China’s ‘necessary’ asset-tokenisation ban targets scams and capital flight, analysts say

With China explicitly banning onshore tokenisation of real-world assets (RWAs) while tightening scrutiny of related offshore activities, analysts say the clampdown is aimed at curbing financial fraud and disorderly capital outflows, while still preserving space for regulated innovation in markets such as Hong Kong.

Tokenisation refers to the process of converting the rights to an RWA – including real estate, art, bonds and commodities like gold – into a digital token. Such tokens represent ownership, enabling easier trading, increased liquidity and fractional ownership for previously illiquid assets.

Currently, many so-called RWA investments within mainland China are, in essence, financial scams, said Liu Xiaochun, vice-president of the China Academy of Financial Research at Shanghai Jiao Tong University.

“First, there are too many scammers nowadays,” he explained. “Second, there are also numerous cases of capital outflow being conducted using either RWAs or crypto assets. That’s why a ban is necessary.”

Crucially, no entities – Chinese or foreign – are allowed to issue yuan-pegged offshore stablecoins without approval. Stablecoins are cryptocurrencies designed to minimise volatility by pegging to a stable asset, typically a fiat currency such as the US dollar.

Stablecoins represent the most widely adopted use case for RWAs on blockchains – technology that records cryptocurrency transactions.

The move also comes as Hong Kong prepares its first batch of stablecoin issuer licences. Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority (HKMA), said last week that the regulator was assessing 36 applications and planned to issue only a small number of licences by March.