China's Regulation Slows Tokenization in Hong Kong: A Step Towards Risk Minimization in the Digital Boom

China's securities regulator has recently advised certain local brokerage firms to pause their activities in the tokenization of real-world assets (RWA) in Hong Kong. This recommendation highlights Beijing's concerns about an overly enthusiastic push into the booming overseas digital asset market. The RWA tokenization process transforms traditional assets such as stocks, bonds, funds, and even real estate into digital tokens that are traded via a blockchain. Numerous Chinese companies, including brokerage firms, have introduced RWAs in Hong Kong in recent months. According to sources, at least two leading brokerage firms have recently received informal notices from the China Securities Regulatory Commission (CSRC) to suspend their overseas RWA activities. This is intended to strengthen risk management in a new business segment and ensure that claims made by companies are supported by substantial, legitimate business practices. While Hong Kong has increasingly sought to position itself as a hub for digital assets over the past year, China, following the 2021 ban on cryptocurrency trading and mining, is taking a more cautious approach towards digital assets. Just recently, Chinese regulators urged major local brokerage firms to cease publishing reports supportive of stablecoins to curb domestic investors' interest in digital currencies. Amidst these developments, Hong Kong's financial regulator and the Hong Kong Monetary Authority (HKMA) announced in June a legal review of RWA tokenization at an international comparative level. The global RWA market currently stands at approximately 29 billion USD, according to data provider RWA.xyz. Projections by China Merchants Securities suggest that this figure could exceed 2 trillion USD by 2030. It is unknown how long the informal directive from China's securities regulator for some brokerage firms to suspend RWA activities in Hong Kong will remain in effect. The CNMC, HKMA, and FSTB did not respond to Reuters' request for comment, while the Securities and Futures Commission (SFC) in Hong Kong declined to comment.