Seven Chinese self regulatory and trade associations covering banking, securities, futures and asset management have published warnings about participating in real world asset (RWA) tokenization. Engaging in issuance, trading, financing and ancillary tokenization activities may involve “illegal financial activities”, according to the associations. This raises an important question for Hong Kong’s tokenization activities: even if Hong Kong issued tokens are not allowed to be traded within mainland China, are they allowed to involve the tokenization of Chinese assets? The inclusion of the word “financing” suggests they probably are not.
The alert follows a separate warning last week that effectively shut down any stablecoin activities following China’s central bank convening a meeting of the country’s judicial bodies and financial regulators. The latest tokenization alert was issued by the China Banking Association, the Securities Association of China (SAC) and Asset Management Association of China (AMAC), amongst others. It initially warns about previous government announcements cracking down on cryptocurrencies and initial coin offerings (ICOs) in 2017. Exchanging fiat currency for virtual currencies (which would include stablecoins) is not allowed. The ultimate effect of the latest announcement is to treat tokenization activities as equivalent to cryptocurrency activities.
The warning states, “Tokenization of real world assets involves financing and trading activities through the issuance of tokens or other rights and bonds with token characteristics, carrying multiple risks, including the risk of fictitious assets, business failure and speculative activity. Currently, China’s financial regulatory authorities have not approved any real world asset tokenization activities.”
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