China Bans Onshore Tokenization of Real World Assets Amid Regulatory Crackdown

Authorities Prohibit RWA Tokenization and Strengthen Virtual Currency Controls

China’s banks and regulators have banned domestic work that turns real assets into digital tokens. The People’s Bank of China and the China Securities Regulatory Commission, with help from six other groups, made this clear rule. They stress that this step cuts risks found in risky digital finance and keeps asset markets in order.

What the Regulation Covers: Definition and Prohibitions

The new rule starts now. Its aim is to stop the work that ties traditional asset rights to tokens using cryptography and chain-based tech. The tokens stand for claims on real items like buildings or stocks. Key points include:

• Onshore token work is not allowed unless firms get approval and work on approved systems.
• Firms in China must follow strict rules when they work on similar projects that reach beyond China.
• Some token projects fall under illegal money work, such as unapproved public sales and fund collections.
• Issuing virtual coins, even those with values tied to the renminbi, is not allowed for domestic groups or their partners abroad without clear permission.

Regulatory Rationale and Risk Considerations

The rule stops dangerous bets on token work and virtual coins. These bets risk money and may disturb national safety. The move follows President Xi Jinping’s call for strong checks on money systems that guard both the economy and society. Experts point to worries with:

• Unlawful fund collections and money leaving the country.
• Problems with data care and clear rules for blockchain work.
• The need for world rules on token sales that cross borders.

Impact on DeFi, Digital Assets, and Innovation

The rule slows local work that tries to mix token ideas with old assets. Yet, it does allow projects with permission to work on approved systems. This exception may let some safe digital asset forms work well, especially for work between countries. Experts see this rule join a world trend that tries to stop weak links in money work, as seen by groups like the Financial Stability Board.

Relationship to China’s Central Bank Digital Currency (e-CNY)

Even as China stops some token projects, it still builds up its central bank digital money, e-CNY. This state-backed coin takes the place of other virtual coins. Some insiders think approved token projects that go across borders might work with the e-CNY system soon.

Conclusion

China’s ban on domestic token work sends a clear message. The rule stops risky moves with both tokens and digital coins. At the same time, it leaves a door for safe projects that get permission and follow the rules. This decision ties together token work, DeFi ideas, money rules, and efforts to keep financial systems safe as the use of digital tools grows.

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This article was generated by Hivebox AI in collaboration with nGRND.
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