China's Regulatory Posture and the Future of Real-World Asset (RWA) Tokenization

China's regulatory authorities have cemented their stance against Real-World Asset (RWA) tokenization in 2024–2025, framing it as part of a broader crackdown on crypto-linked activities. Seven major financial associations-including the China Banking Association and the Securities Association of China-have issued joint warnings, declaring RWA tokenization as illegal financial activity. These entities emphasize that tokenizing assets such as real estate claims or corporate receivables poses risks of fraudulent fundraising and speculative bubbles. The regulatory framework explicitly groups RWA tokenization with virtual currencies and stablecoins, subjecting it to criminal liability if conducted domestically. This position aligns with China's longstanding prohibition on crypto transactions and its efforts to centralize financial oversight.

The implications of this stance are profound. Domestic financial institutions are barred from providing services that enable RWA tokenization, including technical integration, payment processing, or platform operations. Even foreign firms engaging in RWA activities targeting mainland users face potential legal repercussions, as regulators treat such actions as complicit in "illegal financial operations." Internet platforms are further prohibited from hosting RWA-related content, creating a multi-layered barrier to innovation in this space. This approach starkly contrasts with global trends, where jurisdictions like the EU, U.S., and Singapore are actively developing frameworks to legitimize and scale RWA tokenization.

Globally, the EU's Markets in Crypto-Assets (MiCA) regulation, fully enforced in 2025, provides a structured pathway for RWA tokenization. MiCA mandates reserve audits and white-paper disclosures, fostering institutional trust while mitigating risks. In the U.S., the Securities and Exchange Commission (SEC) has classified most tokenized RWAs as securities, subjecting them to existing regulatory oversight but also creating a legal foundation for their growth. Meanwhile, Singapore's Monetary Authority (MAS) has pioneered initiatives like Project Guardian, which experiments with tokenized funds under defined compliance boundaries, positioning the city-state as a hub for DeFi innovation.

China's exclusionary approach highlights a strategic divergence. While the EU, U.S., and Singapore are embedding RWA tokenization into their financial ecosystems to enhance liquidity and cross-border capital flows, China's regulators prioritize stability through centralization. This divergence raises questions about China's long-term positioning in the DeFi landscape. By stifling domestic RWA innovation, China risks ceding ground to jurisdictions that are actively building infrastructure for tokenized assets. The Asia-Pacific region, for instance, has emerged as a focal point for DeFi development, with countries adopting frameworks that encourage institutional participation and cross-border experimentation.

For investors, the contrast is clear. Jurisdictions with adaptive regulatory frameworks-such as Singapore and the EU-offer fertile ground for RWA tokenization, attracting capital and talent. Conversely, China's rigid stance limits opportunities within its borders, pushing innovation to offshore markets. However, the risk of regulatory arbitrage remains: foreign firms may attempt to circumvent Chinese restrictions, but the threat of legal action against mainland users complicates such strategies.

In conclusion, China's regulatory posture reflects a calculated prioritization of financial stability over innovation. While this approach aligns with its broader economic governance model, it positions the country at odds with the global DeFi trajectory. As RWA tokenization matures in more permissive jurisdictions, China's absence from this space could deepen its isolation in the evolving digital asset ecosystem. Investors and institutions must weigh these dynamics carefully, recognizing that regulatory environments-not just technological capabilities-will define the future of RWA adoption.