China Financial Associations Consider RWA Tokenization as Risky

Key Insights
China’s financial industry stakeholders say RWA is risky and illegal.
Scammers using RWA and virtual assets for fraudulent activities are likely a reason behind the opposition.
China continue to push its digital yuan agenda and recently completed its first international retail use in Laos
Seven financial industry associations in China have issued a joint document warning about the risks associated with cryptocurrencies.

The document titled “Risk Warning on Preventing Illegal Activities Involving Virtual Currencies.” It highlighted real-world assets (RWA) tokenization as a risky practice.

China’s National Internet Finance Association signed the document. The Asset Management Association added its signature. Banking, Securities, and Futures Associations joined in. Payment & Clearing and Listed Companies Associations finalized the signing.

Regulatory Crackdown on RWA Tokenization in China
According to the document, RWA carries various risks, including speculation, business failure, and false asset risks. It added that Chinese regulators have not approved RWA activities in the country.

With the declaration, financial industry stakeholders condemned any efforts to issue or trade RWA in the country. The regulatory authority has not approved RWA. However, some entities have taken advantage of the regulatory uncertainty surrounding the issue.

Some of these entities have issued RWA tokens, an alternative to virtual currencies. They are banned in China. However, industry associations consider RWA and cryptocurrencies to be equivalent in terms of risk.

The document further warned that engaging in RWA activity is illegal and may result in liability. Issuing RWA amounts to unauthorized issuance of securities.

It also constitutes illegal futures business. Authorities classify it as illegal fundraising. China’s securities law treats these acts as crimes with penalties.

Interestingly, the document also warned that service providers for RWA could be held liable in the country. It stated that the domestic staff of foreign crypto or RWA token service providers, as well as domestic companies, will be held accountable.

It said:

Opposition to RWA Tokenization Likely Due to Fraud
Meanwhile, the strong opposition to RWA aligns with the previous government crackdown on cryptocurrency and mining in mainland China. The country has been strongly opposed to cryptocurrencies since as early as 2017, and has even banned stablecoins.

However, this has not stopped these activities from occurring in the country. However, they remain highly restricted. Speculations that China might ease its stance on cryptocurrency have been dispelled by the recent clampdown on Bitcoin mining.

A legal expert, Liu Honglin, believes opposition to RWA stems from widespread scams. He argues that many schemes disguise themselves as RWA. Such frauds erode trust in legitimate projects.

This prevalence likely drives regulators to resist RWA. The document itself mentioned this, noting that criminals use the term for fraud, Ponzi schemes, and other illegal activities.

China Doubles Down on Digital Yuan
China’s strong opposition to virtual currencies contrasts with its recent efforts to boost the adoption of the digital yuan. An official of the People’s Bank of China recently released a framework outlining plans for the digital yuan in 2026.

Part of the plan was to pay interest on the central bank digital currency (CBDC) and treat it like regular deposits. The Bank also plans to expand the use of the digital Yuan internationally. They completed a milestone retail payment in Laos in December 2025.

The PBOC has developed a cross-border blockchain-powered digital payment platform capable of enabling direct digital yuan payments in other countries. This was deployed in Laos in partnership with the Bank of Laos and the Bank of China’s branch in Vientiane.