China Pauses Hong Kong Asset Tokenization to Align Policies, Curb Risks

China’s securities regulator has directed several mainland brokerages to pause real-world asset (RWA) tokenization activities in Hong Kong, signaling heightened regulatory caution amid the city’s push to become a global digital finance hub. The China Securities Regulatory Commission (CSRC) has issued informal guidance to key brokerages, urging them to halt initiatives that convert traditional assets—such as real estate, bonds, and equities—into blockchain-based tokens for offshore trading. This move underscores Beijing’s focus on aligning capital market policies with Hong Kong’s evolving digital asset framework, even as the city advances its ambitions as Asia’s premier digital finance centerRWA Tokenization Hits A Political Speed Bump In China^[1].

The CSRC’s intervention reflects three primary concerns: , , and . First, tokenizing credit-sensitive assets in a context of ongoing mainland property stress risks creating the perception of maturity transformation through a novel wrapper. While Hong Kong’s regulatory structure for tokenized securities is robust, Beijing is wary of offshore instruments potentially serving as a pressure valve for stressed balance sheetsRWA Tokenization Hits A Political Speed Bump In China^[1]. Second, the mainland’s absence of a consolidated rulebook for tokenized financial instruments—coupled with its 2021 cryptocurrency ban—necessitates time to harmonize definitions, disclosures, and prudential expectations with Hong Kong’s frameworkRWA Tokenization Hits A Political Speed Bump In China^[1]. Third, Hong Kong’s emphasis on tokenized deposits and wholesale CBDC as settlement layers for assets requires policy alignment. A temporary pause ensures that tokenized Chinese assets settle in regulated money rails rather than unregulated stablecoins or cross-border crypto networksRWA Tokenization Hits A Political Speed Bump In China^[1].

For mainland-affiliated brokerages and developers, the guidance implies a strategic recalibration. Initiatives tied to onshore real estate or opaque private credit will likely slow, while lower-risk RWAs—such as tokenized money-market funds, short-duration government paper, or transparent trade receivables—remain viable. Hong Kong’s Securities and Futures Commission (SFC) has already outlined disclosure and operational standards for tokenized products, but mainland comfort with risk exposure and investor access remains a critical factorRWA Tokenization Hits A Political Speed Bump In China^[1]. Banks, however, are advised to prioritize tokenized deposit integration, PvP/DvP workflows, and interbank settlement testing under Hong Kong Monetary Authority (HKMA)’s Project Ensemble. These infrastructure efforts are seen as foundational for cross-border pilots once policies convergeRWA Tokenization Hits A Political Speed Bump In China^[1].

The global RWA market, currently valued at $29 billion, is projected to grow to $2 trillion by 2030, with tokenized U.S. Treasuries alone expected to reach $4.2 billion in 2025Chinese Regulators Crack Down on Real-World Asset Businesses …^[2]. Hong Kong’s recent stablecoin licensing regime and 77 firms expressing interest in applying for licenses by August 31 further underscore its digital finance momentumMainland China warns firms to pause RWA tokenization in Hong …^[3]. However, Beijing’s caution has already impacted market dynamics. For instance, GF Securities’ Hong Kong unit introduced “GF Tokens” in June, while China Merchants Bank International facilitated a 500 million yuan digital bond issuance. These initiatives now face scrutiny under the CSRC’s informal guidanceMainland China warns firms to pause RWA tokenization in Hong …^[3].

Geopolitically, the pause highlights the tension between Hong Kong’s innovation drive and Beijing’s macroprudential priorities. While Hong Kong seeks to demonstrate that regulated tokens can enhance market efficiency, Beijing aims to ensure offshore tokenization aligns with capital account management and consumer protection. This policy sequencing, rather than a direct conflict, is critical for scaling RWA tokenization. The CSRC’s action reinforces a strategic path: tokenize money first (e.g., treasuries, MMFs), then assets that behave like money, and finally higher-risk classesRWA Tokenization Hits A Political Speed Bump In China^[1].

Global markets are watching closely. Hong Kong’s approach to regulated tokens, coupled with Beijing’s caution, could influence tokenization agendas in corridors like Gulf-Asia, EU-Asia, and US-LATAM. For now, the CSRC’s pause is not a ban but a recalibration—one that underscores the importance of aligning technology with policy frameworks before scaling adoptionRWA Tokenization Hits A Political Speed Bump In China^[1].