According to a Reuters report on Monday (September 22) citing two informed sources, the China Securities Regulatory Commission (CSRC) recently issued "informal guidance" to some mainland securities firms, requesting them to suspend RWA (Real World Asset)-related tokenization businesses in Hong Kong. This move is interpreted as the latest signal of Beijing's cautious stance towards the overseas digital asset boom.
The authenticity of this news cannot yet be confirmed, but it has undoubtedly attracted widespread market attention. Assuming the news is true, we believe that while it appears superficially to be a shift in regulatory direction, it actually represents a renewed understanding of the nature of RWA businesses. This "informal guidance" should not be simply interpreted as a suppression of innovation, but rather as a prudent statement on risk management by regulators within a complex international financial environment.
I. The Legal Gray Area of RWA Businesses
It is no secret that practical breaches of the legal framework exist in real-world asset tokenization operations.
In the asset ownership confirmation stage, the process of converting physical assets into on-chain tokens involves issues of connecting with property law. China's property law system is built based on physical assets, while the nature of tokenized assets remains undefined. This ambiguity in legal attributes creates hidden risks for subsequent operations.
The valuation stage also presents challenges. Traditional asset valuation methods struggle to adapt to the characteristics of 24/7 global trading post-tokenization, making it difficult to balance valuation frequency and accuracy.
There are numerous cross-border regulatory issues concerning data, foreign exchange, and taxation. Cross-border data compliance is particularly prominent. Tokenized asset trading inherently possesses cross-border attributes, while China's Cybersecurity Law and Data Security Law impose strict restrictions on the outflow of financial data. The conflict between the two requires innovative solutions.
RWA businesses might circumvent existing foreign exchange control measures, achieving de facto cross-border flow of assets through tokenization, which creates tension with current capital account control policies. Cross-border taxation issues are equally complex. The lack of rules regarding tax jurisdiction and timing for cross-border digital asset transactions could lead to tax revenue loss.
Furthermore, there is insufficient coordination mechanisms for cross-border financial supervision. RWA businesses involve multiple jurisdictions, while the regulatory cooperation framework still primarily targets traditional financial businesses. Regulatory coordination for new digital asset businesses is still in the exploratory stage. Against this backdrop, the regulators' prudent attitude holds logical rationale.
II. The Substance Behind the "Suspension"
For the mainland, RWA businesses have always existed in a relatively legally marginal zone. China has not yet introduced specific laws and regulations governing digital asset tokenization. Existing operations mostly rely on expansive interpretations of current laws. Securities firms' operations that blend mainland and Hong Kong laws and regulations are essentially seeking survival space within legal interstices.
From a legal perspective, this "suspension" lacks substantive direction because there were no clear regulations promoting RWA businesses in the mainland to begin with. The related businesses previously conducted by securities firms were based on the demonstrative influence of earlier cases like Longshine Technology. The logic of "everything not prohibited is permitted" does not fully apply in the financial sector, as not every RWA business is similar to sandbox projects, especially those involving cross-border capital flows and systemic risks.
The regulators' "informal guidance" should be understood more as a risk warning rather than a policy shift. It reminds market participants of the potential legal and policy risks associated with excessive innovation in the absence of a clear regulatory framework. This warning helps prevent the market from forming incorrect expectations and avoids the introduction of one-size-fits-all regulation.
It is worth noting that this guidance specifically targets RWA businesses conducted "in Hong Kong," indicating that regulatory focus is no longer limited to domestic businesses but has begun to关注 the potential risk transmission from overseas activities of Chinese financial institutions. This expansion of cross-border regulatory perspective aligns with China's policy orientation of balancing financial openness with risk prevention.
III. Moving Beyond the Misconception of "Regulatory Arbitrage"
During the development of RWA businesses, a misunderstanding of "regulatory tacit approval" or even "regulatory relaxation" gradually formed in the market. Some practitioners believe that as long as something is technically feasible and there is market demand, the business can proceed, and regulatory attitudes will gradually move from tolerance to acceptance. This misconception stems from a one-sided understanding of the relationship between financial innovation and regulation.
Financial regulation and innovation have always been a dialectical unity. It is normal for regulation to lag behind innovation, but this does not mean that regulation will unconditionally approve all innovation. The bottom line of regulation is to prevent systemic risks and maintain financial stability. Any innovation that might endanger this bottom line will ultimately be regulated.
This regulatory statement clarifies this misunderstanding, indicating that certain "regulatory arbitrage" thinking that breaches the bottom line is unsustainable. For RWA businesses to develop healthily, compliance must be placed at the core from the very beginning, rather than being remedied afterwards. This requires practitioners to consider not only technical feasibility and commercial value but also fully assess compliance costs and regulatory attitudes.
The future development of RWA businesses will place greater emphasis on "substance over form." Even if certain regulatory requirements are circumvented through technical means or cross-border arrangements, as long as the substance of the business involves financial activities, it must accept corresponding regulation. This regulatory principle helps prevent regulatory arbitrage and promotes fair market competition.
IV. Towards a Compliant Future Development
The trend of digital tokenization is indeed inevitable. Blockchain technology creates significant potential for enhancing asset liquidity, and major global financial markets are actively exploring related applications. However, the irreversibility of the technological trend does not mean that all technological applications are commendable; the key is how to control risks while grasping the trend.
Adhering to value orientation is the prerequisite for the healthy development of RWA businesses. Tokenization should serve to improve the efficiency of the real economy, not create speculative tools. Project selection should prioritize those quality assets that genuinely need tokenization to solve liquidity problems, avoiding creating trading markets for assets lacking real value.
Lawful and compliant operation is the foundation for the stable and long-term development of RWA businesses. This requires practitioners to proactively communicate with regulators and actively participate in rule-making, rather than evading regulation. Introducing compliance considerations at the initial design stage ensures the business model aligns with regulatory principles, rather than applying remedies afterwards.
Specifically, RWA businesses should focus on the following compliance priorities: First, client suitability management, ensuring only qualified investors participate in related transactions. Second, transparent information disclosure, fully revealing asset risks and token structure to investors. Third, risk isolation, preventing the transmission of tokenization risks to the traditional financial system. Fourth, cross-border regulatory collaboration, proactively cooperating with regulatory requirements of different jurisdictions.
Regulation and innovation are never opposing relations but a dynamically balanced relationship of mutual promotion. The CSRC's "informal guidance" this time should not be simply interpreted as a negation of RWA businesses, but rather as guidance for the healthy development direction of the industry. Under the irreversible macro-trend of asset digitization, only by placing risk prevention and control at the core of innovation can we realize the original intention of technology empowering finance and avoid repeating the mistakes of uncontrolled financial innovation in the past.
The prospects for RWA businesses remain broad, but the path may require constant adjustment. Market participants should view this regulatory statement as an opportunity to clarify misunderstandings and return to rationality, working together to build business models and regulatory frameworks that can leverage technological advantages while effectively controlling risks. Only in this way can real-world asset tokenization truly become a beneficial exploration of financial innovation, rather than the next point of risk outbreak.
