Beijing escalates rwa tokenization china clampdown with sweeping ban and legal risk for Hong Kong Web3 links

Regulators on the mainland have moved decisively against rwa tokenization china, reshaping the landscape for domestic and offshore Web3 projects tied to Chinese users.

Seven finance associations declare RWA illegal activity

Seven major Chinese financial industry associations have jointly classified real-world asset tokenization as an illegal financial activity, according to a local report in China. The move, announced in 2025, places RWA structures in the same risk bucket as cryptocurrencies, stablecoins, and crypto mining.

The China Internet Finance Association, China Banking Association, China Securities Association, China Asset Management Association, China Futures Association, China Association of Listed Companies, and China Payment and Clearing Association jointly issued the notice. Moreover, they warned both domestic and overseas practitioners that RWA activities lack any legal basis under current Chinese law.

The statement explicitly listed RWA alongside stablecoins, cryptocurrencies and crypto mining as primary forms of illegal virtual currency activity. However, it went further by characterizing tokenization projects as inherently high-risk and fraudulent, rather than emerging financial technologies still awaiting regulatory clarification.

China skeptical of real world asset push

An attorney cited in the report described the coordinated announcement as “a blatant cross-industry, cross-regulatory ‘unified messaging’ operation.” According to this view, such synchronized association action typically occurs only at critical moments when authorities seek to prevent systemic financial risks.

The joint notice defined real-world asset tokenization as “financing and trading activities through the issuance of tokens or other rights and debt instruments with token characteristics.” It added that these activities carry “multiple risks, including the risk of fictitious assets, the risk of business failure, and the risk of speculation.”

Regulators stressed that Chinese financial authorities have not approved any real world asset tokenization projects. That said, the notice also removed any room for projects to claim they are still in exploratory phases or awaiting registration, stating plainly that no such regulatory sandbox exists for RWA in China.

The stance stands in sharp contrast to Singapore, which the document notes leads the global ranking in 2025 for RWA adoption. While Singapore pushes ahead with pilots and institutional collaborations, Beijing is instead tightening constraints and extending the long-running china crypto crackdown into the RWA segment.

Three core legal violations and criminal law basis

Officials outlined three key violations under existing Chinese law associated with RWA operations. First, projects that issue tokens to the general public while raising funds may be deemed to engage in illegal fundraising. Second, facilitating transactions or distributing tokens without approval can be treated as unauthorized public securities offerings.

Third, token trading models that involve leverage, betting mechanisms or similar structures may constitute illegal futures business operations. Moreover, these legal characterizations are grounded directly in provisions of China’s Criminal Law and Securities Law, underscoring the seriousness of potential enforcement.

The document further argued that RWA token structures cannot guarantee legal ownership or orderly liquidation of underlying assets. This holds even when project teams insist their assets are genuine and their technology transparent. However, regulators concluded that risk spillover remains essentially uncontrollable, including in projects presenting themselves as compliant or institutionally focused.

Offshore projects and Hong Kong caught in the net

The notice signaled that the clampdown is not limited to onshore initiatives. China’s securities regulator is reportedly urging domestic brokerages to halt real-world asset tokenization operations in Hong Kong. This move directly touches firms that saw the city as a base for RWA structures aimed at regional or global investors.

The warning also targeted projects seeking to bypass rules through narratives such as “real-world asset anchoring,” “overseas compliance path,” and “technology service output.” Moreover, the communication aligns with the broader web3 service crackdown that has gradually narrowed the space for mainland-linked crypto and token ventures using Hong Kong as a hub.

Authorities stated that even where operations are nominally offshore, the presence of mainland staff or service providers links those structures back to Chinese jurisdiction. In practice, this shifts how teams must think about hong kong rwa regulation when they involve any onshore personnel or infrastructure tied to mainland clients.

Liability extends across the Web3 service chain

Crucially, the notice did not stop at targeting project founders. It also focused on the broader service stack supporting RWA projects, both inside and outside China. Here, the document invoked a “knowing or should have known” standard to define legal responsibility.

Under this standard, “domestic staff of relevant overseas virtual currency and real-world asset token service providers, as well as domestic institutions and individuals who knowingly or should have known that they are engaged in virtual currency-related businesses and still provide services to them, will be held accountable according to law.” However, authorities do not need to prove subjective intent if reasonable objective judgment indicates awareness.

The approach effectively dismantles common Web3 operating models built on offshore company registration paired with mainland Chinese staff. According to the notice, teams cannot escape liability by claiming to provide only technology services or neutral infrastructure. Moreover, the text explicitly states that project planners, technology outsourcing providers, marketing agents, influencer promoters, and payment interface providers may all face legal consequences if they support RWA projects targeting Chinese users.

The directive stressed that even hiring a single operations employee in China could expose a nominally offshore RWA initiative to enforcement risks. In effect, the rule closes a major loophole that many teams had used to maintain onshore distribution and support functions while booking business via overseas entities.

Domestic RWA and Web3 business models collapse

By combining a ban on primary RWA activities with expansive liability for support providers, the enforcement approach effectively terminates the domestic Web3 service chain built around tokenized assets. That said, the impact extends beyond issuance platforms to include marketing, legal support, and payment channels tied to mainland users.

The authorities argued that the china crackdown responds to frequent fraudulent schemes operating under the RWA banner. The document noted that “criminals are taking advantage of this to promote related trading and speculation activities, using stablecoins, worthless coins, Real-World Asset (RWA) tokens, and ‘mining’ as a guise to carry out illegal fundraising, pyramid schemes, and other illegal activities.”

For regulators, these patterns show that RWA branding has become a convenient wrapper for classic high-yield scams. Moreover, the statement connects these issues directly to past china crackdown on crypto mining and broader efforts to limit unsanctioned capital channels that might threaten financial stability.

Alignment with digital yuan and capital controls

The timing of the policy shift coincides with China’s push to internationalize its digital yuan through a new Shanghai operations center. This center focuses on cross-border payments and blockchain-based services under direct state oversight. However, authorities have simultaneously blocked major tech firms from issuing stablecoins in Hong Kong, reinforcing a de facto china stablecoin ban.

Seen together, the initiatives highlight Beijing’s desire to maintain a state monopoly over currency issuance and key payment rails. The new rules on RWA and the digital yuan cross-border trajectory both point toward tighter control of cross-border capital flows, even when new technologies are involved.

Within this framework, rwa tokenization china appears less as a promising financial innovation and more as a perceived channel for regulatory arbitrage and illicit fundraising. Moreover, by shutting down both domestic issuance and onshore support for offshore projects, Beijing has signaled that tokenized real-world assets will not be allowed to evolve in parallel with official digital currency initiatives.

In summary, the coordinated actions by seven top industry associations, backed by securities and financial regulators, mark a decisive escalation in China’s approach to RWA, extending earlier crypto-focused measures to a broader range of token-based financing and trading structures.