China has taken a decisive step against real-world asset (RWA) tokenization, effectively shutting down lingering hopes that Hong Kong could serve as a bridge for a broader crypto reopening.
According to an analysis by Leon Waidmann, head of research at OnchainHQ, the latest regulatory stance marks a clear end to that narrative.
Key Takeaways
China has officially classified RWA tokenization as illegal financial activity, alongside stablecoins and mining.
The rules leave no room for pilots or sandboxes and target both domestic and offshore-linked teams.
Hong Kong’s role as a crypto testing ground continues to diminish.
The stance reinforces a move toward permissioned, state-controlled finance and away from public blockchains.
Authorities have now formally classified RWA tokenization as illegal financial activity, placing it alongside stablecoins, crypto mining, and scam-related token projects. The move leaves little room for interpretation and signals a firm rejection of public blockchain-based finance.
No Sandbox, No Transition, No Exceptions
What stands out most is the lack of any phased approach. There are no pilot programs, no regulatory sandboxes, and no visible pathway toward future approval. The policy applies broadly, extending beyond issuers to include developers, infrastructure providers, marketers, and other service participants.
Crucially, onshore teams that support offshore projects are also explicitly in scope. This suggests that operating outside mainland China does not eliminate regulatory risk if there is any domestic link, sharply limiting jurisdictional workarounds.
Hong Kong’s Role Fades Further
The decision also weakens Hong Kong’s position as a potential testing ground for crypto and tokenization. Once viewed as a controlled environment for experimentation under Beijing’s watch, the city now appears to be losing relevance as China doubles down on centralized, permissioned financial systems.
The broader signal, as Waidmann interprets it, is a clear preference for state-controlled rails over open settlement layers, with public blockchains increasingly viewed as incompatible with China’s financial model.
Strategic Implications Beyond Crypto
From a global perspective, the move may carry unintended consequences. At a time when tokenization and digital finance are becoming strategic tools worldwide, stepping away from public blockchain infrastructure could reduce China’s influence over the future financial architecture.
Waidmann argues the shift looks less like confidence and more like concern over capital flight and loss of control. Rather than strengthening China’s competitive position, the policy may ultimately signal underlying weakness as other regions advance regulated on-chain finance.
