Several of the largest financial industry associations in China have signaled that the nation’s regulators…

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Several of the largest financial industry associations in China have signaled that the nation’s regulators may be preparing for a significant crackdown on Real-World Asset (RWA) tokenization. This collective includes the Asset Management Association of China, the National Internet Finance Association of China, the China Banking Association, the Securities Association of China, the China Futures Association, the China Association for Public Companies, and the China Payment Clearing Association. These organizations have reportedly moved to shift the classification of RWA tokenization away from its previous standing.

Rather than being viewed as a “new technology” that requires further regulatory clarification, the associations now categorize it as a “risky” business model. This change in perspective effectively places RWAs alongside other activities that are currently prohibited or heavily restricted within the country. The associations have explicitly listed real-world asset tokenization, stablecoins, and “air coins”—a term used to describe tokens that lack real underlying value—as well as cryptocurrency mining among activities deemed illegal in relation to cryptocurrencies. This alignment suggests a unified front among the country’s financial gatekeepers against the proliferation of tokenized assets. By reclassifying these activities, the associations are signaling to both domestic and international participants that the regulatory environment is tightening. The move emphasizes a shift from technological curiosity to risk mitigation, potentially closing off avenues that some market participants had hoped would remain open for experimental development.

Context

According to the industry associations, real-world asset tokenization is defined as involving financing and trading activities that are carried out through the issuance of tokens or other debt certificates and rights that possess token-like characteristics. The current regulatory environment is stark, as no real-world asset tokenization activities have received approval from China’s financial regulatory authorities to date. This lack of approval, combined with the recent policy shift by the industry associations, effectively defines any involvement with RWAs as financing and trading activity that is prohibited under Chinese law. Consequently, any entities or individuals participating in these activities are now considered at risk of a direct regulatory crackdown.

The reasoning behind this stance, as highlighted by translations of the associations’ messages, is that real-world financial risks are perceived to overwhelmingly outweigh any potential technological benefits. The associations’ documents are notable for what they lack; there is reportedly no mention of “technical pilots,” “tiered regulation,” or “prudential development.” This absence suggests that the regulatory objective is not to refine or optimize the application of RWA tokenization within a legal framework, but rather to exclude the practice entirely from the legal landscape. The associations have characterized the situation as an unequivocal message that this is not merely a technological or mechanistic issue, but a fundamental concern regarding financial risk. This hardline stance indicates that the window for integrating tokenized real-world assets into the formal Chinese financial system is being shut, as the government prioritizes the containment of speculative and unauthorized financial activities over the exploration of new digital asset formats.

Impact

The impact of these regulatory signals is part of a broader trend of tightening control over digital and decentralized financial instruments in China. In October, for instance, the People’s Bank of China and another regulatory authority reportedly took steps to dissuade major technology giants within the country from pursuing their plans for stablecoins. This move signaled deep-seated concerns from Beijing regarding the potential for private digital currencies to disrupt the domestic financial system or bypass capital controls. While these private initiatives are being suppressed, the state continues to advance its own digital currency initiatives. Specifically, commercial banks in China were permitted to start paying interest on balances held in digital yuan wallets as of a recent Thursday.

This development highlights a clear divergence in strategy: the prohibition of private or decentralized assets like RWAs and stablecoins, contrasted with the active promotion and enhancement of the sovereign digital yuan. By excluding RWA tokenization from the legal landscape, regulators are effectively ensuring that the digital yuan remains the primary vehicle for digital finance and payments within the country. The exclusion of RWAs prevents the emergence of alternative financial layers that could compete with or complicate state-led digital finance projects. For market participants, this means that the opportunities to innovate within the blockchain space in China are increasingly restricted to those projects directly sanctioned or operated by the government. The cumulative effect of these policies is to create a more controlled and centralized digital economy where the risks associated with speculative tokens and unauthorized financing are minimized through total exclusion from the regulated market.

Outlook

Looking at the global landscape, China’s restrictive stance on RWA tokenization and stablecoins stands in contrast to developments in other major economies, particularly the United States. In July, the US government passed the GENIUS Act, and regulators there have been making progress toward establishing a federal framework for payment stablecoins. This regulatory divergence could have long-term implications for the competition between the two nations over global digital payment standards. Coinbase chief policy officer Faryar Shirzad noted in December that the ongoing debate over the implementation of such laws in the US could potentially weaken the country’s global position. This is especially relevant as China aggressively competes for the use of its digital yuan in international payments.

While China has chosen to exclude many forms of digital asset innovation from its legal framework, its focus on the digital yuan—now with interest-bearing capabilities—suggests a strategy aimed at capturing the global payments market through a state-controlled mechanism. The US, by contrast, is navigating a complex legislative path to integrate stablecoins into its financial system. The outcome of these different approaches will likely determine which nation’s digital infrastructure becomes the preferred choice for international trade and finance. As China continues to suppress private digital asset activities like RWA tokenization, it reinforces its commitment to a centralized digital economy, placing the digital yuan at the forefront of its global financial ambitions while its Western counterparts still grapple with the balance between innovation, regulation, and private sector involvement.