Author: Crypto Salad
On December 5, seven industry associations, including the China Internet Finance Association and the Banking Association, jointly released a "Risk Warning on Preventing Illegal Activities Involving Virtual Currency." This follows the meeting of thirteen ministries and commissions on November 28 to crack down on virtual currency trading and speculation, with industry associations quickly following up with regulatory actions. The subtle undertones of this document (hereinafter referred to as the "Risk Warning") sent a chill down the spines of some entrepreneurs planning to tokenize real-world assets (RWA).
Many people asked in the background: Lawyer Sha, is RWA completely dead in mainland China?
As Web3 legal professionals, we believe the answer to this question is not a simple "yes" or "no." The core of RWA is to tokenize offline assets through blockchain technology, digitize them, and then enable secondary market liquidity and financing. However, under the current regulatory context in mainland China, any tokenization behavior attempting to engage with public trading essentially challenges the red line set by the "9.24 Notice" in 2021. The "Risk Warning" from the seven associations is more like adding a few more glaring locks to an already tightly shut iron door.
I. Why It "Cannot Be Done" in Mainland China: Risk Isolation Under a Bottom-Line Mindset
The "Risk Warning" clearly states: "Currently, China's financial regulatory authorities have not approved any real-world asset tokenization activities (within mainland China)." Engaging in RWA in mainland China faces legal obstacles akin to "three great mountains":
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Qualification as Illegal Financial Activities: The document categorizes domestic RWA issuance and financing as suspected illegal fundraising, unauthorized public issuance of securities, and other illegal financial activities. In mainland China, any financing behavior bypassing特许经营权 is like licking blood off a knife's edge.
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Comprehensive Blockade by Financial Institutions: Banks, payment institutions, and internet platforms are completely prohibited from providing settlement and promotional support for such businesses. Without funding channels and traffic inlets, domestic RWA becomes water without a source.
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The Dominant Position of Legal Tender: Stablecoins involved in RWA do not have legal status in mainland China. Attempting to use them to anchor asset returns touches on the nerve of monetary sovereignty.
Using the bottom-line mindset common in criminal defense: engaging in RWA in mainland China may not be a question of "whether it's dead," but rather "how many years in prison." However, from a governance perspective, this high-pressure stance is actually an "emergency brake" by regulators who have not yet figured out effective monitoring methods. As mentioned in the dialogue, this is largely to protect society and avoid another systemic financial disaster similar to the P2P crisis.
II. The "Oasis" Overseas: The "Outlet" Under the Macro Narrative
Since mainland China is a forbidden zone, attention naturally turns to offshore markets like Hong Kong and Singapore. Although the seven associations mentioned that "overseas service providers conducting business in mainland China is also illegal," they did not issue a clear "sweeping ban" on purely overseas businesses.
This hides a profound macro narrative: China's internal economic circulation ultimately needs to connect with external circulation. The "strict lockdown" in mainland China and the "firm opening" in Hong Kong are actually two sides of the same coin. Mainland China needs such an "outlet" to allow assets to enter the international market in a compliant context.
As long as a project can achieve true "full offshore" operations—with underlying assets, funding sources, servers, and compliance entities all located overseas, and without involving the outflow of domestic RMB—mainland regulatory authorities generally lack the motivation for cross-border enforcement. Under this model, if you are operating vigorously overseas and complying with local regulations (such as obtaining a Hong Kong VASP license), that is your freedom.
III. The Theoretical "Thoroughfare" and the Practical "Chasm": Timing Matters More Than Anything
At this point, some domestic bosses might hatch a plan: Can I take the income rights of my domestic factory or mineral resources to Hong Kong for RWA?
Theoretically, it is feasible to set up an SPV through an ODI (Overseas Direct Investment) structure and "transfer" the rights to an overseas entity. However, in practical operation, this is comparable to the Shu Road in Li Bai's poetry, even近乎 "a chasm":
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First, the Compliance Shackles of Asset Outflow: Cross-border rights confirmation is complex and极易 suspected as asset转移.
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Second, the "Circuit Breaker" of Fund Repatriation: The settlement环节 faces extremely strict scrutiny involving virtual currencies. Account freezing is often the lightest consequence; more severe outcomes include fines and suspicion of illegal fundraising.
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Finally, the Legal Risks for "Domestic Persons": If individuals are operating overseas virtual currency-related businesses from within mainland China, law enforcement agencies can still crack down (whether it's the boss, management, or ordinary employees, it is considered illegal financial activity).
Actually, regarding RWA business, the more core issue lies in "timing." Currently, we judge that at the regulatory level, multiple ministries and commissions have unified opinions, and the country is in a "high-pressure period" of making examples. Even in Hong Kong, due to the cautious consideration of political and business relations by listed companies and licensed institutions, the current stance is mostly a practical state of "even if it's not prohibited by law, please wait for now." The best strategy for existing projects at this stage is to respond to "window guidance"—either halt operations or completely switch to a full overseas方案,切忌 acting against the wind.
IV. Conclusion
RWA is not dead in mainland China; it has never truly been "figured out." The document issued by the thirteen ministries and commissions and the seven associations reiterates the red line for domestic business.
However, for ambitious domestic enterprises, the real opportunity for RWA lies in the deep waters of "offshore." This is no longer a mainland-style illegal fundraising show in disguise, but a high-difficulty acrobatics act involving legal compliance, foreign exchange management, and international private placement.
Our advice is: If you want to engage in RWA, first sever all ties with domestic currency, ordinary retail investors, and promotional channels. In the face of red lines, living long is more important than running fast. Legal red lines are never meant for jumping rope.
The current silence is for future standardization. If you are planning to launch RWA business overseas and need legal compliance论证 or structural design, please feel free to contact us for in-depth consultation.
