China’s 2025 RWA Ban and Market Implications

Summary of the 2025 policy action

In December 2025, seven major Chinese financial industry associations jointly issued a public risk warning that amounts to the first explicit national prohibition of real-world asset (RWA) tokenization activities in mainland China. The advisory, coordinated across banking, securities, funds, futures, payment clearing, listed companies and internet finance sectors, also reiterated existing prohibitions on virtual currencies and related services.

Regulators stated that no RWA tokenization activities have been approved in China, and emphasized that issuing, exchanging, or raising funds via tokenized real-world assets or virtual currencies is not permitted within the mainland jurisdiction. The statement extended enforcement reach to domestic staff of offshore service providers, and explicitly included stablecoins and other token formats in the ban.

What the announcement covers

• Prohibition of RWA tokenization activities within mainland China without regulatory approval.
• Reaffirmation that virtual currencies and stablecoins lack legal status and cannot circulate domestically.
• Restrictions on fundraising, issuance, exchange, custody and technical services tied to tokenized assets.
• Potential legal consequences for mainland-based personnel of offshore virtual asset service providers.
• Increased scrutiny on payment channels, mining infrastructure and schemes that use token formats to evade controls.

Why authorities acted: regulatory drivers

Officials outlined multiple concerns behind the coordinated action. Primary among them is the risk that tokenization could be used to facilitate capital flight by converting domestic assets into tokens, transferring them offshore and converting into foreign currency outside traditional foreign exchange controls. Other cited risks include money laundering, investor fraud, and systemic financial stability threats related to rapid growth in unregulated token markets.

The move follows a series of high-level discussions in late 2025 between monetary and financial authorities and aligns with an escalation in enforcement activity since 2021. Authorities have framed the action as protecting domestic financial order while promoting regulated digital payments such as the digital yuan.

How enforcement is being coordinated

The joint statement creates a multi-layered enforcement framework that industry analysts describe as comprehensive:

• Monitoring and disruption of onshore technical and payment infrastructure that enables tokenization.
• Blocking domestic channels for stablecoin settlements and related payment flows.
• Legal and administrative measures aimed at preventing mainland staff participation in offshore tokenization services.
• Public risk warnings and follow-up compliance checks to deter speculative schemes and fraudulent projects.

Scope and cross-border reach

Although the ban targets activities carried out in mainland China, authorities signalled that offshore operations tied to mainland users or employees could also face consequences. This approach narrows potential regulatory arbitrage and signals enforcement will focus on connections to domestic actors rather than solely on jurisdictional boundaries.

Global tokenization market context in 2025

RWA tokenization has expanded rapidly through 2024–2025, with global market estimates tracking beyond tens of billions of dollars. Institutional appetite for tokenized exposure to traditional assets—such as funds, real estate, and debt instruments—has been a key growth driver, and market participants have increasingly used tokenized instruments as collateral and settlement assets in decentralized and centralized trading venues.

That said, regulatory responses have diverged across jurisdictions:

• Some markets pursued formal licensing regimes and pilot programmes to accommodate tokenization under defined safeguards.
• Others moved to restrict or ban certain token forms, citing investor protection and capital control priorities.
• Regulatory fragmentation has created separate ecosystems for tokenized assets: tightly regulated domestic pilots in a few financial centers and open offshore markets where permissive frameworks persist.

Regional divergence: Mainland China vs. Hong Kong and offshore hubs

The December advisory highlights a growing regulatory divergence between mainland China and neighboring financial hubs. Hong Kong, for example, launched a licensing framework for certain stablecoin activities in 2024 and continued to permit tightly controlled RWA pilots aimed at offshore assets and non-mainland users through 2025. Other international markets likewise pursued regulatory clarity to attract institutional tokenization projects.

For market participants, this divergence reinforces a two-track reality: domestic innovation channels in mainland China must align with state-backed digital payments and strict compliance standards, while international tokenization activity increasingly migrates to jurisdictions offering clearer legal frameworks for digital-asset business models.

Market and investor reactions in 2025

The announcement triggered a broad online debate among retail and institutional observers in China. Young retail investors, who in recent years have shown strong interest in digital assets and tokenized opportunities, voiced frustration about being excluded from global tokenization markets and the potential for missed wealth-creation channels.

At the institutional level, asset managers and fintech firms reviewing cross-border strategies face tougher compliance choices. Entities with onshore footprints are re-evaluating product designs, client onboarding practices and technical architectures to ensure they do not run afoul of the new guidance.

Implications for different stakeholders

For domestic investors

• Reduced access to tokenized products and offshore liquidity pools from within mainland China.
• Heightened need for due diligence on digital asset offerings and awareness of legal risks associated with participation.
• Possible migration of investment activity to permitted vehicles such as regulated mutual funds or state-backed digital payment channels.

For fintech firms and service providers

• Requirement to assess onshore operations and personnel exposure to tokenization services offered offshore.
• Potential necessity to redesign services to comply with domestic restrictions, including limiting features or geofencing access.
• Strategic decisions about relocating tokenization activities to permissive jurisdictions or focusing on regulated domestic use cases.

For international markets

• Opportunity to capture demand migrating offshore, particularly for institutional tokenization projects that need regulatory clarity.
• Increased scrutiny of counterparty and jurisdictional risk when onboarding clients connected to mainland China.
• Potential rise in compliance and KYC expectations for projects aimed at Chinese-linked participants.

Practical guidance and next steps

Market participants should take several immediate actions in response to the new guidance:

• Conduct enterprise-wide legal and compliance reviews to identify any activities that could be construed as RWA tokenization or virtual currency services within mainland China.
• Implement robust geographic and personnel controls to segregate onshore staff from offshore tokenization operations where necessary.
• Engage with legal advisors and regulators in relevant jurisdictions to clarify permissible business models and licensing requirements.
• Monitor enforcement developments closely, including follow-up statements from regulatory bodies and industry associations.

Outlook for 2026 and beyond

Looking ahead, the regulatory stance in mainland China is likely to remain cautious through 2026 as authorities prioritize financial stability, capital controls and systemic risk mitigation. Domestic innovation in digital payments—anchored by the state-backed digital yuan—will continue, while tokenization experiments may be constrained to tightly controlled pilots or moved to offshore venues where legal frameworks are more permissive.

Globally, the tokenization market is expected to expand, but growth will be shaped by regulatory clarity and interoperability between regimes. Firms that succeed will combine strong compliance frameworks, transparent governance for tokenized instruments, and clear segregation of onshore and offshore activities where regulatory divergence persists.

Conclusion

The December 2025 advisory by seven Chinese financial associations represents a significant regulatory development for the global tokenization landscape. By explicitly prohibiting RWA tokenization activities in mainland China and broadening the scope of enforcement to include related personnel and infrastructure, the guidance underscores a preference for stringent domestic controls and a cautious approach to asset tokenization.

For investors, firms and international partners, the announcement reinforces the need for careful compliance planning, geographic risk management and ongoing monitoring of policy shifts as tokenization evolves in 2025 and into 2026.

MEXC will continue to monitor regulatory developments and provide updates and resources for market participants navigating the evolving tokenization landscape.

Disclaimer: This post is a compilation of publicly available information.
MEXC does not verify or guarantee the accuracy of third-party content.
Readers should conduct their own research before making any investment or participation decisions.