China’s recent ban on Real World Asset (RWA) tokenization has effectively frozen Hong Kong’s RWA market, industry sources said. The financing model, which issues tokens or token-like rights and bonds backed by real-world assets, has seen mainland inquiries drop 90% over the past two months, with most ongoing deals on hold, according to several Hong Kong consulting firms.

On Dec. 5, seven major Chinese financial industry associations, including the Securities Association of China, jointly warned against illegal activities involving virtual currencies. The notice highlighted multiple risks associated with RWA tokenization, including fake assets, business failures, and speculation, and directed all member institutions to refrain from participating in virtual currency or RWA token issuance and trading in China.

The move marks the first time Chinese authorities have explicitly defined and addressed RWA tokenization.