RWA tokenization regulatory guidance is clear: strict prohibition domestically, strict regulation abroad

Securities Times Reporter Cheng Dan

Regulatory authorities adopt the principle of “strictly prohibiting domestic activities and tightly regulating overseas” for the regulation of real-world asset (RWA) tokenization.

On February 6, the People’s Bank of China, China Securities Regulatory Commission, and six other departments jointly issued the “Notice on Further Preventing and Controlling Risks Related to Virtual Currencies and Other Areas” (hereinafter referred to as the “Notice”), which bans RWA tokenization activities within the country. All trading platforms are prohibited from participating in RWA issuance and trading within China, and from directly or indirectly providing related services to clients for RWA tokenization business domestically, such as internet companies not allowed to offer online venues, commercial displays, marketing, paid traffic, and other services for RWA tokenization. Domestic entities engaging in RWA tokenization abroad through foreign debt or based on domestic asset ownership or income rights (hereinafter collectively referred to as “domestic rights”) for asset securitization or equity-like RWA tokenization outside China must follow the principle of “same business, same risk, same rules,” with supervision carried out by the National Development and Reform Commission, China Securities Regulatory Commission, State Administration of Foreign Exchange, and other relevant departments according to their responsibilities and laws. No organization or individual may carry out the above activities without approval or filing from relevant authorities.

Regarding strict overseas regulation, the “Notice” requires financial, intermediary, and technical service providers supporting RWA tokenization activities to operate prudently and lawfully abroad. Domestic financial institutions’ overseas subsidiaries and branches providing RWA tokenization services must manage risks carefully. Intermediaries and IT service providers offering services related to RWA tokenization based on domestic rights abroad must strictly comply with laws and regulations, strengthen business and risk controls, and report or file relevant activities with the appropriate authorities. The “Notice” emphasizes that overseas entities and individuals are prohibited from illegally providing RWA tokenization-related services to domestic entities in any form.

Peking University Distinguished Professor Tian Xuan stated that RWA tokenization essentially maps real assets onto the blockchain, but its cross-border nature can easily bypass capital controls and compliance reviews. “Strictly prohibiting domestic activities” aligns with China’s current financial market development stage. RWA tokenization involves complex fields such as blockchain technology, encrypted assets, and traditional financial assets. Its operational logic differs significantly from the existing financial system. If fully liberalized domestically, current financial regulatory frameworks and risk prevention mechanisms would be insufficient to cover it. “Strict overseas regulation” is a necessary response to cross-border financial risks. Through transparent supervision and cross-border cooperation, it aims to prevent cross-border financial risks and maintain financial stability in China.

“Tightening the responsibilities of domestic institutions and strictly prohibiting providing financial, intermediary, technical, clearing, or custodial support for overseas RWA projects is a way to cut off the spread of RWA tokenization risks within China at the source, building a solid financial security barrier,” Tian Xuan said.

Currently, China’s financial regulators have not approved any RWA tokenization activities. Unauthorized RWA activities often involve illegal fundraising, scams, illegal issuance of tokens or securities, unauthorized securities issuance, and illegal securities or futures operations. The “Notice” clearly states that illegal financial activities and crimes will be severely cracked down upon. Once discovered, legal action will be taken. Financial regulators, industry authorities, and local governments will crack down on speculative activities under the guise of RWA, illegal financial activities, and crimes, to safeguard national security and social stability.

Additionally, the China Securities Regulatory Commission will strictly regulate RWA tokenization based on domestic asset ownership or income rights conducted abroad, following the principle of “same business, same risk, same rules,” and has issued the “Regulatory Guidelines for Overseas Issuance of Asset-Backed Securities Based on Domestic Assets.” First, before engaging in related activities, domestic controlling enterprises must file with the CSRC and submit relevant reports and full issuance documents abroad. Second, domestic enterprises and assets must not violate laws, harm national interests or social public interests, threaten national security, or violate the negative list of prohibited assets for securitization. Third, all activities must comply strictly with relevant laws and policies on cross-border investment, foreign exchange management, cybersecurity, and data security as mandated by the State Council and industry regulators.