China Curbs RWA Innovation as Hong Kong Pushes Ahead

China's securities regulator has advised domestic brokerages to pause real-world asset (RWA) tokenization efforts in Hong Kong, signaling heightened regulatory scrutiny over the offshore digital asset market. The China Securities Regulatory Commission (CSRC) issued informal guidance to at least two major brokerages, instructing them to halt RWA activities, according to sources familiar with the matter. This move reflects Beijing's concerns over speculative risks and the need for stronger risk management in a rapidly expanding sector. The RWA tokenization process involves converting traditional assets such as stocks, bonds, and real estate into blockchain-based tokens, a trend that has gained momentum in Hong Kong as the city positions itself as Asia's digital asset hub.

Hong Kong's push to become a global leader in digital finance has accelerated in recent months, with over 77 firms expressing interest in applying for stablecoin licenses as of August 2025. The city's Financial Services and the Treasury Bureau (FSTB) and Hong Kong Monetary Authority (HKMA) are conducting legal reviews of RWA tokenization, drawing on international frameworks. Meanwhile, Chinese firms have launched initiatives such as tokenized bonds and yield-generating products. For example, GF Securities' Hong Kong unit introduced "GF Tokens" backed by U.S. dollars and offshore renminbi, while China Merchants Bank International recently helped raise 500 million yuan ($70.29 million) through an RWA-based digital bond.

The global RWA market is currently valued at $29 billion, according to data provider RWA.xyz, with projections suggesting it could surpass $2 trillion by 2030. However, Beijing's cautious stance contrasts sharply with Hong Kong's proactive approach. While China banned cryptocurrency trading and mining in 2021, it has maintained a more restrained attitude toward digital assets, emphasizing stability over rapid innovation. Last month, regulators also instructed brokers to cease publishing research promoting stablecoins, further underscoring their risk-averse strategy. Analysts note that the CSRC's latest guidance on RWA tokenization is part of a broader effort to mitigate speculative excesses and ensure that tokenized assets are underpinned by legitimate business models.

The regulatory divergence between mainland China and Hong Kong has sparked market volatility and investor uncertainty. Shares of Chinese firms involved in digital asset initiatives have experienced significant swings, with Guotai Junan International's stock surging over 400% after securing crypto trading approval in June. Similarly, Fosun International's shares rose 28% following high-profile meetings with Hong Kong officials. These movements highlight the growing influence of digital asset-related activities on traditional markets, even as regulators seek to temper enthusiasm. The CSRC's informal directive, though not a formal ban, has created ambiguity for firms operating in the space, with some delaying product launches pending further clarity.

Despite the pause, experts argue that RWA tokenization could unlock trillions in traditional finance markets. Animoca Brands estimates that tokenizing RWAs could access a $400 trillion addressable market, while the 2025 Skynet RWA Security Report projects growth to $16 trillion by 2030. Institutional interest is rising, with major banks and asset managers exploring tokenization for liquidity management and yield generation. However, the lack of standardized regulations remains a barrier. The CSRC's guidance emphasizes the need for robust compliance frameworks, suggesting that Hong Kong's regulatory clarity could position it as a bridge between China's cautious policies and global digital finance trends.

The CSRC's intervention underscores the delicate balance between innovation and oversight in China's financial landscape. While Hong Kong continues to attract global investment with its digital asset-friendly policies, Beijing's focus on systemic risk management highlights the challenges of harmonizing regulatory approaches. The outcome of the HKMA and FSTB's legal review of RWA tokenization will likely determine the pace of adoption in the region. In the short term, the pause may slow offshore RWA projects, but long-term projections remain bullish, contingent on the development of a stable regulatory environment.

The regulatory landscape for RWAs remains fluid, with key stakeholders in both Hong Kong and mainland China navigating competing priorities. As the CSRC and Hong Kong authorities refine their frameworks, the market will likely see a temporary consolidation of projects until clarity emerges. The eventual resolution of these regulatory tensions could shape the trajectory of RWA tokenization not only in Asia but globally, as investors and institutions seek jurisdictions that balance innovation with risk mitigation.