China Bans RWA Tokenization, Targeting Web3 and Bitcoin-Linked Assets

• China considered the tokenization of RWA illegal and lumped it with crypto and stablecoins.
• The regulatory environment broadened the reach of the liability in offshore projects that had mainland-based employees or service providers.
• The decision is consistent with China’s digital yuan and capital control policies.

China releases its widest-ranging crackdown to date on real-world asset (RWA) tokenization, designating it as an illicit and high-risk business while now applying it to all RWA projects, both overseas and offshore with any connections to China. This is expected to severely limit any RWA projects related to Bitcoin and crypto, effectively marking an end to China’s Web3 ecosystem.

Seven major financial industry bodies jointly released the notice, including the China Internet Finance Association, China Banking Association, China Securities Association, China Asset Management Association, China Futures Association, China Association of Listed Companies, and the China Payment and Clearing Association.

The notice places RWA tokenization in the same category as cryptocurrencies, stablecoins, and crypto mining. Regulators described tokenization not as an emerging financial innovation but as a vehicle for fraud, speculation, and illegal fundraising. Authorities stressed that Chinese law provides no legal basis for operating or piloting RWA projects.

Unified regulatory message

This move has been described as a rare example of cross-regulatory activity, according to attorney Liu Honglin, who believes that cross-regulatory activity is normally only visible during periods when the system faces higher systemic risks. The regulators also defined RWA tokenization as financing and trading activities that are carried out using the token or token-like debt and equity.

This notification emphasized that none of the Chinese regulator have supported any kind of activity related to RWAs. This means that they cannot use the gray areas and sandboxes, as well as the approvals that are still pending.

Clear legal violations outlined

The three main violation conditions set out by the authorities under the existing law include: Illegal fundraising by projects that give out tokens and raise funds. The platforms that support trading and redistribution of tokens illegally face challenages of illegal public securities offerings. The trading of tokens through leverage, predicting, and gambling platforms is considered as prohibited future business as defined by China’s Criminal Law and Securities Law.

The authorities also dismissed the notion that tokenization guarantees legal ownership of, or liquidation rights over, the underlying assets. This applies to projects that believe they are compliant too, because control over spillover risk cannot be guaranteed.

China’s securities regulator has also asked local brokerages to stop RWA-related businesses in Hong Kong, thereby shutting down a common route utilized by mainland-related schemes.

Liability extends offshore

The notification clearly focuses on efforts to evade regulatory control using “overseas compliance paths,” “real-world asset anchoring,” or “technology service output” rationales. Regulators widened the remit of liability to Mainland staff and service providers assisting in offshore RWA projects.

The standard of ‘knowing or should have known’ obviates the need to prove intent. Project planners, developers, marketing companies, influencers, and payment service providers are held vulnerable by this principle. Engaging one operations staff member in China may mean that action is taken.

Attorney Liu pointed out that “counseling teams are no longer able to shield themselves behind the infrastructure or technology support exemption.”

Strategic contrast and broader context

The move contrasts sharply with Singapore, which leads global RWA adoption in 2025. In China, however, the ban aligns with Beijing’s push to expand the digital yuan while tightening control over cross-border capital flows.

The timing also coincides with the launch of a Shanghai-based international operations center for the digital yuan. At the same time, authorities blocked major firms such as Ant Group and JD.com from issuing stablecoins in Hong Kong, preserving state control over currency issuance.

By dismantling both RWA operations and their supporting service chains, China has effectively closed the door on domestic Bitcoin- and crypto-linked tokenization, reinforcing its preference for state-controlled digital finance.

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