RWA Project Implementation Overseas: How to Choose the Coin Issuer?

With the continuous improvement and development of the RWA regulatory framework, more and more RWA projects are beginning to be implemented overseas. The core of RWA projects is the tokenization of real-world assets. When it comes to token issuance business, due to the high compliance requirements of various countries' laws and regulations for token issuance, project parties must prioritize compliance when promoting RWA projects. The choice of the issuer is a fundamental yet very critical aspect of the compliance issue in token issuance.

In recent years, due to an open regulatory attitude and a完善的制度框架, Singapore has gradually become a favored region for cryptocurrency industry entrepreneurs and investors, and choosing a Singapore foundation as the issuing entity for RWA projects seems to have become a common practice.

1. The essence of the foundation and its differences from traditional funds

Although different countries have their own definitions and structures for "foundations", most foundations share the following characteristics:

• Non-profit and public welfare: The foundation is established for public welfare purposes, and the income generated from operations can only be reinvested in the foundation and cannot be distributed as benefits to members. Unlike a company, a foundation has no shareholders, only members.

• Independent legal status: The foundation, as an independent legal entity, possesses its own assets and internal governance structure. Some foundations have a board of directors and a board of supervisors responsible for managing daily operations.

In contrast, a "fund" in the traditional sense is essentially an investment tool or a collection of capital pools. Commonly seen in the financial industry, "fund companies" are actually a type of "fund manager". Fund companies raise investor funds by issuing "fund products" to form a capital pool, manage this capital pool to generate returns for investors, complete the "raising, investing, managing, and returning" of the fund, and collect management fees from it.

II. Reasons Why the Cryptocurrency Industry Favors Foundations

Firstly, the non-profit and public welfare characteristics of the foundation align with the decentralized nature of the cryptocurrency industry. The foundation does not distribute profits to its members; instead, members participate in governance as managers, which is consistent with the community autonomy concept advocated in the Web3 field. Therefore, choosing a foundation as the entity is beneficial for project packaging and promotion, making it easier to gain the trust of investors and community participants.

Secondly, many project parties choose foundations as entities, largely influenced by the Ethereum Foundation. As the second largest mainstream cryptocurrency by market value, Ethereum has chosen a foundation as its operating entity. The influence of the Ethereum Foundation has prompted many Web3 entrepreneurs to follow suit.

Finally, the non-profit nature of the foundation can enjoy tax exemptions or incentives in many countries, which helps to reduce the operating costs of the project.

However, from a legal perspective, completing the issuance of tokens does not necessarily have to be done through a foundation. RWA project parties can also choose traditional profit-making entities such as private limited companies or joint stock companies as the issuer of coins. The choice of a foundation is often more due to commercial considerations such as project promotion, operational costs, and tax planning. In addition, as a non-profit organization, foundations may not be able to open accounts with commercial banks in many countries or regions. Therefore, if a foundation is chosen as the issuer of coins, it usually requires the establishment of a private limited company to cooperate with it.

3. The Singapore Foundation and Its Preferred Reasons

It is important to note that the "Singapore Foundation" is more of a colloquial term in the cryptocurrency industry. From a legal perspective, there is no concept of a foundation in the traditional sense under Singapore law. The so-called "Singapore Foundation" in the cryptocurrency industry actually refers to a legal entity recognized as a "Not-for-Profit Organization." Various legal entities can be recognized as non-profit organizations, such as Public Companies Limited by Guarantee, societies, or charitable trusts. RWA project parties typically choose the limited by guarantee legal entity. Therefore, the so-called "Singapore Foundation" in the cryptocurrency industry is actually a limited by guarantee entity recognized as a "Not-for-Profit Organization."

The cryptocurrency industry frequently chose the Singapore Foundation as the issuing coin entity for the following reasons:

1. The Singapore authorities maintain a relatively open and inclusive attitude towards the cryptocurrency industry, which is reflected in the approval of foundation registration applications as issuers of coins. Many cryptocurrency projects can relatively easily pass the relevant approvals and complete token issuance in the form of Singapore foundations.

2. The Singapore government actively supports the development of blockchain and cryptocurrencies, providing a globally leading legal framework and regulatory environment for token issuance activities. Cryptocurrencies are recognized as legal in Singapore, and any contracts involving cryptocurrencies will not be deemed illegal. Singapore has also established a comprehensive legal framework for cryptocurrencies, covering various aspects such as ICOs, taxation, anti-money laundering/anti-terrorism, and the purchase/trading of virtual assets.

3. Singapore has a developed financial and legal infrastructure that has long attracted the attention of international capital and has a good international reputation. Establishing an issue coin entity in Singapore can enhance the credibility and professionalism of the project. At the same time, Singapore is in the same time zone as China, which is relatively friendly for many Chinese players and project parties.

However, can the RWA project in 2025 continue to choose the Singapore foundation as the issue coin entity? From a legal perspective, the Singapore authorities have not explicitly prohibited the Singapore foundation from operating locally as the issue coin entity. However, in recent years, there have been numerous compliance and regulatory issues for cryptocurrency companies established in the form of Singapore foundations. Under the pressure of public opinion and policy regulation, the Singapore authorities, led by ACRA (Accounting and Corporate Regulatory Authority), have begun to significantly tighten the approval for foundations engaged in the cryptocurrency industry.

It can currently be confirmed that ACRA will conduct a detailed background check when registering a foundation. Once a connection with the cryptocurrency industry is detected, it is highly unlikely that the registration application will be approved. Therefore, although the choice of a Singapore foundation as the issuing coin entity for the RWA project is still legally feasible, it has essentially been blocked at the practical level.

4. Other issuers available for RWA projects

In addition to the Singapore Foundation, the RWA project can also consider the following two types of issue coin entities:

1. American Foundation

The logic of choosing the American foundation as the issuer of the coin is basically consistent with that of choosing the Singapore foundation, with the main difference being that the current attitude of American regulatory agencies towards token issuance activities is still relatively open. In addition, the registration cycle for American foundations is relatively fast, with simple threshold requirements and fewer restrictions. Taking Colorado as an example, registering a non-profit foundation can usually be completed within a week.

2. UAE Foundation or DAO organization

The overall structure of the UAE foundation is similar to that of the Singapore foundation. However, it is important to note that Singapore and the UAE belong to different legal systems, and there are significant differences in terms of applicable law, judicial systems, etc., which is crucial when dealing with complex compliance issues across jurisdictions.

A DAO (Decentralized Autonomous Organization) is a form of organization that achieves autonomy through blockchain technology and smart contracts. The UAE has introduced a complete set of rules and a regulatory framework, stipulating that DAO organizations have independent legal status and are characterized by non-profit nature.

In addition, Binance Exchange has reached a $2 billion investment deal with Abu Dhabi investment firm MGX, marking Binance's first introduction of external institutional investors. One of the co-founders of MGX is from the Abu Dhabi Sovereign Fund of the UAE. The collaboration between the UAE Sovereign Fund and the largest mainstream exchange in the crypto space is expected to further promote the development of the cryptocurrency industry in the UAE. In the long term, the prospects for crypto development in the Middle East are promising.

In summary, the UAE foundation or DAO organization is also an option for issuing coins. However, the cost of registering a foundation or DAO in the UAE is relatively high, making it more suitable for projects of a certain scale.

V. Risks and Challenges to Consider When Choosing the American Foundation as the Issuing Entity for RWA Projects

1. Obtain the necessary licenses, such as the MSB license issued by the Financial Crimes Enforcement Network ( FinCEN ).

2. The tense geopolitical relationship between China and the United States leads to frequent changes in the U.S. regulatory attitude and intensity towards offshore companies, creating uncertainty for the long-term compliance operations of companies.

3. The financial and corporate commercial laws in the United States are exceptionally complex, requiring a systematic understanding of federal and state laws, with a high degree of compliance difficulty and complexity.

4. The tax review by the Internal Revenue Service (IRS) in the United States is very strict. Establishing a foundation in the United States requires support from a professional tax planning team to handle related tax issues; otherwise, the business affiliates may be affected by the long-arm jurisdiction of the United States.

VI. Conclusion

In the current context where the regulatory outlook for the global cryptocurrency industry remains unclear, Chinese project teams must adhere to "compliance first" when implementing RWA projects. RWA project teams need to closely collaborate with professional cryptocurrency industry legal teams to jointly promote project implementation.