According to Reuters, two sources indicate that China's securities regulator has advised some local brokerages to suspend their real-world asset (RWA) tokenization operations in Hong Kong, a move that comes at a critical juncture in the city's efforts to establish itself as a digital asset hub. Beijing's sudden slam on the brakes not only reflects mainland China's concerns about the booming offshore crypto market but also further blurs the regulatory boundaries under the "One Country, Two Systems" policy.
Officials issue informal guidance to stop RWA
The report noted that in recent weeks, the China Securities Regulatory Commission (CSRC) has issued informal guidance to at least two major securities firms, requiring them to suspend their RWA tokenization businesses in Hong Kong.
A source close to the regulator revealed that regulators are concerned that some projects are over-packaged, leading to a disconnect between the underlying assets and the on-chain tokens. Therefore, they are asking brokerage firms to re-examine the risks. Another source added that the suspension order isn't about a blanket ban, but rather a requirement that institutions refrain from rushing forward without sufficient legal and technical support. The CSRC's internal view can be summarized as follows:
"Strengthen risk management and ensure that the company's business claims have strong and legal support."
It is unclear how long the guidance will last. The China Securities Regulatory Commission, the Hong Kong Monetary Authority (HKMA) and the Financial Services and the Treasury Bureau (FSTB) did not immediately respond to requests for comment. The Securities and Futures Commission (SFC) also declined to comment.
Beijing cautious, Hong Kong open
In 2021, China banned cryptocurrency trading and mining, citing concerns about the stability of the financial system. Last month, Chinese regulators further ordered major brokerages to stop publishing research reports supporting stablecoins in an effort to curb domestic investors' enthusiasm for digital currencies.
In contrast, Hong Kong is actively promoting the development of digital assets, including conducting legal reviews of RWA tokenization, highlighting the divergence in digital asset policies between the two regions. Over the past few months, several Chinese brokerages have also actively developed RWA tokenization businesses in Hong Kong. For example, GF Securities' Hong Kong branch launched "GF Token" in June of this year, a set of yield products based on the prices of US dollars, Hong Kong dollars, and offshore RMB, supported by its partner HashKey Chain. In addition to brokerages, Chinese real estate developer Seazen Holdings has also established a research institute in Hong Kong to promote RWA tokenization, demonstrating the strong interest of Chinese companies in Hong Kong's digital asset market.
The Dilemma of Chinese Securities Firms
RWA refers to the conversion of traditional assets like stocks and bonds into blockchain-based tokens. According to data provider RWA.xyz, the global RWA market is currently valued at approximately $29 billion, but many institutions predict that the RWA market could surpass $2 trillion by 2030.
Hong Kong-registered Chinese securities firms had hoped that RWAs would become their next growth engine, but now that Beijing has issued a ban, these firms will have to face project delays and increased compliance costs. Yunfeng Financial, for example, has been actively developing on-chain bonds and real estate tokens, but must simultaneously respond to technical testing by the Hong Kong Securities and Futures Commission (SFC) and mainland regulators' review of its parent company. If they halt their progress following the CSRC's guidance, they risk missing out on first-mover advantage; if they rush ahead, they risk facing cross-border regulatory conflicts.
Further reading: Is Jack Ma joining the game? Yunfeng Financial invests $44 million in ETH and partners with Ant Financial to develop RWA
Overall, this policy divergence may have a certain impact on Hong Kong's development as a digital asset hub, particularly for market participants that rely on mainland capital and enterprises. In the short term, Chinese securities firms may need to reassess their business strategies in Hong Kong and seek operating models that better align with regulatory expectations. In the long term, with the rapid growth of the global RWA market, China may gradually relax relevant policies while ensuring manageable risks, aiming to strike a balance between risk control and adapting to global trends. However, the specific regulatory policies that will guide innovation remain to be seen.
