Chinese Industry Groups Push Back Against RWA Tokenization Momentum

Just as the real-world asset tokenization narrative was hitting its stride, a wall of resistance has emerged from the East.

The Pushback

Key industry associations in China are mounting a coordinated challenge against the rush to digitize everything from real estate to bonds on-chain. Their concerns aren't about the technology itself—it's about the Pandora's box of regulatory and systemic risks it might unlock.

They argue that moving trillions in traditional assets onto permissionless ledgers could create shadow financial systems, complicate cross-border capital controls, and expose retail investors to complex, volatile instruments disguised as stable investments. It's a classic case of innovation sprinting ahead of the rulebook.

The Stakes for Crypto

This isn't just a local skirmish. China's stance influences global regulatory sentiment. A hardline position from such a major economic player could slow adoption elsewhere, as other jurisdictions watch and weigh the perceived dangers against the promised efficiency gains.

For crypto natives, it's a frustrating reminder that the old guard still controls the gates. The promise of RWA tokenization—liquidity, fractional ownership, 24/7 markets—runs headlong into the entrenched interests and risk-aversion of legacy institutions. One financier's disruptive breakthrough is another's compliance nightmare.

The clash was inevitable. Tokenization doesn't just change how assets are traded; it challenges who controls them. The path forward now looks less like a green field and more like a protracted negotiation between the future of finance and its very powerful, very skeptical landlords. After all, what's a financial revolution without a few traditionalists trying to tax it?

China strictly warns against the trade of digital assets in the country

Chinese officials have recently stressed their strict approach towards the crypto ecosystem. This emphasis has led many to abandon hopes that Beijing might ease its negative stance on digital assets. According to their expectations, these individuals anticipated that China could follow the lead of the US after its policymakers became more supportive of the cryptocurrency industry.

But as speculation grew that China might gradually embrace digital assets, new reports revealed that the People’s Bank of China (PBOC), along with the public security ministry, cyberspace administration, the top court, and other major regulators, stated last week that stablecoins fail to meet the mainland’s client identification and anti-money-laundering requirements.

Regarding the warning issued on RWA tokenization, industry groups cautioned that their member firms should not be involved in the issuance or trade of cryptocurrencies and tokenized real-world assets in China. They were also warned against providing related services to customers who are willing to participate in these activities.

While China warns against cryptocurrency trading, Hong Kong embraces its goal of becoming a regulated hub for this expanding asset class. This difference in decision has ignited new worries among investors. Considering the intense nature of the situation, Andrew Fei, a partner at King & Wood Mallesons law firm in Hong Kong, weighed in on the matter. He argued that this notice has a major impact across borders.

Fei also pointed out that the associations stated that foreign firms offering cryptocurrency and tokenized RWA activities services, either directly or indirectly, WOULD be viewed as involving themselves in illegal financial activities.

Moreover, the notice highlighted that employees in China working for these foreign service providers could face legal consequences. This situation implied that RWA providers needed to fully separate themselves from the mainland Chinese market, according to an analysis released on Friday, December 5, by Liu Honglin, founder of the Mankun law firm in Shanghai, which specialized in blockchain issues.

Hong Kong positions itself as a hub for digital assets

Following China’s stringent regulations on crypto trading, several firms from mainland China, including financial and tech companies, have initiated RWA projects in Hong Kong this year. This is due to the favorable crypto regulations in the region, as it seeks to solidify its position as a hub for digital assets.

However, these firms stayed out of the spotlight since the CSRC had urged Chinese brokerages in September this year to stop their RWA initiatives in the city.

Meanwhile, one of the most recent developments emerged from a Hong Kong branch of China Merchants Bank. This branch has reportedly tokenized a $3.5 billion money market fund on BNB Chain, the blockchain established by Binance, the world’s largest cryptocurrency exchange. At the same time, the Hong Kong Monetary Authority is running the tokenization sandbox for Project Ensemble

This update was made public after ANT Group chairman Eric Jing Xiandong released a statement in November during Hong Kong Fintech Week. In his statement, he mentioned that through this sandbox, they utilized tokenized bank deposits to allow real-time settlement between banks. On the other hand, it is worth noting that Ant Group is a division of Alibaba Group Holding, which owns the Post.

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