Let's talk about the online rumors of the "RWA suspension" event: Is it real and reliable?

In September, a well-known foreign media outlet released a major news: The China Securities Regulatory Commission has requested that some Chinese-funded brokerages operating in Hong Kong suspend their RWA business. Subsequently, this news was “endorsed” by several well-known media outlets in China: the mainland China Securities Regulatory Commission conveyed the intention to suspend the RWA business to at least two Chinese-funded brokerages through window guidance, but did not issue any written directives.

This message undoubtedly pours a bucket of cold water on RWA, which has been gaining popularity since 2025: the suspension of business not only contradicts the vision outlined in Hong Kong's “Digital Asset Declaration 2.0” released this year, but may also imply a certain divergence between the financial regulatory authorities of mainland China and Hong Kong regarding the development path and trends of RWA and even the entire crypto asset sector.

In the spirit of letting the bullets fly a little longer, the Sa Sister team would like to discuss with everyone what the so-called “suspension of RWA business” is based on the recent information they have gathered and understood, as well as the potential impacts that may follow.

01 Is the RWA suspension event credible?

Firstly, it must be clarified that to date, there is no official information or public confirmation from any brokerage regarding the “RWA suspension” incident. Therefore, any rational person should approach this issue with skepticism.

We have summarized the main sources of this information as follows:

According to the recent frontline practical experience of Sister Sa's team, the relevant information may not be entirely unfounded. Compared to the open attitude of financial regulation in Hong Kong towards crypto assets and the vision of building a crypto financial center, our regulatory agencies are indeed more “cautious” regarding crypto assets (if this were a few years ago, Sister Sa's team might have used the term “passive”). Therefore, in the current context of insufficient practical experience with RWA, inadequate risk identification, and a market that is increasingly driven by emotions, it is indeed not surprising to hit the brakes.

Moreover, it is one-sided to say that the so-called “pause on RWA” can solely be blamed on the financial regulatory agencies in mainland China. Are the Hong Kong Monetary Authority and the Securities and Futures Commission fully confident in implementing RWA? If we look beyond the surface, it is clear that the Hong Kong financial regulatory authorities, under the grand rhetoric of the “Digital Asset Declaration” 1.0 and 2.0, are hiding a cautious heart. Since the public entry of a certain charging pile project and photovoltaic project as benchmarks for RWA into the sandbox for issuance testing nearly a year ago, no “carp” has leaped over this seemingly not so high “dragon gate.” Instead, a large number of civil and semi-civil RWA projects have emerged in the market under the banners and signs of “asset on-chain” and “overseas issuance.”

It is evident that, at least on the point of “RWA should be incrementally increased and tested over the long term,” the financial regulators in Mainland China and Hong Kong have long reached a consensus. Even if the news of “pausing RWA” is true, it is by no means a spur-of-the-moment decision by the regulatory authorities in Mainland China.

What legal issues are currently difficult to resolve with RWA?

The Sajia team has found in practice that there are still many urgent issues to be addressed regarding RWA, and these issues are likely to be a significant reason why regulatory agencies remain cautious about this emerging phenomenon.

(1) There are barriers to cross-border capital

Currently, the vast majority of RWA projects planned for issuance and testing in Hong Kong use underlying assets that are not located in Hong Kong itself, with a significant portion of the assets physically located in mainland China. The project companies acting as the “key” to these assets (limited liability companies or special purpose trusts as SPVs) are also legally registered corporate entities in China.

In order to comply with regulations for issuing RWA projects in Hong Kong, the current mainstream practice is to establish an SPV in Hong Kong or in other offshore countries (such as some common financial centers like the Cayman Islands or BVI) as the actual issuer of the RWA.

This dual-layer structure is actually a very common operation in traditional capital markets, but for a special financial project like RWA that involves crypto assets, there are always two legally difficult issues to resolve:

(1) How will the issuer ensure that funds raised from overseas Token investors are compliant when flowing into the domestic market?

(2) How does the issuer separate the investment returns from the project and deliver them compliantly to the Token investors?

The plan for the inflow and outflow of funds is extremely critical. If not properly addressed, the RWA project cannot become a market-oriented, popular, and scalable financial investment product, nor can it be recognized by regulators. The Sa Jie team has collaborated with several well-known domestic companies to discuss the legal compliance, feasibility in actual operations, and landing costs of two potential pathways when dealing with RWA business.

Plan One: Use the QFLP channel. Simply put, this plan involves making the offshore RWA issuer SPV a compliant offshore investment entity, applying for a QFLP license (Qualified Foreign Limited Partners) from the financial regulatory authority in the location of the underlying RWA assets, and legally bringing the raised offshore funds back to mainland China.

Compared to traditional FDI models, QFLP allows foreign funds to convert and invest in domestic private equity funds, and the funds can also be used for targeted issuance and other investments. Additionally, according to the “Opinions on Further Optimizing the Foreign Investment Environment and Increasing Efforts to Attract Foreign Investment” (Document No. 11) issued by the State Council in 2023, QFLP has advantages in terms of facilitation of foreign exchange management. Our overall policy supports compliant entities to directly invest in the domestic market using RMB raised from abroad.

However, this type of program has many issues in practical operation.

First of all, the QFLP license currently does not have a nationally unified specialized law or guiding documents, and it mainly relies on the pilot policies of various regions and related foreign exchange management and fund supervision regulations for implementation. This requires the issuing entity to conduct extensive research and comparison of the specific policies and requirements of different regions while considering returns and compliance costs (especially in terms of data going abroad) in order to successfully launch the project.

Secondly, the QFLP license involves foreign exchange control and requires coordination among relevant departments such as the Foreign Exchange Administration, the Industrial and Commercial Administration, the Development and Reform Commission, the Ministry of Commerce, and the Taxation Bureau. The access thresholds and approval efficiency vary across different regions.

Again, due to the prudence of mainland regulatory authorities regarding crypto assets and the objective situation where RWA has not yet been fully developed, there is a significant uncertainty about whether the SPV that raises funds through the issuance of RWA projects can successfully obtain the QFLP license.

Second Option: Obtain ODI Approval/Record. ODI refers to the approval/record of overseas direct investment, which is generally the license that mainland Chinese enterprises need to obtain when they want to invest directly or indirectly in overseas projects or companies. It is commonly seen in situations like mainland enterprises setting up factories abroad, mergers and acquisitions, capital increases, and overseas listings. In the RWA project, this means that mainland asset rights holders or project companies (SPV) directly obtain ODI approval/record and then establish an SPV in Hong Kong or other foreign countries to issue RWA. The advantage of this option is that it can better address the issue of cross-border capital flow.

However, this plan also has certain limitations. The compliance costs for ODI are extremely high, requiring approvals from departments such as the business department, the National Development and Reform Commission, and the State Administration of Foreign Exchange (bank) before it can be obtained. During the review process, domestic entities need to explain the investment purpose, and the authenticity, compliance, and necessity of specific investment projects are all key points of ODI review. Given the regulatory authorities' attitude towards RWA in our country, the success rate of applying for ODI for the purpose of “issuing RWA” may not be high.

(2) There is uncertainty in judicial protection

Since the projects for issuing RWA are actually located in the mainland, foreign investors also have doubts about the judicial remedies for defaults by the project parties.

Currently, in our country's judicial practice, there is a prevalent attitude towards activities involving cryptocurrency asset transactions and investments of “invalid legal acts, risks borne by the investors.” The protection of investors' rights is not sufficient. Recently, there was a discussion about this issue between foreign investors and the Sa Jie team, but we cannot provide a clear answer, as there are currently too few samples for reference (strictly speaking, only two projects: a charging pile and photovoltaics), and the market has not yet developed to the stage of resolving disputes over project party defaults.

Therefore, many foreign investors are hesitant to invest real money, even if the underlying assets are indeed high-quality assets, due to the uncertainty of judicial protection.

Final Thoughts

Overall, the Sa姐 team believes that a pause does not equal a ban, but rather a way to proceed in an orderly manner. Regardless of the truth of the news, the attitudes towards RWA in mainland China and Hong Kong are actually quite consistent: the pilot for RWA should only be slowly rolled out after ensuring proper risk identification and regulatory effectiveness testing. Therefore, partners need not be overly pessimistic about this; proceeding in an orderly manner is certainly better than experiencing a wild growth that is abruptly stifled.