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

Securities Times Reporter Cheng Dan

Regulatory authorities adopt the principle of “strict prohibition domestically, strict regulation abroad” for the supervision 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 Activities” (hereinafter referred to as the “Notice”), which bans RWA tokenization activities within the country. All types of trading venues are prohibited from participating in RWA token issuance and trading within China, and are also barred from directly or indirectly providing related services to clients for RWA tokenization activities domestically, such as internet companies not allowed to offer online platforms, 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 activities abroad must follow the principle of “same business, same risk, same rules,” with strict supervision by the National Development and Reform Commission, CSRC, SAFE, and other relevant departments according to their responsibilities and legal regulations. No organization or individual may carry out the above activities without approval or filing from relevant authorities.

Regarding strict regulation abroad, the “Notice” sets requirements for providing financial, intermediary, and technical services for RWA tokenization. Domestic financial institutions’ overseas subsidiaries and branches must provide RWA tokenization-related services abroad in a lawful and cautious manner, managing risks properly. Intermediaries and IT service providers supporting RWA tokenization activities directly or indirectly 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 regulatory departments. 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 makes it easy to bypass capital controls and compliance reviews. “Strict prohibition domestically” aligns with the current stage of China’s financial market development. 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 opened domestically, the current financial regulatory framework and risk prevention mechanisms would be insufficient to effectively oversee it. “Strict regulation abroad” is a necessary response to cross-border financial risks, utilizing transparent supervision and cross-border cooperation to prevent cross-border financial risks and maintain financial stability in China.

“Tightening the responsibilities of domestic institutions, strictly prohibiting providing financial, intermediary, technical, and hidden support such as clearing and custody for overseas RWA projects, is aimed at cutting off the spread of RWA tokenization risks within China from the source, thereby strengthening the 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, and those involved will be held accountable according to law. Financial regulators, industry authorities, and local governments will crack down on various speculative activities under the guise of RWA, illegal financial activities, and crimes, effectively safeguarding national security and social stability.

Additionally, the CSRC, following the principle of “same business, same risk, same rules,” will strictly regulate RWA tokenization activities based on domestic asset ownership or income rights conducted abroad, and has issued the “Regulatory Guidelines for Domestic Assets Issuance of Asset-Backed Securities Overseas.” First, before engaging in related activities, controlling domestic enterprises must file with the CSRC and submit the required filing reports and complete issuance documentation. Second, domestic enterprises and underlying assets must not violate laws, harm national interests or social public interests, threaten national security, or breach the negative list of prohibited conditions for domestic asset securitization. Third, all activities must strictly comply 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.

(Edited by: Wang Zhiqiang HF013)

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