The 13 Ministries and 7 Associations Issue Documents to Prevent Virtual Currency Risks, What Is the Future of RWA?

Article by: Crypto Salad

December 5th, the China Internet Finance Association, Banking Association, and five other industry associations jointly issued a “Risk Reminder on Preventing Illegal Activities Involving Virtual Currencies and Others.” This follows the regulatory actions taken by the thirteen ministries and commissions on November 28th to crack down on virtual currency trading and speculation. The subtle chill conveyed between the lines of this document (hereinafter referred to as the “Risk Reminder”) has sent a cold shiver through entrepreneurs who are planning to tokenize real-world assets (RWA).

Many people have asked in the background: Lawyer Sha, is RWA completely dead in mainland China?

As Web3 legal professionals, 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, then facilitate secondary market liquidity and financing. However, under the current regulatory context in mainland China, any tokenization activity that attempts to connect with the public market essentially challenges the red line set by the “9.24 Notice” in 2021. The “Risk Reminder” from the seven associations is more like adding several bright, heavy locks to a already tightly closed iron gate.

1. Why “can’t do” in mainland China: risk isolation under bottom-line thinking

The “Risk Reminder” clearly states: “Currently, China’s financial regulatory authorities have not approved any real-world asset tokenization activities within the mainland.” Engaging in RWA in mainland China faces legal obstacles akin to “three great mountains”:

• Qualifying illegal financial activities: The document characterizes domestic RWA issuance and financing as suspected illegal fundraising, unauthorized securities issuance, and other illegal financial activities. In mainland China, any financing activity bypassing licensing is akin to walking on a razor’s edge.

• Complete blockade by financial institutions: Banks, payment institutions, and internet platforms are fully prohibited from providing settlement and promotional support for such activities. Without channels for fund inflow and traffic entry, domestic RWA becomes a sourceless water.

• The formidable status of legal currency: The stablecoins involved in RWA do not have legal status in mainland China. Attempting to anchor assets’ yields with such stablecoins touches the nerve of monetary sovereignty.

From a criminal defense perspective, the bottom-line thinking suggests that engaging in RWA in mainland China is less about “whether it is cool” and more about “how many years of imprisonment.” But from a governance perspective, this high-pressure stance is actually an “emergency brake” when regulators have yet to explore effective monitoring methods. As discussed, this is largely to protect society and prevent the entire system from experiencing another systemic financial disaster similar to P2P lending.

2. Offshore “Oasis”: a “water outlet” in macro narratives

Since the mainland is a forbidden zone, attention naturally shifts to offshore markets like Hong Kong and Singapore. Although the seven associations mention that “offshore service providers conducting business within the mainland are also illegal,” they do not explicitly prohibit purely offshore activities with a “one-size-fits-all” ban.

There is a deeper macro narrative here: China’s internal circulation ultimately needs to connect with external circulation. The mainland’s “strict clampdown” and Hong Kong’s “resolute opening” are two sides of the same coin. The mainland needs such a “water outlet” to allow assets to move into the international market within a compliant framework.

As long as projects can truly achieve “full offshore” — from underlying assets to capital, from servers to compliant entities, without involving mainland RMB outflows — mainland regulators generally lack the motivation for cross-border enforcement. In this mode, if you are doing well overseas and comply with local regulations (such as obtaining a Hong Kong VASP license), that is your freedom.

3. Theoretical “throughway” versus practical “impassable barrier”: timing is everything

At this point, some mainland entrepreneurs might consider: Can I take factory or mineral rights income in China to Hong Kong to do RWA?

Theoretically, establishing an SPV via ODI (Overseas Direct Investment) to transfer rights to an offshore entity is feasible. But in practice, this is akin to the Shu Dao (Sichuan Road) in Li Bai’s poetry — almost an “impassable barrier”:

• Compliance restrictions on asset outbound transfer: Cross-border rights confirmation is complex and easily suspected as asset transfer.

• The “breaker” for capital return: Foreign exchange settlement faces strict currency review, and account closures are often the mildest consequences; more serious penalties include fines or suspicion of illegal fundraising.

• Legal risks for “domestic persons”: If individuals in mainland China operate offshore crypto-related businesses, law enforcement can still take action (whether against managers or ordinary employees), as such activities are considered illegal financial activities.

The core issue with RWA business is more about “timing.” Currently, multiple ministries and commissions have a unified stance: China is in a “high-pressure period” targeting typical cases. Even in Hong Kong, due to cautious considerations of listed companies and licensed institutions regarding political-business relations, the prevailing approach is “even if legally permitted, please wait.” The best strategy for existing projects at this stage is to respond to “window guidance” — either halt operations or switch entirely to offshore schemes, avoiding illegal acts.

4. Conclusion

RWA is not dead in mainland China; it has never been truly “played out.” The joint statements from thirteen ministries and commissions and the seven associations reiterate the red lines for domestic activities.

But for ambitious mainland enterprises, the real opportunity for RWA lies in the “offshore” deep waters. This is no longer a masquerade of illegal fundraising but a high-difficulty acrobatic act involving legal compliance, foreign exchange management, and international private equity.

Our advice is: if you want to pursue RWA, first cut off all connections with domestic RMB, retail investors, and promotional channels. In front of the red line, surviving longer is more important than rushing ahead. The legal red line is never meant for playing limbo.

The current silence is for future regulation. If you are planning to develop RWA business offshore and need legal compliance analysis or structural design, please contact us for in-depth consultation.