On February 6, 2026, the People’s Bank of China and eight other ministries issued the “Notice on Further Preventing and Disposing of Risks Related to Virtual Currencies” (Yinfa [2026] No. 42, hereinafter referred to as “Document 42”). Document 42 generally continues the Chinese mainland regulatory attitude of a “one-size-fits-all” strict regulation of virtual currencies.
For stablecoins, Document 42 does not elaborate much, but based on the regulatory principle of “dynamic assessment,” it also leaves room for licensing business development.
More importantly, Document 42 for the first time includes Real World Asset tokenization RWA into the regulatory scope. At the same time, the China Securities Regulatory Commission also issued a “Regulatory Guidelines on the Overseas Issuance of Asset-Backed Securities Tokens for Domestic Assets” (hereinafter referred to as the “Guidelines”). Together with the regulatory requirements for real-world asset tokenization business in Document 42, the guidelines provide a framework for the development of RWA business, which has always been in a gray area.
Document 42 includes all three types of virtual assets/digital assets—virtual currency, stablecoins, and real-world asset tokens—into regulation, filling the previous regulatory gap and is currently the most accurate and complete legal and normative document in the field of virtual asset-related business in mainland China. So far, China’s virtual asset regulatory framework has taken initial shape.
I. Historical Evolution of Virtual Asset Regulation in Mainland China
The “94 Announcement” of September 4, 2017 (“Announcement on Preventing Risks of Token Issuance Financing”) determined that token issuance financing (ICO) is essentially an unapproved illegal public financing, suspected of various illegal and criminal activities, and comprehensively stopped ICO and required trading platforms to clean up and rectify related businesses within a time limit.
The “924 Notice” of September 24, 2021 (“Notice on Further Preventing and Disposing of Risks of Virtual Currency Transaction Speculation”) clarified that virtual currency is not legal tender, and related transactions, exchanges, intermediary, token issuance financing, and derivatives transactions are all illegal financial activities, prohibiting overseas exchanges from providing services to domestic entities, and building a multi-dimensional risk prevention and disposal system.
Related reading: A Brief Description of China’s Regulatory Attitude Towards Virtual Currency (2023.1.25)
After that, there were no complete legal documents issued in this field for a long time. Until November 28, 2025, the inter-ministerial coordination meeting of the thirteen ministries reiterated that virtual currency-related businesses are illegal financial activities, and for the first time clarified that stablecoins are included in the category of virtual currencies and listed as key regulatory areas, adding the Central Financial Office and other departments to strengthen central-local coordination and criminal justice intervention, focusing on monitoring the flow of funds and information to combat regulatory evasion.
The risk warning of the seven associations on December 5, 2025, clarified that virtual currency is not legal tender, and China has not approved any RWA tokenization activities, strictly prohibiting member institutions from participating in or providing related services, warning of illegal risks related to stablecoins, air coins, and RWA tokens, and reminding the public to stay away from speculation.
So far, mainland China’s regulatory form for virtual assets has been non-comprehensive, patch-style, and one-size-fits-all, mainly focusing on preventing illegal financial activities, combating illegal and criminal activities, and maintaining social order.
Until the eight-ministry Document 42 on February 6, 2026, it made accurate distinctions for various categories of virtual assets (virtual currency, stablecoins, real-world asset tokens), as well as the corresponding regulatory forms for each.
II. Interpretation of Core Clauses of Document 42
Notice of the People’s Bank of China, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the National Financial Regulatory Administration, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange on Further Preventing and Disposing of Risks Related to Virtual Currencies (Yinfa [2026] No. 42)
Link: https://www.pbc.gov.cn/tiaofasi/144941/3581332/2026020619591971323/index.html
Clarify the essential attributes of virtual currency, real-world asset tokenization, and related business activities
2.1 The “One-Size-Fits-All” Regulatory Principle for Virtual Currency
(1) Virtual currency does not have the same legal status as legal tender. Virtual currencies such as Bitcoin, Ethereum, and Tether have the main characteristics of not being issued by monetary authorities, using encryption technology and distributed ledgers or similar technologies, and existing in digital form. They do not have legal compensation and should not and cannot be used as currency in the market.
Virtual currency-related business activities are illegal financial activities. Engaging in virtual currency-related business activities such as exchanging legal tender for virtual currency, exchanging between virtual currencies, buying and selling virtual currencies as a central counterparty, providing information intermediary and pricing services for virtual currency transactions, token issuance financing, and trading in virtual currency-related financial products within the territory are suspected of illegal issuance of token tickets, unauthorized public issuance of securities, illegal operation of securities and futures business, and illegal fundraising. All are strictly prohibited and resolutely banned in accordance with the law. Overseas units and individuals shall not illegally provide virtual currency-related services to domestic entities in any form.
Web3 Xiaolv Interpretation:
First of all, the definition of virtual currency is consistent with previous regulatory documents—it does not have the same legal status as legal tender. In addition, the scope of regulatory jurisdiction is clarified for the first time—engaging in related virtual currency-related business activities within the territory is an illegal financial activity. Finally, added—overseas units and individuals shall not illegally provide virtual currency-related services to domestic entities in any form.
This “one-size-fits-all” regulatory principle for virtual currency, one of the types of virtual assets/digital assets regulated in mainland China, clarifies that in addition to being defined as illegal financial activities, the regulatory scope is further clarified, strictly prohibiting any virtual currency-related activities within mainland China: no related activities may be carried out within the territory, and overseas entities may not provide services to domestic entities.
Although virtual currency in mainland China is regarded as a “virtual commodity” (partially recognized for its property attributes in criminal and civil judicial practice); as a “financial asset” or “settlement tool,” its survival soil in mainland China has been completely eradicated.
2.2 The “Dynamic Assessment” Regulatory Principle for Stablecoins
Stablecoins pegged to legal tender de facto perform some of the functions of legal tender in circulation and use. Without the consent of relevant departments in accordance with laws and regulations, no domestic or foreign unit or individual may issue stablecoins pegged to RMB overseas.
Web3 Xiaolv Interpretation:
This is the “dynamic assessment” regulatory principle for stablecoins, the second type of virtual asset/digital asset regulated in mainland China.
Although the document of the thirteen ministries on November 28, 2025, clearly stated that stablecoins are a form of virtual currency, the document also mentioned the need to “dynamically assess the development of overseas stablecoins.”
The “dynamic assessment” of the thirteen ministries also left a gap for stablecoins in Document 42: Without the consent of relevant departments in accordance with laws and regulations… stablecoins pegged to RMB may not be issued.
Then the pending questions remain to be observed: Under what circumstances will the regulator agree to issue stablecoins pegged to RMB? Does the circulation of the digital RMB CBDC with legal tender attributes meet regulatory requirements? How will the Hong Kong stablecoin licensing system develop?
As far as regulatory jurisdiction is concerned, Document 42 innovatively implements a multi-departmental coordination mechanism, clearly dividing regulatory responsibilities into two lines: the central bank regulates virtual currency (including stablecoins), and the China Securities Regulatory Commission, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the State Administration of Foreign Exchange, etc. regulate RWA according to its type.
2.3 The “Licensed Development” Regulatory Principle for RWA
(2) Real-world asset tokenization refers to the activity of using encryption technology and distributed ledgers or similar technologies to convert the ownership, income rights, etc. of assets into tokens or other rights and bond certificates with token characteristics, and issuing and trading them.
Engaging in real-world asset tokenization activities within the territory, as well as providing related intermediary, information technology services, etc., are suspected of illegal issuance of token tickets, unauthorized public issuance of securities, illegal operation of securities and futures business, and illegal fundraising, and should be prohibited; except for related business activities carried out relying on specific financial infrastructure with the consent of the competent business department in accordance with laws and regulations. Overseas units and individuals shall not illegally provide real-world asset tokenization-related services to domestic entities in any form.
(13) Without the consent of relevant departments in accordance with laws and regulations, domestic entities and their controlled overseas entities shall not issue virtual currencies overseas.
(14) Domestic entities that directly or indirectly conduct real-world asset tokenization business in the form of foreign debt overseas, or conduct real-world asset tokenization business similar to asset securitization or with equity nature overseas based on the ownership, income rights, etc. of domestic assets (hereinafter collectively referred to as domestic rights and interests), shall be subject to strict supervision by relevant departments such as the National Development and Reform Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange in accordance with their respective responsibilities and in accordance with the principle of “same business, same risk, same rules.” For other forms of real-world asset tokenization business conducted overseas by domestic entities based on domestic rights and interests, the China Securities Regulatory Commission shall, in conjunction with relevant departments, supervise and manage them in accordance with their respective responsibilities. Without the consent, filing, etc. of relevant departments, no unit or individual may carry out the above-mentioned business.
Web3 Xiaolv Interpretation:
These are the regulatory principles of “licensed development” for RWA, the third type of virtual asset/digital asset regulated in mainland China.
A. Clarify that real-world asset tokenization activities shall not be carried out within the territory
First, Article 2 of Document 42 defines the nature of RWA for the first time, which is generally broad. At the same time, it clarifies the territorial restrictions of supervision, which is the same as virtual currency-related business. It is clarified that real-world asset tokenization activities shall not be carried out within the territory, and the provision of custody, clearing and settlement, intermediary, information technology services, etc. related to real-world asset tokenization are all illegal financial activities and shall be strictly prohibited.
However, with the consent of the competent business department in accordance with laws and regulations, related business activities carried out relying on specific financial infrastructure are excluded. However, there is no clear definition of “specific financial infrastructure” here. If it is some RWA for the purpose of fundraising, it may be possible to land through domestic trading venues, but that is all, without any on-chain programmability and composability.
B. Guidelines for Licensed Development of Overseas Issuance of RWA for Domestic Assets
For real-world asset tokenization activities carried out overseas with domestic assets, Document 42 and the “Guidelines” adopt the regulatory principle of “strict supervision and compliant development” for licensed development. The details are as follows: According to the different nature of real-world asset tokenization business, the corresponding Chinese mainland regulatory authorities shall supervise and manage them in accordance with the regulatory principle of “same business, same risk, same rules.” Domestic assets – overseas issuance – domestic license filing.
RWA business types correspond to the same regulatory model as traditional cross-border financial business. RWA in the form of foreign debt is classified as regulated by the National Development and Reform Commission (corporate foreign debt is reviewed and registered by the National Development and Reform Commission); RWA in the form of equity and RWA in the form of asset securitization are classified as regulated by the China Securities Regulatory Commission (stock issuance is “reviewed by the exchange and registered by the China Securities Regulatory Commission”, and asset securitization is reviewed by the exchange).
As with traditional cross-border financial business, overseas RWA also involves the issue of overseas fundraising being remitted back to China, which is regulated by the State Administration of Foreign Exchange.
In addition, Article (13) of Document 42 leaves a gap for other types of RWA to meet the needs of different innovative businesses. Because the previous ones are more about financial assets as the underlying assets of RWA, this article may provide a path for physical assets or other equity assets.
On the basis of Document 42, the China Securities Regulatory Commission’s guidelines further clarify the relevant compliance requirements for “overseas issuance of asset-backed securities tokens for domestic assets,” and the China Securities Regulatory Commission is responsible for supervising and managing “overseas issuance of asset-backed securities tokens for domestic assets” and carrying out filing.
Definition: “Overseas issuance of asset-backed securities tokens for domestic assets” refers to the activity of using encryption technology and distributed ledgers or similar technologies to issue tokenized equity certificates overseas with the cash flow generated by domestic assets or related asset rights as payment support.
In addition to the China Securities Regulatory Commission’s guidelines, there are other regulatory authorities’ clear guidance documents to be issued, or they will be included in the existing framework of traditional cross-border financial supervision.
For RWA, what needs to be clarified in particular is that the new blockchain and tokenization technology cannot prevent any risks, the underlying assets have not changed, and the risks have not changed.
This RWA represents a new way of asset circulation based on blockchain, rather than a new way of asset creation.
On the asset side, the core issue is what kind of assets are more suitable for tokenization.
III. China Has Initially Established a Virtual Asset Regulatory Framework
China’s regulatory attitude towards virtual currency has not changed, but this Document 42 is not only a reiteration of the severe attitude towards virtual currency.
Document 42 distinguishes and treats the three important forms of virtual assets/digital assets: from the “one-size-fits-all” approach to virtual currency, to the “dynamic assessment” of stablecoins, and then to the positive transformation of the “licensed development” of real-world asset tokenization RWA. This is a progressive regulatory form, and it also marks that China’s virtual assets/digital assets will have a promoting effect on the development from virtual to real.
The above picture is the classification of virtual asset/digital asset categories that I have been sharing in the sharing, and the differentiated supervision of this Document 42 can also be regarded as an endorsement.
As a result, China’s regulatory framework for virtual assets/digital assets has been initially established, and more detailed rules need to be improved. However, the core red line remains: strictly prohibiting business development within the territory and business development facing the territory; strictly prohibiting the use of virtual currency (stablecoins) to perform the functions of legal tender.
Looking back at Dr. Xiao Feng of Hashkey’s proposal of “starting from the origin and looking at the first principle of blockchain,” its underlying logic is still clear: blockchain is becoming a new global unified ledger and the infrastructure of new finance; the tokenized money on this ledger will level the efficiency and cost of global value flow; thereby building a global, all-weather, multi-asset class payment, lending, and capital financial market.
Then China’s initially formed virtual asset/digital asset framework will give full play to the advantages of blockchain and tokenization, and inject more innovative vitality into the real economy and traditional finance.
Document 42: China’s Regulatory Framework Signals Shift from Prohibition to Controlled Innovation in Digital Assets
Executive Summary
On February 6, 2026, China’s central bank and eight other ministries issued “Document 42,” establishing the nation’s first comprehensive regulatory framework for virtual assets. This landmark document categorizes digital assets into three distinct classes—virtual currencies, stablecoins, and real-world asset tokens (RWA)—and applies differentiated regulatory approaches to each. The framework represents a significant evolution from China’s previous outright prohibition of crypto activities to a more nuanced approach that creates controlled pathways for certain innovations, particularly in RWA tokenization.
Market Impact Analysis
Regulatory Framework Evolution
Document 42 marks a pivotal moment in China’s regulatory approach, moving beyond the simplistic “94 Announcement” (2017) and “924 Notice” (2021) that prohibited virtually all crypto activities. The new framework demonstrates sophisticated understanding of the digital asset ecosystem by distinguishing between:
- Virtual currencies (Bitcoin, Ethereum): Subject to a “one-size-fits-all” prohibition
- Stablecoins: Under “dynamic assessment” with potential licensing pathways
- Real-world asset tokens: Governed by a “licensed development” framework
This differentiated approach reflects regulatory maturity and acknowledges the distinct characteristics and risk profiles of each asset class. The framework closes previous regulatory gaps, particularly for RWA which had existed in a legal gray area.
Market Segmentation and Global Implications
China’s regulated approach creates a segmented global crypto landscape with significant implications:
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Crypto Isolation: The continued prohibition of virtual currency activities within China’s territory and restrictions on overseas entities providing services to domestic entities further isolate the Chinese market from global crypto trading. This fragmentation may reduce liquidity and price discovery for major cryptocurrencies in the short term.
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RWA Legitimization: By establishing a regulatory framework for RWA, China implicitly acknowledges tokenization as a legitimate financial innovation. This endorsement could accelerate global institutional adoption of RWA projects, as China’s large economy gives regulatory approval in this area significant weight.
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Competitive Positioning: The framework positions China as a potential innovation hub for regulated RWA applications, potentially attracting global RWA projects to establish compliant operations that bridge traditional finance and blockchain technology.
Token Price Implications
The regulatory framework will have varying impacts across different crypto asset classes:
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Bitcoin and Major Cryptocurrencies: Continued prohibition in China maintains downward pressure on these assets, as Chinese retail and institutional capital remains restricted. However, this negative sentiment may be offset by potential inflows from jurisdictions with more progressive crypto regulations.
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Stablecoins: The “dynamic assessment” approach creates both uncertainty and opportunity. If China eventually licenses stablecoin activities—particularly those integrated with the digital yuan—compliant stablecoin solutions could see significant demand. Projects that can demonstrate compliance with potential licensing requirements may outperform peers.
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RWA Tokens: The establishment of a regulatory framework could boost prices of tokens associated with legitimate RWA projects that can navigate the complex licensing requirements. Projects with established compliance frameworks and clear pathways to operate under China’s “licensed development” model may experience valuation re-rating.
Risk Assessment
Implementation and Compliance Risks
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Regulatory Ambiguity: While Document 42 provides a high-level framework, significant details remain undefined, particularly regarding “specific financial infrastructure” for RWA and the exact criteria for stablecoin licensing. This uncertainty could hinder immediate market development.
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Operational Complexity: The multi-departmental coordination mechanism—with the PBC regulating virtual currencies and the CSRC, NDRC, and SAFE regulating RWA—creates potential regulatory conflicts and compliance burdens for market participants.
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Technology Constraints: The requirement for RWA activities to be conducted through traditional financial infrastructure rather than fully on-chain solutions limits blockchain’s innovative potential, potentially creating less efficient systems than those possible with pure decentralized approaches.
Market and Geopolitical Risks
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Regulatory Arbitrage: The divergent global regulatory landscape encourages regulatory arbitrage, where crypto businesses relocate to jurisdictions with more favorable regulations. This migration could create market instability and uneven competitive conditions.
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Capital Flow Restrictions: The framework’s strict controls on cross-border capital movements, particularly for RWA proceeds remitted back to China, could limit the efficiency and attractiveness of China-compliant RWA markets globally.
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Innovation Suppression: While the framework creates pathways for certain innovations, the continued prohibition of virtual currencies and restrictions on decentralized applications may slow China’s participation in broader blockchain innovation.
Investment Opportunities
RWA Sector Growth Potential
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Institutional Adoption Catalyst: China’s formal recognition of RWA as a regulated asset class could accelerate institutional adoption globally. Traditional financial institutions in China may now explore blockchain solutions for asset tokenization, creating significant demand for compliant RWA infrastructure.
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Export of Regulatory Model: China’s approach to differentiating between various digital asset classes could influence regulatory frameworks in other jurisdictions, particularly those with similar economic concerns about capital controls and financial stability. This could create opportunities for projects that anticipate and prepare for similar regulatory approaches globally.
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Traditional Finance Integration: The framework’s alignment of RWA with traditional financial regulation (“same business, same risk, same rules”) creates opportunities for blockchain projects that can seamlessly integrate with existing financial infrastructure rather than attempting to replace it.
Strategic Considerations for Investors
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Portfolio Rebalancing: Investors should reassess their exposure to different crypto asset classes in light of China’s regulatory distinctions. Increasing allocation to RWA-focused projects may provide better risk-adjusted returns given the regulatory clarity in this segment.
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Geographic Diversification: The regulatory fragmentation necessitates geographic diversification of crypto investments. Projects with strong compliance capabilities and the ability to operate in multiple regulatory environments may be better positioned for long-term growth.
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Compliance-First Approach: As regulations become more sophisticated globally, compliance capabilities will increasingly differentiate viable crypto projects from those at risk of regulatory intervention. Projects with proactive compliance frameworks and transparent operations may command premium valuations.
Conclusion
Document 42 represents a significant evolution in China’s approach to digital assets, demonstrating regulatory sophistication through its differentiated treatment of various crypto asset classes. While maintaining strict controls on cryptocurrencies, China has created controlled pathways for RWA innovation that could profoundly influence the global market.
For investors, this development necessitates a reassessment of risk exposures and strategic positioning. The RWA sector emerges as the clear beneficiary of China’s regulatory approach, offering potential opportunities amid increasing global regulatory divergence. Projects that can navigate complex compliance requirements while maintaining technological innovation may be best positioned to capitalize on the emerging regulatory landscape.
China’s framework also signals a potential global trend toward more sophisticated, nuanced regulation that acknowledges the distinctions between different types of digital assets. Investors should monitor how other jurisdictions respond to China’s approach and position their portfolios accordingly.