China Imposes Comprehensive Ban on Real-World Asset Tokenization

China has declared the tokenization of real-world assets (RWA) an illegal financial activity, impacting Web3 service chains in both mainland China and Hong Kong. This decision follows a joint announcement from seven major financial industry associations, which cited multiple risks associated with RWA operations and highlighted that no regulatory approvals have been granted for such activities.

Key Takeaways

Ban on RWA Tokenization: China has prohibited RWA tokenization, categorizing it as illegal.
Joint Statement from Financial Associations: Seven financial industry groups released a notice outlining the risks of RWA activities.
Legal Classifications: Unauthorized fundraising, public securities offerings, and illegal futures trading arise from RWA operations.
Impact on Web3 Services: The ban affects the entire Web3 ecosystem, holding service providers accountable.
Fraud Mitigation Efforts: The crackdown aims to combat fraudulent activities linked to RWA branding and tokenization.

China bans real-world asset tokenization RWA

Main Content

China has taken decisive action against real-world asset (RWA) tokenization, declaring it illegal. A report from local sources reveals that a coalition of seven major financial associations in China, including the China Internet Finance Association and the China Banking Association, issued a warning to both domestic and international operators that RWA activities lack legal grounding under Chinese law.

These associations place RWA tokenization alongside other banned activities like stablecoins, cryptocurrencies, and crypto mining, labeling tokenization efforts as high-risk and potentially fraudulent rather than legitimate financial technologies pending regulatory approval.

China's Doubts Over RWA Initiatives

Legal expert Liu Honglin characterized this unified announcement as a strategic operation across various sectors, suggesting that such coordinated messaging typically happens only during crucial moments to prevent systemic financial risks. The associations provided a clear definition of RWA tokenization, describing it as earning and trading through token issuance or other rights and debt instruments that resemble tokens. They reported that such activities pose multiple risks, including issues related to fictitious assets, business failures, and speculative practices.

The regulators firmly stated that there are no approved RWA tokenization initiatives in China, which undermines claims from projects suggesting they are in the process of regulatory review or awaiting approval. This regulatory stance contrasts sharply with Singapore, which is leading global RWA adoption efforts in 2025.

The notice highlighted three major violations under current Chinese legislation related to RWA tokenization. Projects that issue tokens to the public for fundraising could face illegal fundraising charges, while distributing tokens or facilitating transactions without applicable permissions risks being classified as unlicensed public securities offerings. For projects that involve leveraged trading or betting mechanisms, there is a possibility they could be deemed illegal futures operations. These characterizations stem directly from China’s Criminal Law and Securities Law.

Furthermore, the notice explained that RWA token structures cannot ensure legal ownership or asset liquidation, regardless of any claims made by project teams regarding the authenticity of their assets and transparency of technology. The regulators concluded that risk management remains elusive, even in purportedly compliant ventures.

In light of this, China's securities regulator has urged local brokerages to cease RWA tokenization activities in Hong Kong. The warning specifically targeted projects attempting to bypass regulations by utilizing terms like "real-world asset anchoring," "overseas compliance path," and "technology service output."

Scrutinizing Web3 Service Providers

The warning is not just directed at token generators but encompasses the entire Web3 service ecosystem that supports RWA activities. The notice stated that domestic employees of overseas virtual currency providers, as well as local businesses or individuals aware of their involvement in virtual currency operations, will be held accountable under the law.

The legal standard of “knowing or should have known” implies a presumption of liability based on objective criteria, removing the need for proof of intent. This contradicts the prevalent model of Web3 operations that often rely on offshore company registrations while employing staff within mainland China. According to Liu, this standard makes it difficult for teams to deny accountability by claiming they only offer technological support or infrastructure services.

Various stakeholders, including project planners, technology outsourcing firms, marketing agencies, influencers, and payment interface providers, could face legal repercussions if they offer services to RWA projects targeting the Chinese market. The directive indicated that even hiring just one operations person in China could expose offshore projects to legal risks.

Ultimately, this enforcement approach effectively dismantles the domestic Web3 service chain supporting RWA projects in China. Supporting services will suffer from reduced viable business models in light of the ban on core operations.

This crackdown comes on the heels of rampant fraudulent activities associated with RWA branding, as authorities pointed out that criminals exploit these projects for illegal fundraising and pyramid schemes under the guise of stablecoins, worthless cryptocurrencies (like π coin), RWA tokens, and “mining” efforts.

Interestingly, this prohibition aligns with China’s broader objective to internationalize its digital yuan via a new operations center in Shanghai that focuses on blockchain services and cross-border payments. Concurrently, the Chinese government has restricted major tech companies, including Ant Group and JD.com, from issuing stablecoins in Hong Kong to maintain its monopoly over currency issuance.