The thirteen ministries and seven associations issued a document to prevent risks associated with virtual currencies. What is the way forward for RWA?

On December 5, the China Internet Finance Association, the Banking Association, and six other major industry associations jointly released a document titled "Risk Warning on Preventing Risks Related to Virtual Currency and Other Illegal Activities." This follows the meeting of thirteen ministries on November 28 to crack down on virtual currency trading speculation, marking a subsequent regulatory action by industry associations. The document (hereinafter referred to as "Risk Warning") carries a chilling tone that has sent shivers down the spines of some entrepreneurs who are planning to tokenize real-world assets (RWA).

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

As legal professionals in Web3, 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, and then facilitate secondary market liquidity and financing. However, under the current regulatory context in the mainland, any tokenization activity attempting to link with public trading essentially challenges the red line set by the "Notice of September 24, 2021." The "Risk Warning" from the seven associations feels more like adding several glaring locks to an iron door that has long been tightly shut.

1. Why the Mainland "Cannot Do It": Risk Isolation Under Bottom-Line Thinking

The "Risk Warning" clearly states: "Currently, no financial management department in China has approved any (real-world asset tokenization activities in the mainland)." Engaging in RWA in the mainland faces legal obstacles akin to "three mountains":

1. Qualifying Illegal Financial Activities: The document characterizes the issuance and financing of RWA in the mainland as suspected illegal fundraising and unauthorized public issuance of securities. In the mainland, any financing behavior that bypasses licensing is akin to licking blood off a knife's edge.

2. Comprehensive Blockade of Financial Institutions: Banks, payment institutions, and internet platforms are completely prohibited from providing settlement and promotional support for such businesses. Without channels for deposits and traffic, RWA in the mainland becomes like water without a source.

3. The Strong Position of Legal Currency: The stablecoins involved in RWA do not have legal status in the mainland, and attempting to anchor asset returns with them touches the nerve of monetary sovereignty.

From the perspective of bottom-line thinking commonly used in criminal defense: engaging in RWA in the mainland may not be a matter of "whether it is dead," but rather "how many years of imprisonment." However, from a governance perspective, this high-pressure situation is essentially an "emergency brake" by regulators who have yet to find effective monitoring methods. As mentioned in the dialogue, this is largely to protect society and prevent the entire community from experiencing another systemic financial disaster similar to P2P.

2. The "Oasis" Abroad: The "Outlet" Under Macro Narratives

Since the mainland is a restricted area, attention naturally turns to offshore markets like Hong Kong and Singapore. Although the seven associations mention that "overseas service providers conducting business in the mainland are also illegal," they have not issued a clear blanket ban on purely overseas operations.

There is a profound macro narrative hidden here: China's internal economic circulation ultimately needs to connect with external circulation. The mainland's "strict blockade" and Hong Kong's "decisive opening up" are, in fact, two sides of the same coin. The mainland needs such an "outlet" to allow assets to enter the international market in a compliant context.

As long as the project can achieve true "full offshore" status—where the underlying assets, funding sources, servers, and compliant entities are all located abroad and do not involve the outflow of RMB from the mainland—regulatory authorities in the mainland typically lack the motivation for cross-border enforcement. In this model, if you are thriving overseas and comply with local regulations (such as obtaining a Hong Kong VASP license), that is your freedom.

3. Theoretical "Thoroughfare" vs. Practical "Chasm": Timing is Everything

At this point, some mainland entrepreneurs may come up with an idea: Can I take domestic factories and mineral revenue rights to Hong Kong to do RWA?

In theory, establishing an SPV through an ODI (Overseas Direct Investment) structure and "transferring" rights to an overseas entity is a feasible path. However, in practical operations, this is akin to the treacherous paths described in Li Bai's poetry, almost like a "chasm":

• First, the Compliance Shackles of Asset Exit: Cross-border rights confirmation is complex and easily suspected of asset transfer.

• Second, the "Circuit Breaker" for Fund Repatriation: The currency exchange process faces extremely strict scrutiny, and having accounts frozen is often just the mildest consequence; more serious cases may face fines or even suspicion of illegal fundraising.

• Finally, the Legal Risks for "Domestic Individuals": If individuals in the mainland operate overseas currency-related businesses, law enforcement agencies can still take action (whether against management or ordinary employees, all are considered illegal financial activities).

In fact, the core issue regarding RWA business is more about "timing." Currently, we assess that, at the regulatory level, multiple ministries have a unified stance, and the domestic environment is in a "high-pressure period" focused on typical cases. Even in Hong Kong, due to the cautious consideration of political and business relationships by listed companies and licensed institutions, the prevailing attitude is often "even if it is permissible by law, please wait a moment." The best strategy for existing projects at this stage is to respond to "window guidance," either halting operations or completely shifting to an all-offshore plan, avoiding any actions against the wind.

4. Conclusion

RWA is not dead in the mainland; it has never truly been "understood." The statements from the thirteen ministries and seven associations once again reaffirm the red lines for domestic operations.

However, for ambitious mainland enterprises, the real opportunity for RWA lies in the deep waters of "offshore." This is no longer a show of illegal fundraising in the mainland but a high-difficulty acrobatics concerning legal compliance, foreign exchange management, and international private placements.

Our advice is: **If you want to engage in RWA, please first cut