Thirteen ministries and seven associations issued a document to prevent the risks of virtual currencies. Where is RWA headed?

On December 5, seven major industry associations in China—including the National Internet Finance Association and the Banking Association—jointly issued a “Risk Alert on Preventing Illegal Activities Related to Virtual Currencies.” This move followed closely after the regulatory crackdown on virtual currency trading and speculation by thirteen ministries and commissions on November 28. The document (the “Risk Alert”) carries an unmistakably stern tone, sending a chill through entrepreneurs planning to tokenize real-world assets (RWA).

Many have asked: Attorney Sha, is RWA truly finished in mainland China?

As Web3 legal professionals, we believe the answer is not a simple “yes” or “no.” The essence of RWA is to digitize and tokenize offline assets using blockchain technology, enabling secondary market trading and financing. Yet under current mainland regulations, any tokenization activity that connects to public trading fundamentally challenges the red line set by the 2021 “9.24 Notice.” The latest “Risk Alert” from the seven associations is like adding several more locks to an already sealed iron gate.

I. Why RWA Is Off-Limits in Mainland China: Risk Isolation Under Bottom-Line Thinking

The “Risk Alert” makes it clear: “At present, China’s financial regulators have not approved any real-world asset tokenization activities (in mainland China).” Three major legal barriers stand in the way of RWA in mainland China:

• Illegal Financial Activity Classification: The document categorizes domestic RWA issuance and financing as suspected illegal fundraising and unauthorized public securities offerings. In China, any financing that circumvents licensing is a high-risk gamble.
• Comprehensive Financial Institution Blockade: Banks, payment institutions, and internet platforms are strictly prohibited from providing settlement or promotional support for such activities. Without funding channels or user access, domestic RWA projects are left without lifeblood.
• Dominance of Legal Tender: Stablecoins involved in RWA lack legal status in mainland China. Attempting to use them to anchor asset returns directly challenges monetary sovereignty.

From a criminal defense perspective, the issue with RWA in mainland China is less about whether the market is “finished” and more about “how many years” one might face. From a regulatory standpoint, this intense pressure is an “emergency brake” in the absence of effective monitoring tools. As discussed, this approach aims to protect society and prevent another systemic financial crisis like the P2P collapse.

II. The Offshore “Oasis”: Macro Narrative and Regulatory Outlets

With the mainland off-limits, attention naturally turns to offshore markets like Hong Kong and Singapore. While the seven associations note that “overseas service providers conducting business in mainland China is also illegal,” they stop short of imposing a blanket ban on purely offshore activities.

This reflects a deeper macro narrative: China’s domestic economic cycle ultimately needs to connect with the global economy. The strict clampdown in the mainland and the openness in Hong Kong are two sides of the same coin. Mainland China requires an “outlet” to allow assets to enter international markets under compliant frameworks.

If a project achieves true “full offshore” status—with underlying assets, capital, servers, and compliance entities all outside China, and no domestic RMB outflow—Chinese regulators typically lack motivation for cross-border enforcement. In this model, if you operate robustly overseas and comply with local regulations (such as holding a Hong Kong VASP license), you are free to proceed.

III. Theoretical Pathways vs. Practical Barriers: Timing Is Everything

Some mainland business owners may ask: Can I take my domestic factory or mining rights to Hong Kong for RWA?

Theoretically, establishing a Special Purpose Vehicle (SPV) through an Outbound Direct Investment (ODI) structure to transfer rights to an overseas entity is possible. In practice, however, this path is as daunting as the treacherous roads described in classical Chinese poetry—nearly insurmountable:

• Compliance Barriers for Asset Outflow: Cross-border confirmation of rights is complex and easily suspected as asset transfer.
• Capital Repatriation “Circuit Breakers”: Settlement processes face extremely strict crypto-related scrutiny. Account freezes are often the mildest consequence; more severe cases may result in fines or even allegations of illegal fundraising.
• Legal Risks for Mainland Residents: If individuals in China operate overseas crypto-related businesses, authorities can still prosecute (both management and employees are at risk for illegal financial activity).

For RWA business, timing is the central issue. Currently, regulatory consensus among multiple ministries has created a “high-pressure period” for enforcement. Even in Hong Kong, listed companies and licensed institutions remain cautious due to government-business sensitivities, resulting in a prevailing attitude of “even if not explicitly prohibited, it’s best to wait.” The optimal strategy for existing projects is to follow regulatory guidance: either suspend operations or fully transition to an offshore model. Acting against the regulatory tide is strongly discouraged.

IV. Conclusion

RWA is not “finished” in mainland China; it has never truly been understood or implemented. The statements from the thirteen ministries and seven associations reinforce the regulatory red line for domestic business.

For ambitious Chinese enterprises, the real RWA opportunity lies offshore. This is no longer a shell game of illegal fundraising, but a complex act requiring legal compliance, foreign exchange controls, and international private placement expertise.

Our recommendation: If you intend to pursue RWA, first sever all ties with domestic RMB, retail investors, and promotional channels. When facing regulatory red lines, survival is more important than speed. The law’s red line is not meant to be tested.

The current lull is a preparation for future regulatory clarity. If you are planning offshore RWA business and need legal compliance analysis or structural design, contact us for in-depth consultation.

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