Policy Reversal! China's Seven Major Financial Associations classify RWA as "high-risk" illegal activity

In early January 2026, according to sources such as Wu Shuo Blockchain and others, seven major core financial industry associations—including the Asset Management Association of China, the China Internet Finance Association, and the China Banking Association—jointly issued a clear regulatory signal. They reclassified the tokenization of real-world assets (RWA) as a “high-risk” business model and listed it alongside stablecoins, “air coins,” and cryptocurrency mining as illegal financial activities.

This move marks a fundamental shift in China’s regulatory stance on RWA, transitioning from a previously possible “new technology” observation window to a clear focus on risk containment and business prohibition. Analysts point out that this policy aims to completely exclude RWA from the legitimate financial system. Simultaneously, the United States is advancing its stablecoin framework under the GENIUS Act, highlighting a growing divergence in the paths of China and the US in digital asset regulation and currency digitalization. This divergence will have a profound impact on the development of related global sectors.

Upgrading the Classification: From “Technological Exploration” to “Illegal Business” Regulatory Logic Evolution

The sudden change in policy direction is not unfounded but a continuation of China’s cautious—often strict—approach to cryptocurrency and related derivatives. According to leaked internal notices from the associations, regulators have defined RWA clearly and strictly: “The tokenization of real-world assets involves financing and trading activities conducted through issuing tokens or other rights or debt certificates with token-like features.” This definition directly places the core of RWA business—issuing and trading tokenized certificates—within the scope of illegal public financing and trading activities under current Chinese law, without approval.

Notably, the notice completely abandons previously used exploratory terms such as “technological pilot,” “graded regulation,” or “prudent development” when addressing financial technology innovation. As Wu Shuo Blockchain’s analysis points out: “The message from regulators is clear: this is not a technical issue, nor a mechanism issue—real financial risks far outweigh any technological benefits.” This indicates that regulators’ focus has shifted entirely from “technical feasibility” to “risk absolute controllability.” In their view, risks such as asset fraud, operational failures, and speculative hype associated with RWA cannot be effectively isolated or managed under the current financial regulatory and technological environment. Therefore, the safest strategy is a “one-size-fits-all” ban.

Behind this decision lies a profound practical background. In October 2025, Chinese regulators, including the People’s Bank of China, had already discouraged domestic tech giants from advancing their stablecoin plans, reflecting deep concerns over privately issued digital currencies pegged to fiat. Listing RWA alongside stablecoins and “air coins” essentially categorizes a series of blockchain-based business models—potentially challenging existing financial management order and capital controls—into high-risk categories and outright rejection. This is not targeting any specific project but drawing a clear red line: any attempt to split, finance, or circulate physical assets (whether bonds, real estate, or art) via tokens within China is currently prohibited.

Key Points on Association and Policy Classification

Jointly Issuing Associations: China Asset Management Association, China Internet Finance Association, China Banking Association, China Securities Industry Association, China Futures Industry Association, China Listed Companies Association, China Payment & Clearing Association.

Regulatory Classification Change: From “new technology” requiring “observation and clarification” to a “business model” with clear risks.

Listed as Illegal Activities: Real-world asset tokenization (RWA), stablecoins, “air coins,” cryptocurrency mining.

Core Risk Recognitions: Asset fraud risk, operational failure risk, speculative hype risk.

Missing Key Phrases: The full notice does not include terms like “technological pilot,” “graded regulation,” or “prudent development,” which were previously used in innovation contexts.

The Global Perspective on RWA Competition: The Distinct Paths of China and the US

Just as China closes the regulatory doors on RWA and stablecoins, the other side of the Pacific—America—is accelerating exploration along a different path. In July 2025, the US passed the GENIUS Act, aiming to establish a federal regulatory framework for payment stablecoins. This is widely seen as a major legislative step toward integrating cryptocurrencies—especially fiat-pegged stablecoins—into the mainstream financial system. Although the implementation details are still under discussion and face lobbying from traditional banking sectors, the policy direction is clear: within a controlled regulatory sandbox, accept and regulate these emerging digital assets.

This policy “temperature difference” is not accidental; it is rooted in the different financial system structures, notions of monetary sovereignty, and global financial strategies of the two countries. For the US, its dollar hegemony provides confidence and motivation to incorporate innovation, integrating crypto assets into its vast financial ecosystem and even using them as tools to consolidate fintech leadership. Coinbase Chief Policy Officer Faryar Shirzad’s warning in December 2025 is representative: he believes that internal US debates and delays over stablecoin legislation could weaken US competitiveness, as China is actively promoting its digital renminbi for global payments. In fact, China’s strict stance on private stablecoins and RWA is partly aimed at creating broader application scenarios for its official digital renminbi, preventing potential competition and confusion.

Thus, we see a stark contrast: one side (the US) attempts to bring private sector crypto innovation into the regulatory fold through legislation, seeking a balance between innovation and risk; the other (China) chooses to strengthen the state-led digital currency path, while adopting a “zero tolerance” approach toward private crypto innovations—especially those involving payments and asset securitization—that could interfere with this path or cause financial instability. Which approach is better remains uncertain, but together they define the two main competitive tracks in the future global digital asset landscape. For RWA project developers, investors, and traditional financial institutions worldwide, understanding this geopolitical regulatory divide is a primary prerequisite for market positioning and risk assessment.

What is RWA? The Trillion-Dollar Imagination Behind the Banned Track

To grasp the profound impact of China’s regulatory policy, it is first necessary to clarify what RWA (Real-World Asset Tokenization) is. In short, RWA refers to using blockchain technology to convert ownership or income rights of physical or financial assets—such as government bonds, corporate bonds, real estate, commodities, or art—into digital tokens on the chain. This process aims to address pain points in traditional asset trading, such as high barriers, poor liquidity, complex procedures, and slow settlement.

Its token economy model generally revolves around several core elements: underlying asset anchoring (ensuring each token represents a clear, legitimate claim to a specific asset), compliance and legal frameworks (using special purpose vehicles or trust structures to ensure legality), price oracles (reliably transmitting off-chain asset prices onto the chain), and secondary market liquidity (trading on decentralized or compliant centralized platforms). The roadmap typically includes phases: from single-asset, small-scale pilot issuance, to multi-asset, cross-jurisdictional platform operations, with the ultimate goal of creating a global, 24/7, high-efficiency “all assets” trading network.

Because it touches the core of traditional finance—asset issuance and trading—RWA is regarded as one of the most disruptive potential applications of blockchain technology. Consulting firms like Boston Consulting Group have predicted that by 2030, tokenized assets could reach $16 trillion to $20 trillion. It allows splitting a commercial building, a masterpiece, or a private debt into countless small shares, enabling ordinary investors to participate at very low thresholds, while greatly increasing liquidity for these otherwise non-standard, low-frequency assets. From Goldman Sachs and DBS to native DeFi protocols like Ondo Finance and Centrifuge, many are heavily investing in this field.

However, the enormous imagination also comes with significant risks. This is precisely what Chinese regulators worry about: how to ensure that on-chain tokens and off-chain assets are not tampered with or forged? (asset fraud risk) Could smart contract bugs or platform operational issues lead to investor losses? (operational failure risk) Will the ease of token trading foster frenzied speculation detached from the underlying assets? (speculative hype risk) In the eyes of regulators, in a system where capital projects are not fully open and financial stability takes priority, these risks are currently unacceptable. Therefore, rather than cautiously “feeling the stones to cross the river” in risky waters, it is better to raise a clear “no swimming” warning sign.

Industry Impact and Future Outlook: The Frozen Land and the Outbound Vessel

The joint stance of the seven associations effectively issues a “freeze order” for all domestic RWA-related entrepreneurial efforts and capital deployments. Any business publicly promoting or conducting RWA token issuance and trading within China will face extremely high legal and compliance risks. Previously, explorations of “digital collectibles” or “digital assets” on alliance chains or restricted environments will be scrutinized more strictly than ever; any mode involving financial or rights trading may be cut off.

For Chinese teams or capital already involved in the global RWA space, the strategy will become clearer: they must shift their focus of technological development, legal entities, and market operations overseas. The domestic market in China, in the foreseeable future, will only serve as a base for technological R&D (not involving asset issuance) or purely theoretical research. This will continue to promote the trend of Chinese crypto talent and capital “going abroad,” with destinations including Singapore, the UAE, Switzerland, and other jurisdictions more open to digital assets.

From a broader perspective, the policy divergence between China and the US on RWA and stablecoins may lead to the formation of two relatively separate yet interconnected “galaxies” in the global digital asset market. One is the “compliant innovation galaxy” centered on US regulation and dollar-stablecoins, attracting global traditional financial capital and compliant projects; the other is the “sovereign digital galaxy” characterized by China’s digital renminbi and strict capital controls, with an ecosystem mainly led by state infrastructure and applications. There will be trade, investment, and technological exchanges between these “galaxies,” but the channels for free asset flow will be narrow and tightly controlled.

Ultimately, the wave triggered by this notice has significance far beyond the event itself. It is a key case illustrating how the two largest economies define the future boundaries of digital finance. For industry participants, it means abandoning illusions and seeking survival and growth within clear but strict rules; for the global market, it signals that competition and cooperation in digital assets will increasingly be intertwined with geopolitics and great-power strategies. The trillion-dollar dream of RWA has not disappeared, but its future map will largely be shaped by these cold words written in regulatory documents today.