Blockchain and RWA Offer China a New Financial Frontier, Stablecoins Not Withstanding

A former Chinese official has urged the government to prioritize support for blockchain technology and the tokenization of real-world assets (RWA) instead of focusing on the regulation of stablecoin issuance. The recommendation highlights a strategic shift in China’s approach to the digital economy, emphasizing infrastructure and innovation over competition in the volatile stablecoin space.

The concept of RWA refers to the process of tokenizing real-world assets such as real estate, commodities, and infrastructure on blockchain networks. This facilitates fractional ownership and enhances liquidity by allowing these assets to be traded digitally. Hong Kong has recently taken a significant step in this direction by launching the world’s first RWA registration platform, which aims to standardize and streamline the process of converting physical assets into digital tokens.

The initiative in Hong Kong underscores the potential for RWA to serve as a bridge between traditional finance and blockchain-based systems. The platform integrates asset providers, capital sources, and service providers, ensuring transparency and traceability through a “chain-off-chain legal authentication and on-chain circulation” model. This development positions China Hong Kong as a key player in the global RWA ecosystem and aligns with broader efforts to integrate blockchain into the financial framework.

According to a former official, China should focus its resources on fostering blockchain-based innovation and the tokenization of real-world assets rather than engaging in regulatory battles over stablecoin issuance. The rationale is that blockchain and RWA can contribute more meaningfully to the economy by enhancing financial inclusion, improving capital efficiency, and supporting the digital transformation of traditional asset classes.

The RWA model has several advantages, including the ability to break down high-value assets into smaller, tradable units. This democratizes access to investments that were previously limited to institutional players. Additionally, tokenization can reduce settlement times and increase transparency, making it an attractive option for both investors and regulators. As China considers its digital financial strategy, the potential of RWA as a tool for financial modernization is increasingly coming into focus.

While the government has shown cautious optimism toward stablecoin regulation, the focus on RWA and blockchain appears to reflect a broader, more forward-looking vision for China’s financial infrastructure. By supporting the development of blockchain standards and encouraging the tokenization of real-world assets, China could establish itself as a leader in the next phase of financial innovation.