China is taking steps to slow down the rollout of real-world asset (RWA) tokenization projects in Hong Kong. The country’s securities regulator (CSRC) has instructed several leading brokerage firms to pause their initiatives aimed at converting real estate, bonds, and other traditional assets into digital tokens.
Why this matters:
- Risk of overpromising: Authorities are skeptical whether publicly announced RWA projects truly have reliable underlying assets or legally sustainable management structures.
- Risk management first: Regulators want to ensure that companies engaging in tokenization follow proper due diligence, guarantees, and compliance standards — including asset valuation, transparency, and accountability.
- Control over digital finance: China remains cautious with digital assets, particularly when deployed in offshore jurisdictions. Tokenization of assets is seen as a new and potentially risky way to bypass traditional financial oversight.
Key challenges to watch:
- Liquidity remains a weak point: Even if tokenization advances, the lack of transparent trading venues, fragmented standards, and limited legal recognition could prevent tokens from being freely traded.
- Legal enforceability: If a token represents ownership of real estate or a bond, the question remains whether courts and legal systems will recognize the token as valid proof of ownership.
- Regulatory fragmentation: Different jurisdictions approach tokenized assets differently, creating both uncertainty and risks of regulatory illegitimacy.
Takeaway:
The situation in Asia is a major signal for the global RWA industry. While many projects promise a financial revolution through tokenization, regulation still poses a significant barrier. For sustainable growth, the sector will need:
- clear legal frameworks recognizing tokens as enforceable instruments,
- standardized valuation and reporting rules,
- infrastructure for secondary trading,
- and stronger international regulatory alignment.
