China Financial Association makes a sudden U-turn! RWA new technology reclassified as "high-risk assets"

The China Financial Association has made a sudden policy turn, with seven major industry associations jointly releasing a notice reclassifying RWA (Real-World Asset Tokenization) from a “new technology” requiring regulatory clarification to a “high-risk” business model, placing it alongside stablecoins, air coins, and cryptocurrency mining as illegal activities. This marks a fundamental shift in the attitude of Chinese regulators toward RWA, with related enterprises facing regulatory crackdown risks.

Three Key Signals of the Policy U-turn

Wu Blockchain reported on Monday that the China Asset Management Association, China Internet Finance Association, China Banking Association, China Securities Association, China Futures Industry Association, China Listed Companies Association, and China Payment and Settlement Association issued a joint statement. The synchronized action of these seven associations is extremely rare and usually indicates that high-level authorities have already defined the nature of a certain business.

The message conveyed by the China Financial Association is very clear: RWA is no longer a technical issue or a mechanism problem, but a business with financial risks far exceeding its technological advantages. The document makes no mention of common phrases used for emerging technologies such as “technology pilot,” “graded regulation,” or “prudent development.” This clearly indicates that the regulatory goal is not to optimize RWA but to completely exclude it from the legal framework.

What is even more noteworthy is the timing. Reports indicate that in October, the People’s Bank of China and another regulatory body discouraged domestic tech giants from advancing their stablecoin plans, suggesting that Beijing’s concerns over digital asset tokenization have escalated into systemic policy adjustments. From the discouragement of tech giants’ stablecoin plans in October to the current joint classification of RWA as high-risk by the seven associations, this policy coherence shows that regulatory consensus has been formed.

The industry associations’ policy adjustment effectively defines participation in RWA activities as “financing and trading activities” prohibited by Chinese law, putting related companies at risk of regulatory enforcement. Unlike previous regulatory warnings, this time the classification directly places RWA alongside “air coins,” which in regulatory language is almost equivalent to fraudulent financial activities.

The Logic Behind the Joint Suppression by the Seven Associations

According to Wu Blockchain’s translation, the relevant associations stated: “Real-world asset tokenization refers to financing and trading activities conducted through issuing tokens or other rights or debt certificates with token-like features. It involves multiple risks, including asset fraud risk, operational failure risk, and speculative trading risk. Currently, Chinese financial regulators have not approved any real-world asset tokenization activities.”

This official statement reveals the core concerns of the China Financial Association regarding RWA. First, RWA is defined as “financing and trading activities,” not as technological innovation or fintech application. This classification directly pulls RWA into China’s strict regulatory domain over financing, making any unapproved financing activities illegal fundraising in China.

Three Major Risk Categories for RWA Classification

Asset Fraud Risk: The authenticity of underlying assets during tokenization is difficult to verify, with potential for false assets on the chain, double pledging, and other frauds.

Operational Failure Risk: Security of technical platforms, reliability of custodians, and vulnerabilities in smart contracts could all lead to asset losses.

Speculative Trading Risk: Assets after tokenization are traded on secondary markets, with prices detached from the underlying asset value, evolving into purely speculative tools.

Secondly, the associations explicitly state that “Chinese financial regulators have not approved any real-world asset tokenization activities,” meaning all RWA businesses within China or targeting Chinese residents are currently illegal. This is consistent with the logic of the 2017 ICO ban—comprehensive prohibition first, then selective pilot openings—but based on current statements, the likelihood of pilots is extremely low.

Third, placing RWA alongside stablecoins, air coins, and mining indicates that regulators see RWA as fundamentally no different from other cryptocurrency activities, all challenging the existing financial order. This classification effectively closes the possibility of legalizing RWA in China, at least in the foreseeable future.

Geopolitical Considerations in US-China Digital Currency Competition

China’s strict stance on RWA must be understood within the broader context of US-China digital currency competition. After the US passed the “GENIUS Act” in July, regulators have been working to establish a federal-level stablecoin payment framework. However, reports indicate that banks have pressured legislators to address issues related to stablecoin rewards, even as the law is still being implemented.

Faryar Shirzad, Chief Policy Officer of the largest compliant crypto exchange in the US, stated in December last year that debates over the law’s implementation could weaken America’s position, as China is competing with the US for the application of digital yuan in global payments. Starting Thursday, Chinese commercial banks have been authorized to pay interest on digital yuan wallets, marking the transition of digital yuan from pilot to practical application.

In this geopolitical competition, China’s full ban on RWA and stablecoins while vigorously promoting digital yuan reveals a clear strategic logic: ensuring the sovereignty and controllability of digital currency. Although RWA and stablecoins claim to be linked to physical assets, their issuance, circulation, and regulation operate within a decentralized framework, which directly conflicts with China’s emphasis on financial sovereignty and capital controls.

In contrast, the digital yuan is entirely controlled by the People’s Bank of China, enabling precise monetary policy transmission and capital flow monitoring. China’s association’s crackdown on RWA is effectively clearing the way for the promotion of digital yuan. In the future, if Chinese enterprises or individuals need to tokenize assets or conduct digital transactions, the only legal channel will be through the officially sanctioned digital yuan system.

Overall, China’s financial associations reclassifying RWA as high-risk assets signifies a clearer regulatory stance on decentralized financial innovation. This is not only a crackdown on RWA but also a strategic path China has chosen in the global digital currency competition.