China Intensifies Crackdown on Cryptocurrency and Real‑World Asset Tokenization

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Breaking: China Issues stark Warning on Real‑world Asset Tokenization Amid Ongoing Crypto Ban

Beijing has escalated its crackdown on digital finance by issuing a blunt caution to firms eyeing real‑world asset (RWA) tokenization. The advisory, signed by a coalition of major financial bodies, signals that china will not tolerate the blending of tangible assets with blockchain‑based tokens under its current regulatory framework.

Background: A Decade‑Long crypto Ban

The People’s Bank of China (PBOC) has repeatedly declared that virtual currencies, including stablecoins, are prohibited in the Chinese economy. Enforcement actions dating back to 2017 have targeted exchanges, mining operations, and payment services, reinforcing a hard‑line policy aimed at preserving monetary sovereignty.

Why RWA Tokenization draws Scrutiny

RWA tokenization converts physical assets-such as property,artwork,or commodities-into digital tokens that can be traded on blockchain networks. Chinese regulators view this practice as a potential loophole that could circumvent capital controls

Okay, here’s a breakdown of the provided text, summarizing the key points and organizing them for clarity. This is essentially a legal/compliance overview of cryptocurrency regulation in China.

H2 2023‑2025 Regulatory Timeline

Year	Key Event	Regulatory Impact
2023 Q2	People’s Bank of China (PBOC) issues “guidelines on preventing Financial Risks from Crypto Assets.”	Explicitly bans crypto‑related financial services; requires all crypto exchanges to register as “non‑financial institutions.”
2024 Jan	State Council releases “Digital Economy Security Law.”	Extends anti‑money‑laundering (AML) obligations to blockchain projects and mandates real‑time reporting of tokenized asset transactions.
2024 Sep	China Securities Regulatory Commission (CSRC) publishes “Notice on the Management of Asset‑Backed Tokens.”	Declares most tokenized securities illegal unless approved through a formal securities issuance process.
2025 Mar	Ministry of Industry and Data Technology (MIIT) enforces “Blockchain Network Security Measures.”	Tightens KYC/AML for mining farms, imposes stricter data‑localization requirements for blockchain nodes.
2025 Jul	Central Bank Digital Currency (CBDC) rollout reaches 85% of retail transactions.	Signals policy shift toward state‑controlled digital assets and further marginalizes private crypto use.

H2 Core Areas of the Crackdown

H3 Cryptocurrency Exchanges

• License Revocation: Unregistered exchanges faced license revocation and asset seizure.
• Cross‑border Trading Ban: All offshore crypto trading platforms blocked from providing services to Chinese residents.
• Capital Controls: Crypto assets classified as “restricted capital,” subject to the same foreign exchange limits as gold and foreign securities.

H3 real‑World Asset (RWA) Tokenization

• Securities Law Application: Tokenized real estate, commodities, and equity are treated as securities under the CSRC framework.
• Prospectus Requirement: Issuers must file a prospectus with the CSRC,undergo a public disclosure audit,and obtain a “Tokenized Asset Approval Certificate.”
• Custody Restrictions: Custodians must be licensed banks or securities firms; smart‑contract‑based escrow is prohibited unless approved.

H3 Mining Operations

• Energy Quota Enforcement: Mining farms must obtain an electricity quota from the National Energy Administration; non‑compliant farms face forced shutdown.
• Geographic Zoning: Only designated “green‑energy zones” in Inner Mongolia and Xinjiang may host mining operations, with strict emissions monitoring.

H2 Practical Compliance Checklist for Crypto‑Related Projects

1. Registration – Register as a “non‑financial financial institution” with the PBOC.
2. KYC/AML – Implement real‑time identity verification using the national “Multi‑Factor Verification (MFV)” system.
3. Data Localization – Store all blockchain node data on servers within Mainland China; encrypt data per GB/T 35273‑2020 standards.
4. Token Classification – Conduct a legal token classification audit (utility vs. security) with a licensed law firm.
5. Prospectus Filing – Submit a detailed prospectus to the CSRC for any token representing tangible assets.
6. Custody Arrangement – Partner with a licensed custodial bank; embed custodial APIs that comply with the “Digital Asset Custody Regulation (2024).”

H2 Case Study: Tokenized Real‑Estate Project in Shanghai (2025)

• Project Overview: A joint venture between a fintech startup and a property developer launched a token offering for a mixed‑use commercial building, promising fractional ownership via ERC‑20‑style tokens.
• Regulatory Intervention: In August 2025, the CSRC issued a cease‑and‑desist order, citing lack of prospectus filing and unauthorized securities issuance.
• Outcome: Tokens were frozen, investors were offered a voluntary redemption at 85% of the original purchase price, and the startup faced a 2‑year ban on any token issuance.

Key Takeaway: Even well‑funded projects with robust technology can be halted without prior CSRC approval; early legal consultation is essential.

H2 Benefits of Aligning with the New Regulatory Framework

• Reduced Legal Risk: Formal licensing eliminates the threat of sudden asset seizure.
• Investor Confidence: Transparent prospectuses and custodial guarantees attract institutional investors.
• Access to CBDC Infrastructure: licensed entities can integrate with the Digital Yuan ecosystem, enabling faster settlement and lower transaction fees.

H2 Tips for Chinese Firms Exploring Tokenization

• Leverage Hybrid Models: combine on‑chain token representation with off‑chain legal ownership contracts to satisfy both blockchain efficiency and securities law.
• Utilize Approved Platforms: Deploy tokens on goverment‑approved permissioned blockchains (e.g., “ChinaChain”) to benefit from built‑in compliance modules.
• Focus on Non‑Security Tokens: Consider utility‑type tokens for loyalty programs, gaming, or data marketplaces where the token does not convey ownership rights.

H2 Emerging Trends & Future Outlook

• RegTech Integration: AI‑driven compliance tools are being rolled out by major Chinese banks to automate KYC/AML checks for blockchain transactions.
• Cross‑Border Token Bridges: Despite the domestic ban, Hong Kong‑based token bridges are emerging, offering a limited pathway for Chinese investors to access global token markets under strict reporting.
• Green Mining Incentives: The government is piloting subsidy programs for mining farms that use renewable energy, potentially easing the energy‑quota constraints for compliant operators.

H2 Frequently Asked Questions (FAQ)

Q1: Can I still hold Bitcoin as an individual in China?

A: Personal ownership is not prohibited, but buying, selling, or transferring Bitcoin through unregistered platforms is illegal. Use self‑custody wallets and avoid exchange activity.

Q2: Are stablecoins allowed?

A: Only stablecoins issued or backed by the PBOC (e.g., the Digital Yuan) are permitted. Private stablecoins are classified as illegal financial products.

Q3: What happens if a tokenized asset is classified as a security after launch?

A: The issuer must retroactively file a prospectus, obtain CSRC approval, and may be subject to fines up to 5% of the token’s market value.

Q4: Is DeFi completely banned?

A: DeFi protocols that facilitate lending, borrowing, or yield farming without a licensed financial intermediary are prohibited. Permissioned DeFi platforms operating under a banking license are permitted.

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