On March 6th, the Fourth Session of the 14th National People’s Congress held a press conference focused on the economy as scheduled. When answering questions from Shanghai Securities Journal about the China Securities Regulatory Commission’s next steps in risk prevention and strengthened regulation, Chairman Wu Qing elaborated on the regulatory approach. He stated that the CSRC will focus on strengthening oversight of new types of businesses. The overall considerations are to pursue profit while avoiding harm, standardize development, ensure effective regulation, and strictly control risks. Key measures include emphasizing fairness principles, deepening and refining regulation of high-frequency quantitative trading, introducing derivatives trading regulation measures, supporting legitimate and compliant risk management activities, and restricting excessive speculation through rules. They will also strengthen the regulation of real-world asset (RWA) tokenization, adhere to the principle of “strictly prohibited domestically, strictly regulated abroad,” establish and improve the regulatory framework for crypto assets, and crack down severely on behaviors that misuse RWA as a pretext for illegal speculation and financial crimes.
Wu Qing emphasized the importance of building a comprehensive regulatory system to firmly establish a “risk防波堤” (risk breakwater) for the capital markets. This statement quickly resonated within the fintech and digital asset sectors.
Just over a month ago, the People’s Bank of China, the CSRC, and six other departments jointly issued the “Notice on Further Preventing and Disposing of Risks Related to Virtual Currencies and Other Matters,” which for the first time officially defined the tokenization of real-world assets (RWA) and established the core principle of “strictly prohibited domestically, strictly regulated abroad.” From the joint issuance by eight departments to the CSRC chairman’s emphasis at the two sessions, the regulatory stance on this emerging field has become clear.
For the RWA track, is this a “pause” in development or a “starting gun” for a new wave of regulation? What behaviors are prohibited within the “breakwater”? Is there room for compliant exploration outside the “breakwater”?
1. What exactly is the “breakwater” protecting against?
To understand the regulator’s stance, first clarify a core question: what is RWA tokenization?
According to the joint notice, the official definition is: activities that use cryptographic technology and distributed ledgers 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 covers the entire chain from technological implementation to financial activities.
Based on this, regulators have established the principle of “strictly prohibited domestically, strictly regulated abroad.” The notice clearly states that engaging in RWA tokenization activities within the country, providing related intermediary or IT services, suspected of illegal issuance of tokens, unauthorized public offerings of securities, illegal securities and futures operations, or illegal fundraising, should be prohibited.
This means that any issuance or trading of RWA tokens targeting the domestic public, along with related services, are legally considered illegal financial activities. This is not the first time regulators have issued a red flag for such behaviors. As early as 2017, authorities explicitly banned initial coin offerings; in 2021, they further clarified that virtual currency-related activities are illegal financial activities. The recent statements on RWA can be seen as a natural continuation of this regulatory logic.
However, it’s noteworthy that the notice also leaves an “opening”: activities conducted with the approval of the relevant regulatory authorities and in accordance with laws and regulations, relying on specific financial infrastructure, are exempt. This exception suggests that regulation is not a blanket ban on RWA technology itself but imposes strict preconditions on “who issues, who operates, and whether it is regulated.”
Wu Qing’s remarks at the press conference further specify the focus of regulation. He particularly emphasized “cracking down on behaviors that misuse RWA as a pretext for illegal speculation and financial crimes.” The key phrase is “misusing RWA.” In other words, the regulation targets those who claim to use RWA concepts but are actually engaged in illegal financial activities, not the RWA technology itself.
Meanwhile, for foreign institutions providing services to domestic entities, the red line is also clear: foreign entities and individuals are prohibited from illegally providing RWA-related services to domestic subjects in any form. This means that even if a project is registered abroad and issued overseas, as long as its service targets domestic entities, it faces compliance risks.
From policy documents to high-level statements, the consistent message from regulators is that RWA tokenization, as a new financial form, must be incorporated into the existing regulatory framework and cannot become a legal “wild zone.” Those attempting to exploit the hype or profit in regulatory vacuum are the primary targets of the “breakwater.”
2. Why is regulation “taking action” now?
The regulators’ intensive statements are not without reason. Since 2026, multiple local regulatory agencies have issued risk alerts pointing to illegal financial activities under the guise of virtual currencies, RWA, and related concepts.
On January 16th, the Hebei Financial Regulatory Bureau issued a “Risk Reminder on Preventing Illegal Financial Activities,” highlighting that illegal financial activities often disguise themselves under various labels, including pension, cultural tourism, cloud farming, RWA, etc. On January 30th, the Yichun Market Supervision Administration in Heilongjiang issued a warning against illegal financial risks, listing RWA alongside blockchain, virtual currencies, and consumer rebate apps, warning of misuse by criminals.
These risk alerts are substantive. The People’s Bank of China’s Hunan branch published an article in late January detailing typical scams involving virtual currencies: enticing users with high returns to fake platforms, inducing large investments with small rebates, and then disappearing during withdrawal attempts. The case of “Old Wang,” who was lured into a “Bitcoin wealth management platform with 50% annualized returns,” illustrates that such platforms are often just digital numbers behind the scenes, and large withdrawals are blocked with “system maintenance” or unresponsive customer service.
More concerning is that some criminals are beginning to use RWA as a new “mask.” The Hebei Financial Regulatory Bureau’s risk warning pointed out that illegal financial activities are constantly evolving, with some criminals promising “high profits with capital protection” to lure people into illegal fundraising, online scams, and financial pyramid schemes. Since RWA is a relatively unfamiliar concept to ordinary investors, it is easy for bad actors to package it as “cutting-edge investment opportunities” and mislead.
From the industry side, some projects are indeed using RWA concepts for illegal promotion. Some claim to have overseas physical assets backing their tokens, issuing “tokenized securities,” but cannot provide clear asset rights or legal guarantees. Some even directly solicit funds from the domestic public, promising high returns, crossing the line into illegal fundraising.
Lawyer Shi Zihan of Dacheng Law Firm and a distinguished expert at Zhejiang University City College said that investors who suspect they are caught in virtual currency scams should collect evidence such as promotional materials, investment agreements, payment records, and WeChat chats, and report to the police together with other affected investors. This indicates that judicial crackdown on such illegal activities is underway.
From the regulator’s perspective, the timing of “taking action” involves three considerations. First, protecting investors. Past lessons, from P2P collapses to “air coin” speculation, show that many retail investors lacking professional judgment suffered heavy losses under high-yield scams. RWA involves cross-border and cross-market complex structures, making it harder for ordinary investors to identify risks. Building a “risk防波堤” early is a necessary protective measure.
Second, preventing financial risks. RWA essentially combines real-world assets with digital technology. If detached from the real economy’s value and used for excessive leverage, risks could propagate through complex chains and impact traditional finance. Wu Qing’s mention of “limiting excessive speculation” reflects this concern.
Third, establishing regulatory expectations. As shown in the eight-department notice, regulation does not aim to ban RWA technology itself but to set clear boundaries. Within these boundaries, compliant exploration can proceed in an orderly manner; outside, illegal activities will be severely punished. This “combination of easing and tightening” helps prevent the industry from falling into a cycle of “free-for-all” or “strict crackdown.”
3. Where are the opportunities for RWA in China under regulation?
Looking at the broader picture, while mainland regulators have made it clear that “domestically prohibited,” Hong Kong’s RWA practices are making tangible progress.
In late February, Hong Kong’s first real estate RWA project was approved. Deling Holdings announced that two of its RWA tokenization products received “no objection” from the Hong Kong Securities and Futures Commission (SFC), allowing them to proceed with implementation. This marks the first time that physical assets in Hong Kong’s core commercial district—such as the Deling Tower in Central—have been tokenized and offered to qualified investors.
Specifically, the underlying assets include: a limited partnership fund holding the Deling Tower, and a fund investing in private equity projects like Animoca Brands. The Deling Tower, located on Wellington Street in Central, is within walking distance of the International Finance Centre. Deling Holdings purchased the top five floors and the naming rights for over HKD 280 million in 2023. This is the first physical asset in Hong Kong’s prime commercial district to be tokenized for qualified investors.
Operationally, Deling Securities will serve as the proposed token distributor, establishing necessary infrastructure and product listing procedures; Deling Digital will act as the investment manager, collaborating with the tokenization service provider Asseto to issue tokens representing the fund’s interests via blockchain technology.
William Li, partner at Deling Holdings, said in an interview with Caijing that the project involved extensive communication with the SFC from the start, and after months of review, they received the “no objection” response. “This is not just about a single product approval but about the RWA business model gaining regulatory recognition, enabling further development.”
This case demonstrates a feasible path for compliant RWA implementation under strict regulation. The SFC’s tokenization guidelines require that such products follow existing licensing regimes and ensure investor protection. The approval was possible because the project relied on licensed institutions, targeted qualified investors, and adhered to disclosure requirements.
This “strict regulation in the mainland, pioneering in Hong Kong” pattern forms a strategic complement. Mainland regulation emphasizes risk control and clear boundaries, while Hong Kong’s licensing and investor protection framework allows compliant institutions to explore with qualified clients. The latest global RWA product models, technical standards, and risk management practices tested in Hong Kong can inform future policies in the mainland and other regions.
So, under the “strictly prohibited” stance in the mainland, is there still room for compliant participation in RWA?
The policy text’s mention that “activities conducted with the approval of the relevant authorities and relying on specific financial infrastructure” are exceptions leaves room for compliant exploration. If activities meet regulatory requirements, obtain approval, and rely on compliant financial infrastructure, they are not necessarily forbidden.
Practically, three potential paths exist. First, service innovation for enterprise financing. Under current securities law, using blockchain to improve transparency and transfer efficiency of non-standard assets like supply chain finance and leasing is a process optimization, not issuing securities tokens, thus carrying lower policy risk. The core is not to “issue and trade publicly.”
Second, leveraging Hong Kong as a bridge for cross-border cooperation. Mainland institutions can partner with licensed Hong Kong entities to offer compliant RWA products to professional investors. This requires strict adherence to “funds not leaving the country, assets not entering the country” principles, ensuring no public fundraising or trading within the mainland. Hong Kong’s regulatory framework and mutual recognition arrangements provide a foundation for such cooperation.
Third, providing “technology solutions” to licensed financial institutions. Since issuing tokens is banned, offering technical solutions, smart contract auditing, and asset custody services related to RWA can be a low-risk market. China’s abundant tech talent and mature blockchain development capabilities give it a competitive edge.
It’s important to emphasize that these explorations must be based on strict compliance and regulatory communication, not encouraging public speculation. As Li Xiaojia recently emphasized regarding RWA, tokenization must not reduce the underlying risks of real-world assets. This underscores the core issue: regardless of technological innovation, the quality of assets, cash flows, and legal rights remains fundamental to investment value.
From the joint notice to the two sessions’ high-level remarks, the “breakwater” regulators have set for RWA tokenization is clear. It blocks the tide of illegal activities disguised as concepts and provides a stable environment for compliant exploration.
For industry practitioners, the key now is not to complain about strict regulation but to reconsider: within the existing legal framework, what real value can RWA technology create for the circulation of specific assets? Is it to continue operating in gray areas, trying to bypass regulation? Or to return to serving the real economy and find innovative opportunities under compliance? The answer is obvious.
The “breakwater” is not a “pause.” Instead, it points the way forward: only innovations that are incorporated into regulation, serve the real economy, and withstand risk tests can truly sail into broader waters. Those attempting to bypass the “breakwater” and venture into storms will ultimately be overwhelmed by the waves.
(RWA Research Institute reminder: This article’s discussion on the future path of RWA is based on current regulatory logic. Any exploration related to RWA must be within the scope permitted by national laws and financial regulators. Currently, the mainland maintains a high-pressure stance against any token issuance and fundraising activities targeting the public. Industry participants must strictly adhere to compliance and avoid illegal activities.)
