On December 5, the China Internet Finance Association, the Banking Association, and six other industry associations jointly issued a document (regarding the risk warning for preventing illegal activities related to virtual currencies, etc.). This follows the meeting of thirteen ministries and commissions on November 28 to crack down on virtual currency trading speculation, and the industry associations' subsequent regulatory actions. This document (hereinafter referred to as the "(risk warning)") conveys a sense of chill between the lines, causing some entrepreneurs who are planning to tokenize physical assets (RWA) to shudder.
Many people are asking in the background: Lawyer Sha, is RWA completely dead in the mainland?
As legal professionals in Web3, we believe the answer to this question is not simply "yes" or "no". The core of RWA is to digitize and tokenize offline assets through blockchain technology, followed by secondary market liquidity and financing. However, under the current regulatory context in the mainland, any attempt to link tokenization with public trading essentially challenges the red line established by the "9.24 Notice" in 2021. The risk warning from the seven associations is more like adding several glaring locks to that iron door that has already been tightly closed.
I. Why the Mainland "Cannot Engage": Risk Isolation Under Bottom Line Thinking
(Risk Warning) Clearly states: "Currently, our financial management departments have not approved any (in the mainland) real-world asset tokenization activities." Engaging in RWA in the mainland, legal obstacles are like "three towering mountains":
Defining illegal financial activities: The document characterizes the issuance and financing of domestic RWA as suspected illegal fundraising and unauthorized public issuance of securities, among other illegal financial activities. In the mainland, any financing behavior bypassing the license is like licking blood on a knife's edge.
Comprehensive blockade of financial institutions: Banks, payment institutions, and internet platforms are completely prohibited from providing settlement and promotional support for such businesses. Without inflow channels and traffic entrances, domestic RWA becomes like water without a source.
The strong position of legal currency: The stablecoins involved in RWA do not have legal status in the mainland, and attempting to anchor asset returns with them touches the nerve of monetary sovereignty.
From the perspective of criminal defense, the bottom line thinking suggests: engaging in RWA in the mainland may not be a matter of whether it is "cooling down," but rather "how many years of sentencing". However, from a governance perspective, this high-pressure stance is actually an "emergency brake" taken by regulators when they have not yet figured out effective monitoring methods. As mentioned in the dialogue, this is largely to protect society and avoid the entire society experiencing another systemic financial disaster similar to P2P.
II. The "Oasis" Offshore: The "Outlet" under Macro Narrative
Since the mainland is a restricted area, attention naturally turns to offshore markets such as Hong Kong and Singapore. Although the seven associations mention that "overseas service providers conducting business in the mainland are also illegal," they do not provide a clear blanket ban on purely overseas operations.
There is a profound macro narrative hidden here: China's economic internal circulation ultimately needs to connect with external circulation. The "strict deadlock" in the mainland and the "decisive opening up" in Hong Kong are actually two sides of the same coin. The mainland needs such an "outlet" to let assets flow into the international market in a compliant context.
As long as the project can achieve true "fully offshore" status—from the underlying assets to the financial end, from servers to compliant entities all located overseas, and without involving the outflow of domestic RMB, regulatory authorities in the mainland usually lack the motivation for cross-border enforcement. In this model, if you are thriving overseas and complying with local regulations (such as obtaining a Hong Kong VASP license), that is your freedom.
III. Theoretical "Thoroughfare" vs. Practical "Heavenly Chasm": Timing is Everything
At this time, some mainland bosses may have a thought: Can I take domestic factory and mineral income rights to Hong Kong for RWA?
In theory, establishing an SPV through an ODI (Overseas Direct Investment) structure to "transfer" rights to an overseas entity is a feasible path. However, in practice, this is akin to the treacherous roads in Li Bai's poetry, almost a "heavenly chasm":
First, the compliance shackles of asset outflow: cross-border rights confirmation is complex and easily suspected of asset transfer.
Secondly, the "circuit breaker" for fund repatriation: The currency exchange process faces extremely strict cryptocurrency scrutiny, and having accounts frozen is often just the mildest outcome; more severe consequences may include fines or even suspicion of illegal fundraising.
Finally, the legal risks for "domestic individuals": If someone is operating overseas cryptocurrency-related business in the mainland, law enforcement can still take action (whether it is the boss or management or ordinary employees, they are all considered illegal financial activities).
In fact, the more core issue regarding RWA business is "timing". Currently, we judge that at the regulatory level, multiple ministries have unified opinions, and the domestic situation is in a "high-pressure period" for catching typical cases. Even in Hong Kong, due to the cautious consideration of the relationship between politics and business by listed companies and licensed institutions, the prevailing sentiment is often "even if it is not prohibited by law, please wait a moment". The best strategy for existing projects at this stage is to respond to "window guidance", either halting operations or completely changing to an all-overseas solution, avoiding any actions against the wind.
IV. Conclusion
RWA in the mainland is not cooling down; it has never truly been "played clearly". The announcements from thirteen ministries and seven associations reiterate the red line for domestic operations.
However, for ambitious mainland enterprises, the real opportunity for RWA lies in the deep waters of "offshore". This is no longer a show of illegal fundraising in the mainland, but a high-difficulty acrobatics involving legal compliance, foreign exchange management, and international private equity.
Our advice is: If you want to engage in RWA, please first cut off all connections with domestic RMB, ordinary retail investors, and promotional channels. In the face of red lines, living longer is more important than running fast. The legal red line is never meant to be jumped over.
The current silence is for future regulation. If you plan to engage in RWA business overseas and need legal compliance verification or structural design, please contact us for in-depth consultation.
Special statement: This article is an original work by the Crypto Salad team, representing only the personal views of the author and does not constitute legal advice or opinions on specific matters. If you need to reprint the article, please contact us for authorization: shajunlvshi.