China's RWA Crackdown: A Liquidity Flow Shock

The immediate impact is a direct ban on domestic RWA tokenization flows. Chinese authorities have issued a notice that banned onshore RWA tokenisation activities and related intermediary or technology services, explicitly targeting these operations as part of a broader crackdown.

The rationale is that these activities are deemed illegal. The notice states that conducting RWA tokenization onshore may constitute illegal issuance of tokenized securities, unauthorized public offerings of securities, illegal securities and futures operations, or illegal fundraising. This classification effectively shuts down the onshore market for these services.

The result is a severe, direct liquidity shock. By prohibiting onshore tokenization and related services, the ban severs the primary domestic channel for liquidity to enter this asset class. This creates a hard stop for any onshore RWA tokenization projects or platforms that relied on domestic capital and infrastructure.

The Offshore Channel: A Low-Volume, High-Friction Flow

The new framework permits offshore tokenization but adds a mandatory filing step. Domestic entities can now issue tokenized securities based on onshore assets abroad, but they must comply with a filing-based system under the new regulatory guidelines. This creates a formal channel where the activity is not outright banned.

The key implication is friction. A filing system, as opposed to pre-approval, is less burdensome but still adds a layer of administrative overhead and regulatory scrutiny. This creates a clear friction point that likely deters significant capital flows.

For the market, this means the offshore path is a low-volume alternative. The added compliance cost and complexity make it less attractive than a simple onshore launch. The result is a constrained, high-friction flow that cannot offset the severe liquidity shock from the onshore ban.

Flow Implications and Catalysts

The net impact is a severe, immediate liquidity shock from the onshore ban, with the offshore channel unlikely to provide a meaningful offset. The new filing system creates a high-friction path that will deter most cross-border activity, leaving the overall RWA liquidity flow from China sharply reduced.

The primary catalyst is the volume of filings under the new offshore system. The actual scale of redirected flows will be signaled by how many domestic entities choose to navigate the mandatory filing process. Low filing numbers would confirm the offshore channel is a non-starter, while higher volumes would indicate some capital is finding a way around the onshore ban.

A key risk is that the filing system's complexity and China's broader crypto crackdown deter all cross-border RWA activity. The regulatory burden, combined with the explicit ban on yuan-pegged stablecoins without approval, creates a hostile environment. This could freeze the entire RWA market for Chinese assets, as the friction and uncertainty outweigh any potential offshore benefits.