The already restrictive Chinese crypto landscape faced another major regulatory blow this week as seven of the nation’s most influential financial associations collectively declared real-world asset (RWA) tokenization illegal. This coordinated stance marks a significant escalation in China’s ongoing efforts to control blockchain applications that intersect with traditional financial markets.
According to a joint statement released Tuesday, the associations—including the National Internet Finance Association of China and the China Banking Association—characterized RWA tokenization as “disguised” cryptocurrency activity operating outside proper regulatory frameworks. The groups emphasized that such tokenization practices represent unauthorized securities issuance that threatens financial stability.
“This is entirely consistent with Beijing’s approach to crypto since 2017,” notes Marcus Sotiriou, head analyst at publicly listed digital asset broker GlobalBlock. “Chinese authorities have systematically closed every avenue for crypto adoption while simultaneously promoting their state-controlled digital yuan. RWA tokenization represented one of the final frontiers where blockchain technology could meaningfully impact China’s financial ecosystem.”
The announcement specifically targets the growing trend of tokenizing physical assets like real estate, commodities, and traditional financial instruments on blockchain networks. This practice has gained substantial momentum globally, with major financial institutions including JPMorgan, Goldman Sachs, and BlackRock exploring various RWA tokenization initiatives over the past 18 months.
Data from Boston Consulting Group suggests the global RWA tokenization market could reach $16 trillion by 2030, underscoring why Chinese authorities might view unregulated growth in this sector as potentially destabilizing. The People’s Bank of China has previously expressed concerns that permissionless blockchain applications could undermine capital controls and monetary policy effectiveness.
The timing of this announcement appears strategic, coming just as several major Chinese tech companies had begun exploring compliant blockchain applications for traditional assets. Sources familiar with regulatory discussions in Beijing indicate that authorities were particularly concerned about Ant Group and Tencent’s early-stage RWA pilots, which reportedly gained significant internal traction despite operating in regulatory gray areas.
“Chinese regulators are sending an unambiguous message that even seemingly legitimate blockchain applications won’t be tolerated if they bypass established financial gatekeepers,” explains Dr. Yan Zhang, former economics professor at Peking University and current blockchain policy consultant. “This effectively closes what many viewed as the last remaining pathway for meaningful crypto adoption in mainland China.”
The statement specifically highlighted three prohibited activities: the tokenization of traditional financial assets like stocks and bonds, the fractional ownership of physical assets through tokens, and the creation of blockchain-based investment vehicles targeting real-world returns. Violators face potential criminal charges under existing securities laws and anti-crypto regulations.
For global markets, China’s hardline stance creates both challenges and opportunities. Asian crypto markets experienced moderate selling pressure following the announcement, with Bitcoin briefly dipping below $63,000 before recovering. However, analysts suggest the long-term impact may ultimately benefit Western and Southeast Asian financial hubs already embracing regulated RWA frameworks.
“Singapore, Hong Kong, and potentially even Japan are positioning themselves to capture the innovation and capital that China continues to push away,” notes Emma Richardson, Director of Tokenization Strategy at Fireblocks. “Their regulatory clarity on RWA tokenization is attracting both talent and investment that might otherwise have remained in mainland China.”
The seven associations’ statement also emphasized that China’s crypto prohibition extends beyond direct trading and mining to include “innovative attempts to repackage virtual currencies.” This language suggests authorities are preparing for evolving evasion tactics as the technology landscape shifts.
Mainland Chinese users already face substantial barriers to cryptocurrency participation, including bans on exchanges, mining operations, and even information services. This latest restriction effectively eliminates what many viewed as a potential compliant use case that could have enabled limited blockchain adoption without directly challenging monetary control.
For international financial institutions pursuing global RWA strategies, China’s stance necessitates a bifurcated approach—one that accommodates Chinese restrictions while still capitalizing on more permissive environments elsewhere. The fragmentation poses operational challenges but also creates regulatory arbitrage opportunities for nimble organizations.
“This isn’t just about crypto anymore—it’s about fundamentally different visions for financial infrastructure,” observes Hailey Zhang, partner at blockchain venture capital firm NGC Ventures. “China is doubling down on centralized, state-controlled systems while much of the world moves toward more open, interoperable financial architecture.”
As global financial centers like New York, London, and Singapore develop comprehensive RWA regulatory frameworks, China’s divergent path suggests a potential long-term competitive disadvantage in financial innovation. Whether this regulatory divergence ultimately impacts China’s broader economic competitiveness remains to be seen, but the immediate effect is clear: another door to blockchain adoption has closed in the world’s second-largest economy.
