Analysis of the State Council Financial Work Report: Is RWA an Illegal Financial Activity?

Author: Liu Honglin

According to news reports, on November 3, Pan Gongsheng, Governor of the People's Bank of China, commissioned by the State Council, reported on financial work since October 2025 at the 25th session of the Standing Committee of the 14th National People's Congress. The report, as usual, covers monetary policy, financial reform, and risk resolution, but contains a statement regarding virtual currencies and RWA that requires careful reading:

Improve the regulatory policy framework for virtual currencies, strengthen the analysis of clues related to underground banks involved with virtual currencies, improve the mechanism for normalized, full-chain rectification of virtual currency "mining," and strengthen the regulation of tokenization of Real World Assets (RWA).

Figure: Report on Financial Work Situation by the State Council, republished from the People's Bank of China

RWA (Real World Assets) refers to a business model where real-world assets such as real estate, bonds, and carbon assets are mapped on-chain for issuance and circulation. In past years, it has always been a carefully used term in regulatory discourse.

This time being included in the State Council's financial work report has led to two interpretations in the market: some interpret it as a tightening stance, expecting regulators to step up oversight; others draw the opposite conclusion, wondering if its inclusion in such a formal document signals the establishment of clear rules and operational pathways.

Both interpretations may have missed the same underlying fact: what truly changes this time is who regulates RWA and under what framework.

First, let's look at where this passage appears.

In Part One of the report, titled "Main Progress and Achievements in Financial Work," there is a section called "Situation Regarding Prevention and Resolution of Financial Risk Hazards." This passage falls under that section, alongside efforts to crack down on organized illegal and criminal activities in the financial sector's "black and gray industries," and nationwide special campaigns against illegal fundraising. The subheading for this item reads "Strengthening Capacity and Mechanism Building for Preventing and Combating Illegal Financial Activities."

The section placement itself reflects regulatory categorization: RWA has been classified under risks associated with illegal financial activities that require prevention and crackdown, rather than falling under the agenda for financial innovation and opening-up.

How RWA Entered Regulatory Routine

RWA has not been singled out by regulators for the first time. In February of this year, the PBOC and seven other departments jointly issued the "Notice on Further Preventing and Disposing of Risks Related to Virtual Currencies and Other Matters" (Yinfa [2026] No. 42), which for the first time listed RWA tokenization alongside virtual currencies as targets for risk disposal. In a report on implementing deliberation opinions, the State Council summarized this regulatory stance as "strictly prohibited domestically and strictly regulated overseas."

In terms of execution: corporate names and business scopes of enterprises and individual businesses must no longer contain terms like "RWA" or "real-world asset tokenization"; internet platforms are prohibited from providing operating venues, displays, marketing, and traffic redirection for related businesses; financial institutions and payment institutions must not provide account opening, fund transfer, and clearing/settlement services.

That notice addressed the problem of "blocking," systematically shutting down domestic channels for such businesses.

The change in the November report lies in the grouping of RWA with underground bank clue analysis and full-chain mining rectification, placing it within the annual work the State Council reports to the NPC, specifically in the section summarizing the past year's work. From a regulatory perspective, this is now standard operational routine.

In other words, RWA is no longer just a new term in a specific circular; it has been integrated into the regular agenda of financial regulation. Moving forward, restrictions on such businesses will not require special notices; routine regulatory and enforcement actions will naturally cover them.

Is Technical Service No Longer Just Neutral?

The practical impact of this shift on practitioners lies in regulatory jurisdiction.

Over the past year and a half, many clients have inquired about RWA projects, with most solutions following a similar template: at the base are real estate, creditor rights, carbon assets, or equipment revenue rights; wrapped above them is a layer of technical services or data-on-chain structures. By rebranding the issuance and fundraising stages, these entities attempt to define the entire operation as a technical or data business to circumvent financial regulation.

Such packaging was already tenuous after Notice No. 42; this report eliminates any remaining room for speculation.

Regulatory jurisdiction over the issuance, trading, and settlement of on-chain assets is clearly placed within the financial framework. The criteria for judgment revert to the most fundamental questions: where does the money come from, where does it flow, who promises returns, and who is targeted by promotion? No matter how cleverly structured, if these elements point to public fundraising and return guarantees, the claim of "we only provide technology" holds no water.

Another easily overlooked detail in the report is: "strengthen the analysis of clues related to underground banks involved with virtual currencies."

This sentence specifically targets capital repatriation channels. Some teams conduct issuances offshore, assuming that offshore structures isolate them from domestic regulation. However, as long as promotions target domestic users and returns flow back through exchange channels, they squarely fall under this regulatory line.

"Strict regulation overseas" does not govern registration locations; it governs where users are located and how funds move.

In the same report, another statement merits parallel attention. Under the section "Financial Reform and Opening-Up," placed alongside cross-border payment channels, RMB swap arrangements, and panda bonds, is the following: "The positioning of the digital RMB has smoothly transitioned from a cash substitute to a deposit currency."

One is filed under "Prevention and Crackdown on Illegal Financial Activities," while the other is under "Financial Reform and Opening-Up." The section placement itself represents the regulatory classification of two distinct on-chain pathways.

This transition was completed earlier this year, publicly confirmed by Pan Gongsheng at the annual Financial Street Forum in October. Its inclusion in this report signifies that it has shifted from a pilot arrangement to an established framework.

While seemingly unrelated to RWA, this initiative actually constitutes the other side of the same strategic chessboard.

The digital RMB's original positioning was as a digital alternative to cash: interest-free, excluded from the credit creation system, and primarily used for small-value payments. Following the switch to a deposit currency, digital RMB managed by banking-type operators is subject to reserve requirement management, balances in verified wallets can accrue interest, and commercial banks can integrate it into full-spectrum services including deposits, lending, remittances, and investments.

The Digital RMB International Operations Center has already begun exploring on-chain issuance, registration, custody, and fund settlement for assets such as commercial paper, trade finance instruments, and carbon emission rights—precisely the application narratives the RWA industry has repeatedly promoted over the past few years.

Viewing these two strands together, the direction becomes clear: regulators are not opposing asset tokenization itself. The strict domestic ban blocks grassroots, public-facing tokenization offerings; what the digital RMB framework builds is an officially sanctioned track for on-chain assets.

For private RWA initiatives, this represents a dual squeeze: one side is prohibitive enforcement, the other is the substitution effect of official infrastructure. The expectation that regulators will first block and later reopen channels for private issuances finds no basis in this report, at least not currently.

How Should RWA Business Teams Interpret This?

For teams currently engaged in or preparing to enter RWA-related businesses, Attorney Honglin outlines three layers of assessment.

Domestic operations should cease using technical services or data-on-chain claims to package issuance and fundraising activities. Regulators have explicitly categorized such businesses as financial activities; packaging attempts will only increase post-hoc explanatory costs without changing their legal characterization.

For offshore issuances, first understand how they are regulated. Article 14 of Notice No. 42 outlines a supervised pathway: utilizing domestic asset ownership or revenue rights as underlying collateral to conduct off-shore quasi-asset securitization or equity-like tokenization businesses shall be strictly regulated by the NDRC, CSRC, and SAFE according to the principle of "same business, same risk, same rules." The regulatory guidelines released concurrently by the CSRC that day require domestic enterprises controlling the underlying assets to first file with the CSRC, while intermediary service providers must also seek approval or file records. In other words, operating offshore is not prohibited, but must follow filing procedures. Bypassing this route, targeting domestic users for promotion, and allowing returns to flow back through exchange channels squarely triggers underground bank clue analysis; structuring operations offshore never serves as a safe harbor.

Regarding timing, there is no need for panic, but planning must align with this trajectory. The report currently represents policy positioning, lacking accompanying detailed rules and effective dates, so existing business operations do not need immediate procedural adjustments based solely on this document. However, if your business model rests on the assumption that "regulators will eventually permit domestic tokenization offerings," this report indicates that this premise does not hold in the foreseeable future. Genuine opportunities lie in areas that avoid touching funds or conducting issuances: technical services, compliance tools, custody and auditing, data services, and initiatives aligning with official frameworks.

Conclusion

The story of RWA is not over; merely the narrative authority has changed hands. Over the past few years, the industry has tended to frame tokenization as technology's transformation of the financial system. This report delivers a clear answer: within China's framework, on-chain assets either operate on regulator-approved tracks, or they have no tracks at all.