Aave’s Horizon RWAs Surge Amid China’s Regulatory Crackdown

• Aave’s Horizon RWAs surge past $800M, doubling since October, driven by growing institutional adoption and tokenized finance.

• Canton blockchain’s $382B RWA share sparks debate, highlighting concentration risks and misleading market metrics.

• China warns against RWA tokenization, citing fraud and speculation, impacting local and overseas DeFi operators.

The real-world asset (RWA) market on Aave is growing at a breakneck pace, hitting record highs as institutional interest continues to climb. According to Sealaunch Intelligence, borrowings on Aave’s Horizon RWA market have surpassed $200 million, while deposits are nearing $600 million.

Consequently, the total market size now stands around $800 million, nearly double its mid-October level. This surge highlights the increasing adoption of tokenized real-world assets by large-scale DeFi platforms, creating a bridge between traditional finance and blockchain.

The rapid growth is not slowing. Back in October, Aave’s Horizon RWA market had already crossed $300 million, doubling within just 30 days. Moreover, data today shows the momentum has accelerated further. “Real-world assets had a strong year in crypto. In 2025, this sector rose about 185%, making it one of the best-performing narratives in the market,” analysts note. Hence, institutional investors increasingly see RWAs as a reliable way to diversify and leverage blockchain-based financial instruments.

Canton’s Market Share Raises Questions

However, some industry insiders question the real significance of these metrics. Bartek.eth commented on X, saying, “Canton blockchain has 95% market share of ‘represented’ RWAs. $382B of assets. Sorry, just one asset, Repurchase Agreements on Broadridge DLR. I am not going to even try to explain what is Canton (glorified database)…this is as useless and confusing metric as it can get.”

Consequently, experts warn that headline figures may overstate adoption, while underlying assets remain narrowly concentrated. Additionally, the complexity of RWA representation could mislead newcomers about the sector’s real liquidity and accessibility.

China Issues Harsh Warning on RWAs

Meanwhile, Chinese regulators issued an unprecedented warning on RWA tokenization. The announcement came from multiple major financial associations, signaling serious regulatory concern. They stated that RWA activities—including token issuance, financing, and trading—constitute financial activity, not technology experiments.

Moreover, the document clarified that no RWA project has ever received approval, and no pilot programs exist. Risks cited include fake assets, business failure, and speculative behavior. “Even if a project claims the asset is real, regulators say token ownership does not guarantee legal rights,” the statement read.

Implications for Global DeFi

The warning affects developers, promoters, and service providers, including overseas firms operating from mainland China. Consequently, common offshore setups with China-based teams may face significant legal risk.

Additionally, this development could slow regional RWA adoption but may accelerate interest in compliant markets abroad. Besides, platforms like Aave could see increased inflows as investors seek regulated, transparent avenues.

Ultimately, the RWA sector stands at a crossroads. Growth continues at unprecedented levels, but regulatory clarity, particularly from China, could reshape the market significantly. Stakeholders must navigate both opportunity and caution carefully.