It fails fundamental flag aesthetics due to the dragon in the middle. A flag is supposed to be clear at a distance, and seals and the like don't do that. It's a flag, not a coat of arms.
I think you mean shield, as the a coat of arms consists of many more parts such as retainers and helm etc.
However, the shields were originally designed to be clear at a distance because they identified individuals on a battlefield. I believe the earliest ones were flown as banners.