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.”

The announcement, jointly released by the People’s Bank of China and seven other government agencies, made it clear that domestic entities, as well as offshore entities under their control, could not issue virtual currencies overseas without approval.

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.

South China Morning Post