At the beginning of February, China's financial market welcomed a far-reaching regulatory reform. The People's Bank of China, along with eight other departments, jointly issued the "Notice on Further Preventing and Disposing of Risks Related to Virtual Currencies" (referred to as "Document No. 42"), simultaneously abolishing the old regulations from 2021.

On the same day, the China Securities Regulatory Commission issued the "Regulatory Guidelines on Domestic Asset Issuance of Asset-Backed Securities Tokens Abroad" (hereinafter referred to as the "Guidelines"). This series of documents established a systematic regulatory framework for "tokenization of real-world assets" (RWA) for the first time, marking China's transition in digital asset regulation from an "overall ban" to a "precise control and a combination of relief and prevention" new phase.

1. Core of the New Regulations: Establishing the General Tone of "Prohibition at Home, Compliance Abroad"

The cornerstone of this regulatory framework is the official, first-ever clear definition of "tokenization of real-world assets" (RWA). According to Document No. 42, RWA refers to activities that transform ownership rights, income rights, etc., of assets into tokens (certificates) or other rights, bonds, with token-like characteristics using cryptographic technology and distributed ledger or similar technologies, and conduct issuance and trading. This definition distinctly separates RWA from the concept of traditional virtual currencies, laying the foundation for subsequent independent regulation.

The new regulations establish a clear dual principle:

1. Strictly prohibited domestically: Engaging in RWA-related business activities within the territory is generally considered illegal financial activity and will be prohibited.

2. Compliance abroad is feasible: Key "exception" clauses for compliance paths have been included—"Business activities conducted with the lawful consent of the competent authority, relying on specific financial infrastructure are exempted". This opens the institutional door for high-quality domestic assets to engage in tokenized financing through compliant channels abroad.

2. Regulatory Framework: Penetrating Regulation and Implementation of "Filing System"

For domestic entities engaging in RWA business abroad, the regulatory authorities have established the core principle of "same business, same risk, same rules". This means RWA is not a new initiative but, based on its financial nature, is incorporated into the existing cross-border financing regulatory framework.

● Clarified Division of Responsibilities in Penetrating Regulation: The National Development and Reform Commission, China Securities Regulatory Commission, and State Administration of Foreign Exchange will supervise according to business type. For instance, RWA related to foreign debt is overseen by the Development and Reform Commission, while equity and asset-backed securities fall under the jurisdiction of the Securities Regulatory Commission, and fund remittances are governed by the Foreign Exchange Administration. This design aims to achieve penetrating management of business essence and capital flow.

● "Filing System" Provides Clear Path: The Guidelines released simultaneously by the Securities Regulatory Commission offer an actionable plan for the "asset-backed securities token" that is most likely to be implemented currently. Its core is "the filing system", which requires domestic entities to file with the Securities Regulatory Commission before issuing abroad, submitting comprehensive materials including underlying asset information and token plans. This provides a clear path for compliant institutions to participate in global RWA innovation, benefiting the long-term healthy development of the industry, while also raising the compliance capacity requirements for participating institutions.

3. Hong Kong's Role: Compliance Hub and Testing Ground under the "Sandbox Plan"

In the broader regulatory landscape of China, Hong Kong is assigned a unique and critical mission. Forming a strategic complement to the "principled ban" of the mainland, Hong Kong is accelerating the construction of a global hub for RWA with a "compliance first" approach.

The "Ensemble" regulatory sandbox plan launched by the Hong Kong Monetary Authority is the core engine of this strategy. This sandbox aims to test interbank settlement using tokenized currencies and focuses on the study of tokenized asset transactions, currently concentrating on fixed income, investment funds, green finance, and trade financing as four major themes. This provides a safe space for financial institutions and technology companies to explore RWA product design, technical standards, and regulatory adaptation in a controlled environment.

Hong Kong's advantage lies in its established mature ecosystem:

1. Comprehensive Regulatory Framework: A dual-track regulation has been formed, with the Securities and Futures Commission (SFC) overseeing security tokens and the Monetary Authority (HKMA) regulating non-security tokens, with transparent rules. The "Stablecoin Ordinance," effective in 2025, further provides a safe fiat settlement tool for RWA.

2. Clear Compliance Pathway: For inland assets, a complete process has been established for issuing RWA in Hong Kong, including asset screening, domestic ODI/foreign exchange filing, setting up cross-border special purpose entities (SPV), technical blockchain implementation, applying for Hong Kong licenses, issuing tokens, and subsequent management.

3. International Market Interface: Licensed exchanges in Hong Kong can connect with global order books, providing a liquidity foundation for RWA tokens to access international capital.

It is broadly believed in the industry that this "strict control on the mainland, experimentation in Hong Kong" "dual-track trial" model not only safeguards the bottom line of financial security in the mainland but also leverages Hong Kong's common law system and international financial center status, keeping pace with global innovation frontiers and accumulating experience for potential policy evolution in the future.

4. Market Impact and Prospects: Moving from Conceptual Speculation to "Assets are King"

The implementation of the new regulations has had an immediate and profound impact on the market.

● Short-term Clearance, Long-term Benefits: In the short term, some poorly qualified projects attempting to take advantage of loopholes will be forced out of the market, causing the market activity to experience growing pains. However, in the long run, the clarity of rules eliminates the greatest policy uncertainties, laying a foundation for sustainable industry development. Compliant projects that obtain filing will gain market trust and are expected to attract funds from traditional mainstream financial institutions.

● Competitive Core Returning to Assets and Compliance: Market competitiveness will shift from mere technology and conceptual speculation to the ability to exploit quality underlying assets and robust compliance operations. Standardized assets with clear ownership and stable cash flow, such as bonds and money market funds, are expected to become mainstream in early development due to their controllable risk and transparent valuation. This aligns with global trends, as tokenized funds launched by international giants like BlackRock are also based on high-standard assets such as government bonds.

● Institutional Leadership and Elevated Professional Threshold: The high threshold of the compliance path determines that initial participants will primarily be licensed financial institutions, large industrial groups, and their professional service providers. This presents new business opportunities for investment banks, international subsidiaries of brokerages, and technology companies that can provide compliance technology solutions for RWA.

5. Challenges and Uncertainties

Although the framework has been established, the path ahead is still filled with challenges and details that need clarification.

● Technical Implementation Challenges: Even with regulatory approval, the actual implementation of RWA on-chain still faces technical ecological constraints such as token standard fragmentation and inadequate compatibility with mainstream wallets, affecting user experience and asset composability.

● Regulatory Boundaries Require Refinement: For instance, the definitions of "domestic assets" and "issuance activities," as well as specific operational details for different types of RWA (such as equity-type), still need further clarification from regulators in practice.

● Sensitive Red Line on Stablecoins: Document No. 42 particularly emphasizes that issuing stablecoins pegged to the Renminbi abroad without approval is regarded as a critical red line for safeguarding currency sovereignty. Any attempt involving Renminbi stablecoins will face high regulatory sensitivity.

The official announcement of China’s RWA regulatory framework is not simply an embrace or another ban on the crypto world, but a systematic reconstruction of rules based on its own financial logic and risk control needs. It continues to isolate speculative virtual currencies while opening a controlled-risk, traceable regulatory compliant channel for the tokenization financing of real assets.

In this grand layout, Hong Kong, with its unique institutional advantages and a comprehensive "sandbox plan," has become a key bridge and stress testing area connecting mainland Chinese assets with global innovative capital. The future development of the Chinese RWA market will be a "compliance race" led by professional institutions, focusing on quality real assets, within strict regulatory boundaries. This marks the entry of China's digital asset governance into a more mature and refined new era.

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