The central bank's RWA regulatory framework officially established: strict domestic control, Hong Kong takes the lead!

In early February, China’s financial markets ushered in a far-reaching regulatory reform. The People’s Bank of China and seven other departments jointly issued the “Notice on Further Preventing and Disposing of Risks Related to Virtual Currencies” (commonly known as “Document No. 42”), simultaneously repealing the old regulations from 2021.

On the same day, the China Securities Regulatory Commission (CSRC) released the “Guidelines on the Regulation of Domestic Asset-Backed Securities Token Offerings Abroad” (hereinafter referred to as the “Guidelines”). This series of documents for the first time established a systematic regulatory framework for “real-world asset tokenization” (RWA), marking China’s transition from an outright ban on digital assets to a new phase of “precise regulation combined with risk management.”

1. Core of the New Regulations: Establishing the Overall Tone of “Prohibition Domestically, Compliance Abroad”

The foundation of this regulatory framework lies in the official first clear definition of “real-world asset tokenization” (RWA). According to Document No. 42, RWA refers to activities that use cryptographic technology and distributed ledger or similar technologies to convert asset ownership, income rights, and other rights into tokens (or tokens with similar characteristics) for issuance and trading. This definition clearly separates RWA from the traditional concept of virtual currencies, laying the groundwork for its subsequent independent regulation.

The new regulations establish a clear dual principle:

1. Strict Prohibition Within China: Conducting RWA-related activities domestically is generally regarded as illegal financial activity and will be prohibited.

2. Compliance Abroad Is Feasible: An important “exception” is left—“with the approval of the relevant regulatory authorities and in accordance with laws and regulations, activities conducted relying on specific financial infrastructure are exempt.” This opens the institutional door for high-quality domestic assets to be tokenized and financed through compliant channels overseas.

3. Regulatory Framework: Penetrative Supervision and the Implementation of a “Filing System”

For domestic entities engaging in RWA activities abroad, regulators have established the core principle of “same business, same risk, same rules.” This means RWA is not a separate track but is incorporated into the existing cross-border financing regulatory system based on its financial nature.

● Clear, penetrative supervision: The National Development and Reform Commission (NDRC), CSRC, and State Administration of Foreign Exchange (SAFE) will supervise according to the type of activity. For example, RWA related to foreign debt will be overseen by the NDRC; equity and asset securitization will be supervised by the CSRC; and capital repatriation will be managed by SAFE. This design aims to achieve transparent, in-depth management of the nature of the activities and the flow of funds.

● The “Filing System” provides a clear pathway: The CSRC’s simultaneous release of the Guidelines offers a practical plan for the most likely implementation of “asset-backed securities tokens.” Its core is a “filing” requirement—domestic entities must file with the CSRC before issuing abroad, submitting comprehensive materials including information on underlying assets and token schemes. This provides a clear path for compliant institutions to participate in global RWA innovation, which is beneficial for industry healthy development in the long term but also raises higher compliance requirements for participating organizations.

3. Hong Kong’s Role: A Compliance Hub and Testing Ground Under the “Sandbox Program”

Within China’s overall regulatory landscape, Hong Kong has been assigned a unique and critical role. Complementing the mainland’s “principle of prohibition,” Hong Kong is accelerating the construction of a global RWA hub with a “compliance-first” approach.

The Hong Kong Monetary Authority’s (HKMA) “Ensemble” regulatory sandbox is the core engine of this strategy. The sandbox aims to test the use of tokenized currency for interbank settlement and focuses on researching tokenized asset trading, currently concentrating on four themes: fixed income, investment funds, green finance, and trade finance. This provides financial institutions and tech companies with a controlled environment to explore RWA product design, technical standards, and regulatory adaptation.

Hong Kong’s advantages include its mature ecosystem:

1. Complete Regulatory Framework: A dual-track supervision system where the Securities and Futures Commission (SFC) oversees securities tokens, and the HKMA oversees non-securities tokens, with transparent rules. The upcoming “Stablecoin Ordinance” effective in 2025 further provides a secure legal framework for RWA settlement.

2. Clear Compliance Channels: For mainland assets, issuing RWA in Hong Kong has formed a comprehensive process including asset screening, domestic ODI/foreign exchange registration, establishing cross-border special purpose vehicles (SPVs), technical on-chain processes, licensing applications, token issuance, and ongoing management.

3. International Market Interface: Licensed exchanges in Hong Kong can connect with global order books, providing liquidity foundations for RWA tokens to access international capital.

Industry consensus holds that this “strict control on the mainland, experimental approach in Hong Kong” dual-track model not only safeguards China’s financial security but also leverages Hong Kong’s common law system and status as an international financial center, keeping pace with global innovation and accumulating experience for future policy evolution.

4. Market Impact and Outlook: From Conceptual Hype to “Asset-Centric” Dominance

The implementation of the new regulations has had immediate and profound market effects.

● Short-term cleanup, long-term benefits: In the short term, projects with poor qualifications attempting to “push boundaries” will be forced out, and market activity may experience some pain. However, clear rules eliminate major policy uncertainties, laying a foundation for sustainable industry development. Compliant projects with filings are likely to gain market trust and attract funds from traditional mainstream financial institutions.

● Return of competition to assets and compliance: Market competitiveness will shift from mere technology and concept hype to the ability to identify high-quality underlying assets and operate with strong compliance. Standardized assets with clear ownership and stable cash flows, such as bonds and money market funds, are expected to become mainstream in early development due to their lower risk and more transparent valuation. This aligns with global trends, such as tokenized funds launched by giants like BlackRock, which base their assets on government bonds and other high-standard assets.

● Institutional-led, higher professional thresholds: The high compliance thresholds mean initial participants will mainly be licensed financial institutions, large industrial groups, and their professional service providers. This creates new business opportunities for investment banks, international subsidiaries of brokerages, and tech firms providing compliance solutions for RWA.

5. Challenges and Unanswered Questions

Despite the established framework, the road ahead remains fraught with challenges and details yet to be clarified.

● Technical implementation difficulties: Even with regulatory approval, actual on-chain realization of RWA faces issues such as fragmented token standards and insufficient compatibility with mainstream wallets, affecting user experience and asset composability.

● Regulatory boundaries need further clarification: For example, definitions of “domestic assets” and “issuance activities,” as well as specific operational details for different types of RWA (e.g., equity-based), still require further practical clarification by regulators.

● Sensitive red lines for stablecoins: Document No. 42 emphasizes that stablecoins pegged to the RMB cannot be issued abroad without approval, seen as a key red line to safeguard monetary sovereignty. Any attempts involving RMB stablecoins will face high regulatory sensitivity.

The official announcement of China’s RWA regulatory framework is not simply an embrace or further crackdown on the crypto world but a systemic reconstruction based on its own financial logic and risk management needs. It continues to isolate virtual currency speculation while opening a risk-controlled, traceable compliant channel for the tokenization of real assets.

Within this grand layout, Hong Kong, with its institutional advantages and comprehensive sandbox program, has become a crucial bridge connecting mainland Chinese assets with global innovative capital and a testing ground for new policies. The future development of China’s RWA market will be a “compliance race” led by professional institutions, centered on high-quality real assets within a strictly regulated environment. This marks China’s digital asset governance entering a more mature and refined era.