Several top financial associations in China have indicated a shift in policy, declaring Real-World Asset (RWA) tokenization as a risky endeavor. According to a report from Wu Blockchain, the Asset Management Association of China and several other financial organizations will no longer view RWAs as a ’new technology’ needing regulatory oversight, but rather as a high-risk business model.

The organizations have categorized RWAs, along with stablecoins, non-viable tokens (known as ‘air coins’), and cryptocurrency mining as illegal operations in the country.

“Real-world asset tokenization involves financing and trading activities through issuing tokens or similar rights or debt certificates. It carries several risks, including fraudulent assets, operational failures, and speculative hype. Currently, no activities related to real-world asset tokenization have received approval from China’s financial regulators,” the associations stated, as interpreted from Wu Blockchain.

This policy update marks a strict stance against RWAs, aligning them with financing and trading activities that are legally prohibited in China. In October, the People’s Bank of China also reportedly advised technology firms against pursuing stablecoin initiatives, highlighting Beijing’s apprehensions.

Coinbase Executive Warns About Competitive Disadvantage

Following the US government’s passage of the GENIUS Act in July, regulators have been working to establish a federal framework for stablecoin payments in the US. However, the pressure from banks to address stablecoin incentives coincides with the implementation of this legislation.

Faryar Shirzad, Coinbase’s chief policy officer, noted that the continued debate surrounding the act’s implementation might weaken the US’s competitiveness as China advances in utilizing its digital yuan for international transactions, especially as commercial banks in China recently began offering interest on digital yuan balances.