positioning was very standard back then:

• Issuing so-called "rights certificates" + future exchangeable RWA tokens;
• Externally宣称 (claimed):
• Tokens are backed by real estate + Pre-IPO equity;
• It is a "safe, stable, real-asset-backed crypto asset."

Doesn't that sound very "compliant"?

Doesn't it sound very much like the rhetoric in a lot of RWA whitepapers now?

The SEC's determination was just one sentence:

This was a typical unregistered securities offering + fraudulent asset-backed promotion.

The core logic was also very harsh:

• Investors are not buying "usage rights";
• But rather an "expectation of future profits from an asset pool";
• You packaging this expectation into a Token is still essentially a security.

Why does the "Utility" argument particularly fail in the RWA field?

Because there is a natural conflict between RWA and "utility tokens":

• Utility tokens emphasize:

Usage rights, consumption, access, governance participation

• RWA emphasizes:

Assets, yield, cash flow, returns

Once your RWA token possesses any of the following:

• Regular dividends
• Proportional profit sharing
• Corresponding to real asset cash flow
• Redeemable for underlying assets according to rules

Then in the eyes of regulators, you are no longer a "utility token," but rather:

• A profit rights certificate
• An asset-backed certificate
• An investment contract
• A security token

This is not abstract reasoning, this is logic that global regulators have already uniformly applied in practice.

A reality you must face:

In the future, RWA token regulation will only become more "security-like"

This is not a trend prediction, but a fact that has already happened:

• United States:

All RWA + yield structures will优先进入 (prioritized for entry into) the unregistered securities offering review path.

• European Union (MiCA + Securities Law):

Anything that is "transferable + has yield attributes +面向公众 (targeted at the public)" naturally falls under securities regulation.

• Switzerland:

Utility Tokens, as long as they "simultaneously have an investment purpose," are directly treated as securities.

• Hong Kong:

As long as it constitutes a "Collective Investment Scheme (CIS)", regardless of whether it's a Token or not, it同样进入 (also enters) the securities regulatory system.

In other words:

Regulators are not ignorant about RWA; they are looking at RWA entirely as an "upgraded version of securities."

Truly harsh one-sentence summary

You might not like this sentence, but it holds true for the vast majority of "RWA utility token projects":

It's not that you don't know you are raising funds, but that you are unwilling to admit you are conducting a "fundraising that cannot be done as a security."

The problem is:

• You can fool the market for a while;
• You can talk about utility, ecosystem, narrative in your groups;
• But you cannot fool the legal定性 (determination) of real regulation.

So does RWA "have to be a security"?

Finally, I'll say something very honest and very important:

Not all RWA must be made into securities, but if you want to "raise funds from the non-specific public + give profit expectations," you must accept the proper path of securities regulation.

From a practical global perspective, currently, if RWA hopes to avoid the "traditional securities law path," there are only three truly viable models:

First, completely de-yielded, retaining only on-chain usage and consumption attributes—"pure utility RWA凭证 (credentials)";

Second, strictly confined to qualified investors in a私募型 (private placement type) RWA;

Third, the path represented by Dubai's VARA—"securities logic virtual assetization"—it doesn't avoid securities, but rather allows RWA Tokens with security attributes to合规触达 (compliantly reach) retail investors under a specialized virtual asset regulatory system.

Other than these, any RWA structure that involves "public fundraising + profit distribution + free tradability" will almost inevitably be pulled back into the securities regulatory framework in major global jurisdictions.

Furthermore:

• Targeting retail investors
• Tradable
• Has yield
• Has dividends
• Has an asset pool

No matter how much you包装 (package) it as a "utility token," the outcome in front of regulators is highly predictable.

One last sentence, for all project teams "struggling with utility RWA":

You are not choosing between "utility type" or "security type"; you are choosing—"long-term compliance" or "short-term侥幸 (gambling on luck)". This is not a moral issue, it is a survival issue.