Executive Summary

The China Securities Regulatory Commission (CSRC) has informally advised leading Chinese brokerages to halt their Real World Asset (RWA) tokenization operations in Hong Kong. This guidance aims to bolster risk management and verify that business claims are substantiated by actual operations. The action introduces an uncertain to bearish sentiment for RWA tokenization in Hong Kong, as regulatory caution from mainland China creates headwinds for the sector, even as global enthusiasm for RWA development continues.

The Event in Detail

The CSRC has, in recent weeks, provided informal guidance to at least two major Chinese brokerages operating in Hong Kong. This guidance instructs them to pause or refrain from expanding their RWA tokenization activities offshore. RWA tokenization involves converting traditional financial products, such as stocks, bonds, and real estate, into digital tokens for trading on blockchain platforms. Sources familiar with the matter indicate that the regulator's intent is to reinforce risk controls within this nascent business and ensure that companies' claims are backed by legitimate underlying assets.

This move by mainland China's top securities regulator contrasts sharply with Hong Kong's proactive strategy to position itself as a digital assets hub. Hong Kong has been rolling out new regulations for stablecoins and virtual asset management, with the Hong Kong Monetary Authority (HKMA) reporting interest from 77 firms in applying for stablecoin licenses since the regime's introduction in June. Chinese financial institutions, including GF Securities' Hong Kong unit, which launched tokenized funds, and China Merchants Bank International, which helped issue a 500 million yuan ($70 million) tokenized bond, have previously explored RWA initiatives in Hong Kong.

Market Implications

The CSRC's informal directive could significantly impede the development and adoption of RWA tokenization within Hong Kong, particularly for financial institutions with mainland China ties. While not a formal ban, the guidance creates a climate of regulatory uncertainty that may compel brokerages to review compliance frameworks and delay new tokenized product launches. This could divert RWA innovation to other jurisdictions that offer clearer regulatory environments.

Globally, the RWA market is experiencing substantial growth. Data from RWA.xyz valued the global RWA market at approximately $29 billion, with some industry forecasts projecting a climb to $2 trillion by 2030, and others as high as $30 trillion. Tokenized U.S. Treasuries alone reportedly jumped 179% in 2024, with projections to reach $4.2 billion this year. Institutions such as BlackRock have entered the market with offerings like the BUIDL fund, which captured nearly 30% of the tokenized Treasury market within six weeks. The regulatory pause in Hong Kong for Chinese brokerages highlights a divergence in pace and policy between a rapidly expanding global market and China's domestically cautious approach.

Broader Context

This action by the CSRC aligns with Beijing's long-standing conservative stance on cryptocurrency and digital assets. Mainland China banned cryptocurrency trading and mining in 2021 and subsequently directed major brokers to cease publishing research endorsing stablecoins. While China has embraced blockchain technology for non-crypto applications, its financial regulators consistently prioritize risk management and capital control, often intervening to prevent market volatility. This pattern reflects a measured approach to emerging financial technologies and asset tokenization, maintaining strict oversight to align with national priorities for financial stability.