Background

The regulatory landscape governing virtual currency business activities continues to evolve in the People’s Republic of China (PRC), with the latest policy promising to tighten oversight on all virtual asset transactions and business activities, as well as naming real-world asset (RWA) tokenisation as a new area of regulatory interest. This comes in a long line of PRC central policies aimed at minimising the risks of money laundering and terrorist financing, and ensuring rigorous government supervision of virtual currency activities.

In September 2021, the People’s Bank of China (PBC) issued Circular no. 237 on Further Preventing Speculative Risks Related to Virtual Currency Transactions,¹ which declared that virtual currencies do not have the same legal status as fiat currency, and listed the following activities as in breach of PRC laws and regulations:

1.  Any use or circulation of virtual currencies in the market;
2. Virtual currency conversion services (whether between virtual currencies or to and from fiat currencies), sale and purchase of virtual currencies, Infomediary or pricing services for virtual currency transactions, virtual currency derivative transactions, and initial coin offerings;
3. Foreign cryptocurrency exchanges providing services to domestic residents via the internet;
4. Provision of ancillary services for virtual currency business activities, such as account opening, fund transfer, clearing and settlement, issuing virtual currency financial products, or use of virtual currencies as collateral;
5. Provision of online business platforms, marketing, paid traffic diversion, or other services by internet service providers for virtual currency business activities; and
6. Any use of words such as “virtual currency”, “virtual asset”, “cryptocurrency”, or similar wording in the name or scope of business of a registered company or in marketing materials.

Summary of new policy

The Notice on Further Preventing and Disposing of Risks Related to Virtual Currencies and Other Related Matters² (Circular no. 42) (the Notice) published on 6 February 2026 by the PBC, the China Securities Regulatory Commission (CSRC), and six other governmental departments, supersedes Circular no. 237. The Notice effectively prohibits the same activities as the earlier circular, but provides additionally that:

1. All virtual currency-related business activities constitute illegal financial activities. Domestic supply of virtual currency-related services by overseas entities and individuals is also prohibited.
2. Providing ancillary services for unapproved RWA tokenisation-related businesses is prohibited.
3. Virtual currency mining activities remain prohibited, and existing mining projects will be terminated.³

The Notice also sets out a list of activities which must only be carried out with prior government approval and are subject to regulatory oversight:

1. Issuance of any stablecoins pegged to renminbi (RMB) outside the PRC, whether by domestic or overseas entities.
2. Domestic RWA tokenisation-related business activities, including those provided by overseas entities and individuals, which must be conducted through designated financial infrastructure.
3. Issuance of virtual currencies overseas, whether by PRC entities or overseas entities controlled by PRC entities.
4. Overseas RWA tokenisation-related business activities conducted by PRC entities, which are based on domestic asset ownership rights, income rights, or other rights (including foreign debts, asset securitisation, or equity-like activities).

In a joint press release,⁴ the PBC and CSRC addressed several questions from the media, providing helpful context for the rationale behind the Notice.

1. What is the background for issuing the Notice? The latest policy is intended to address the recent rise in speculative activities related to virtual currencies and RWA tokenisation, enhance risk prevention, and improve regulatory policies.
2. How does the Notice characterise virtual currencies, RWA tokenisation, and related business activities? The authorities explained that the Notice continues the government’s prohibitive policy stance on virtual currencies and related businesses. In relation to RWA tokenisation, which has developed rapidly in recent years, the Notice clarifies that RWA tokenisation-related business activities are prohibited except with government approval and must be conducted through specific financial infrastructure.
3. What are the regulatory requirements for virtual currencies in the Notice? The authorities emphasised three key areas: (i) concerns over customer identification, anti-money laundering, and other risk factors have led to a general prohibitive policy on virtual currency business activities, (ii) blockchain technology and peer-to-peer transactions transmit associated risks across national borders, and therefore overseas entities controlled by PRC entities are also regulated, and (iii) stablecoins pegged to fiat currency have in some instances effectively performed some functions of fiat currency, which impacts monetary sovereignty and must be regulated.
4. What requirements does the Notice set forth for domestic entities conducting RWA tokenisation-related business activities overseas? RWA tokenisation-related activities conducted by PRC entities overseas will be subject to strict supervision, in line with the principle of “same business, same risks, same rules”. Of particular concern to the regulators are those business activities which concern domestic asset ownership rights, income rights, and other rights. Regulators will also require enhanced compliance and internal control for financial institutions, intermediaries, and information technology service providers (including their overseas subsidiaries or branches) providing RWA tokenisation services.
5. What specific work measures does the Notice propose? Three areas are highlighted: (i) coordinating between central departments and provincial people’s governments to strengthen implementation of local policy, (ii) pooling cross-departmental resources to enhance risk monitoring, control the flow of funds and information, increase regulatory supervision, and strengthen risk prevention, and (iii) strengthening organisational leadership and clarifying work responsibilities of all departments, which must conduct extensive publicity and education to raise awareness of the potential risks of virtual currency and RWA tokenisation-related business activities through legal policy interpretation, case studies, and investment risk education.

Comment

While the PRC regulators have long taken a strict, restrictive stance on cryptocurrencies and related business activities, the latest developments in central policy indicate that certain areas of the crypto trade in the PRC, namely stablecoins and RWA tokenisation, will not be prohibited wholesale, but will instead be subject to prior approval and regulatory oversight. PRC entities and their subsidiaries are also permitted to issue virtual currencies outside of the PRC, with the necessary regulatory approval. This signals the PRC’s willingness to adopt cryptocurrencies and tokenisation in its wider financial ecosystem, albeit with considerable caution.

Crypto businesses are reminded that they may be subject to supervision by PRC regulators even when conducting business outside of the PRC if the relevant operating entity is a PRC entity or controlled by a PRC entity. Issuance of stablecoins pegged to RMB and RWA tokenisation involving domestic property rights are also subject to regulatory scrutiny even if conducted overseas. 

Given the recency of the Notice, the practical effects of this change in policy remain to be seen, including any regulatory or enforcement actions concerning existing RWA tokens involving PRC assets (whether issued domestically or overseas), or RMB-linked stablecoins such as CNHt or AxCNH, both of which are emerging cryptoasset classes.

1. pbc.gov.cn2. pbc.gov.cn3. Note: the ban on crypto mining is not new: it was introduced in 2021 in the Notice on Rectifying Virtual Currency Mining Activities issued by the National Development and Reform Commission, together with other relevant departments (Circular no. 1283). See ndrc.gov.cn.4. csrc.gov.cn

Client Alert 2026-096