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 speculation, with industry associations quickly following up with regulatory actions. The subtle chill emanating from the wording of this document (hereinafter referred to as the "Risk Warning") sent a shiver 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 the digitization and tokenization of offline assets through blockchain technology, followed by secondary market circulation and financing. However, under the current regulatory context in mainland China, any attempt to link tokenization to 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 that already tightly closed 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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Classification as Illegal Financial Activities: The document classifies domestic RWA issuance and financing as suspected illegal fundraising, unauthorized public issuance of securities, and other illegal financial activities. In mainland China, any financing activity that bypasses特许经营权 (special operating licenses) is like walking on 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 channels for capital inflow and traffic entry points, domestic RWA becomes water without a source.
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The Strong Position of Legal Tender: The stablecoins involved in RWA do not have legal status in mainland China. Attempting to use them to anchor asset returns touches a nerve regarding monetary sovereignty.
Using the bottom-line thinking common in criminal defense: engaging in RWA in mainland China might 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 subjecting the entire society to 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 within China is also illegal," they did not issue a clear, all-encompassing ban on purely overseas business.
This hides a profound macro narrative: China's economic internal circulation ultimately needs to connect with the external circulation. The "strict lockdown" in mainland China and the "resolute 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" status—where the underlying assets, funding sources, servers, and compliant entities are all overseas, and it does not involve the outflow of RMB from mainland China—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 is Everything
At this point, some domestic bosses might have an idea: Can I take the income rights of my domestic factory or mine and use them for RWA in Hong Kong?
In theory, establishing an SPV through an ODI (Overseas Direct Investment) structure and "transferring" the rights to an overseas entity is a feasible path. But in practical operation, this is comparable to the Shu Road in Li Bai's poetry, even近乎 (approaching) an "impassable chasm":
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First, the compliance shackles of asset outflow: Cross-border confirmation of rights is complex and极易 (extremely likely) to be suspected as asset转移 (transfer).
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Second, the "circuit breaker" of capital回流 (repatriation): The foreign exchange settlement环节 (link) faces extremely strict scrutiny related to virtual currencies. Account freezing is often the lightest consequence; more severe outcomes include fines and even 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都属于 [all belong to] illegal financial activities).
Actually, regarding RWA business, the more core issue lies in "timing." We currently judge that, at the regulatory level, multiple ministries and commissions have unified opinions, and the country is in a "high-pressure period" of catching typical cases. 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 realistic state of "even if what is not prohibited by law is permissible, 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 (plan)—and avoid 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.
But for ambitious mainland 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 acrobatic act involving legal compliance, foreign exchange management, and international私募 (private placement).
Our advice is: If you want to engage in RWA, please first sever all connections with domestic RMB, 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 playing jump rope.
The current silence is for future standardization. If you are planning to launch RWA business overseas and need legal compliance论证 (analysis) or structural design, please feel free to contact us for in-depth consultation.
