China bans RWA tokenization in biggest crypto attack since 2021

China has explicitly banned the tokenization of real-world assets (RWA) for the first time. The measure is part of the country’s largest coordinated crypto crackdown since 2021. The attack also targets stablecoins, airdrops, and crypto mining.

Complete blocking of crypto activities

Seven influential Chinese financial industry associations jointly warn about the risks of crypto and ban all related activities. A statement last Friday emphasized that no form of RWA tokenization has been approved by Chinese regulators. This explicit rejection is a first and follows the global rise of tokenizable financial products.

The organizations involved, including the banking association, securities watchdog and the payments industry, say virtual currencies such as stablecoins do not have legal status in China. They announce a broad approach that will block all financing channels, payment methods and technical infrastructure for crypto.

According to analysts, the declaration constitutes a “four-layer blockade”: shutting down mining, freezing stablecoin payments, banning RWA issuance, and combating fraudulent crypto projects.

RWA as a risk for capital flight

The measure comes at a time when the RWA market worldwide is already worth more than 30 billion dollars. Major American players such as BlackRock are leading the way with products that are used as collateral on platforms such as Binance and Crypto.com.

Chinese regulators fear that RWA tokenization could be used to siphon capital out of the country. This technology allows domestic assets to be converted into digital tokens that are then exchanged for foreign currency abroad, outside the regulated banking system. This would be a disaster for China’s inherently insular financial system.

The new rules also apply to foreign crypto providers that deploy staff in China. The policy differs significantly from that in Hong Kong, where regulated crypto activities and RWA pilots are allowed.

Meanwhile, dissatisfaction among young Chinese investors is growing. Many of them feel excluded from the global crypto market and express their frustration with policies on Chinese social media platforms.