China Classifies RWA as Illegal Finance in Regulatory Action

• Seven Chinese financial associations classify RWA tokenization as illegal finance.
• Document states no real-world asset tokenization activities have been approved.
• Service providers and intermediaries face joint liability under the new framework.

Seven leading Chinese financial industry associations released a joint risk warning on Friday, labeling real-world asset (RWA) tokenization as an illegal financial activity. The notice was jointly issued by the National Internet Finance Association of China, along with the Banking, Securities, Asset Management, Futures, Listed Companies, and Payment & Clearing associations.

The document explicitly names RWA for the first time in official regulatory guidance, listing it alongside stablecoins, worthless tokens, and mining operations as prohibited virtual currency activities. The cross-industry coordination at this level typically appears only during major moments of financial risk prevention.

Regulatory Framework Establishes Three Red Lines

Chinese authorities defined RWA as “financing and trading activities carried out through the issuance of tokens or other rights or debt certificates with token-like characteristics.” The document identifies multiple risks, including fraudulent assets, operational failure, and speculative hype.

The statement draws three clear regulatory boundaries. First, RWA is classified as a fundraising mechanism that falls under existing financial regulation prohibited by the Securities Law. Any activity involving token issuance, asset transactions, or interest distribution enters this scope.

Second, regulators highlighted that token structures cannot guarantee legal ownership or enforceable claims on underlying assets. Risk spillover remains uncontrollable even for projects claiming real assets, transparent technology, and compliant structures.

Third, the document states that Chinese financial regulatory authorities have not approved any real-world asset tokenization activities. This declaration means all RWA-branded tokenized assets, services, intermediaries, and trading platforms currently operating lack a legal basis. There is no regulatory exploration phase or future filing pathway.

The notice explicitly addresses joint liability for ecosystem participants. “Domestic staff of overseas virtual-currency or real-world-asset token service providers, as well as domestic institutions or individuals who knowingly or should have known of such activities yet still provide services, will be held legally accountable,” the document states.

This applies to all service providers, including project consultants, technology outsourcers, marketing agents, KOL promoters, and payment integrators. The “knowingly or should have known” standard creates a legal presumption based on reasonable awareness rather than explicit intent.

The guidance directly negates the operational model of an offshore entity with mainland staff. Even companies registered offshore face liability if teams operate in mainland China. Any domestic connection triggers potential legal risks under the framework.

Related: Solana RWA Ecosystem Hits $873M All-Time High With 325% Growth Throughout 2025