From domestic bans to full cross-border, end-to-end oversight, virtual currencies are now facing the most comprehensive regulatory clampdown yet, led by multiple Chinese authorities.
On February 6, eight government bodies—including the People’s Bank of China and the China Securities Regulatory Commission—jointly released the Notice on Further Preventing and Addressing Risks Related to Virtual Currencies and Similar Activities (the “Notice”). Beyond once again reaffirming that virtual-currency-related activities constitute illegal financial activities, the Notice makes several landmark clarifications.
For the first time, it explicitly states that any domestic or overseas entity or individual is prohibited from issuing RMB-pegged stablecoins abroad without approval. It also stresses that conducting real-world asset (RWA) tokenization activities within China—or providing intermediary or IT services for such activities—may constitute illegal token issuance, unauthorized public securities offerings, illegal securities or futures operations, or illegal fundraising, and must therefore be banned.
Described by industry insiders as the “strictest regulatory upgrade in history,” this move not only fully seals off domestic virtual-currency operations, but also extends regulatory reach deep into overseas issuance and cross-border structures.
Under this sweeping ban, the crypto market is undergoing a fundamental shift. Which parts of the industry chain will be hit hardest? Where—if anywhere—does compliant space remain? What risks demand heightened vigilance? And where might the market head next?
Virtual Currencies Classified as Illegal Financial Activities
RMB-Pegged Stablecoins Explicitly Restricted
Virtual currencies are once again at the center of an intense regulatory storm. The Notice makes clear that China maintains a prohibitive policy toward virtual currencies: all related business activities are deemed illegal financial activities and are strictly banned and shut down in accordance with the law.
Explaining why the ban was reiterated, officials from the People’s Bank of China and the China Securities Regulatory Commission noted that virtual currencies currently fail to meet basic requirements for customer identification and anti-money-laundering compliance. They carry significant risks of being used for money laundering, fundraising fraud, and illicit cross-border capital transfers. Moreover, because blockchain-based, peer-to-peer transactions transcend physical borders, risks can easily spill across jurisdictions—prompting international financial organizations and central banks to adopt broadly cautious stances.
The Notice also впервые clarifies that, without approval from competent authorities, domestic entities and overseas entities they control are prohibited from issuing virtual currencies abroad.
Given that stablecoins pegged to sovereign currencies effectively perform some monetary functions and directly implicate monetary sovereignty, the Notice further emphasizes that no entity or individual—domestic or overseas—may issue RMB-pegged stablecoins abroad without approval.
This represents another precise regulatory definition following multiple references to stablecoins in October and November 2025. In October 2025, PBOC Governor Pan Gongsheng stated at the Financial Street Forum that regulators worldwide remain cautious toward stablecoin development, and that China would continue cracking down on domestic crypto trading and speculation while closely monitoring overseas stablecoin developments. The following month, China’s inter-agency coordination mechanism against crypto speculation formally defined stablecoins as a form of virtual currency.
Over the past several years, China’s crypto oversight has remained consistently high-pressure. This latest Notice poured further cold water on an already fragile market. After its release, Bitcoin prices fluctuated sharply, with more than 440,000 traders liquidated globally in the past 24 hours alone, totaling over RMB 13.7 billion in losses.
Wang Peng, associate researcher at the Beijing Academy of Social Sciences, believes the policy will deliver a full-spectrum shock to the crypto industry chain. On issuance and payments, it directly cuts off overseas token issuance channels tied to domestic entities and blocks stablecoin circulation within China, suppressing illegal token creation at the source.
Wang Pengbo, chief analyst at Bocom Consulting, adds that banning RMB-pegged stablecoins overseas will immediately sever issuance pathways for domestic institutions. Some such stablecoins already exist offshore, often with opaque reserve management and questionable compliance, and may act as conduits for illicit cross-border capital flows—posing risks to monetary circulation and foreign-exchange management. Once cut off from domestic penetration, their circulation and trading basis effectively collapses.
He further clarifies that the policy targets genuine issuing entities, not shell organizations hyped online for speculative licensing narratives—many of which never truly existed in the market.
By explicitly banning domestic entities and their overseas affiliates from issuing virtual currencies abroad, the Notice directly strikes at industry chains that relied on offshore issuance for speculation, along with supporting services such as technical development, intermediaries, settlement, and computing-power provision. The survival space for these models will be drastically compressed.
Cutting Off the Source
No New “Mining” Projects Allowed
The Notice targets every link in the crypto chain, including “mining,” which once again comes under scrutiny.
It calls for continued rectification of virtual-currency mining. The National Development and Reform Commission, together with relevant departments, will strictly control mining activities, comprehensively shut down existing projects, and strictly prohibit new ones. Mining-equipment manufacturers are also barred from providing sales or related services domestically.
Mining essentially involves using specialized hardware to run algorithms, validate transactions, and earn token rewards. China already comprehensively banned mining and trading in 2021, classifying mining as a sunset industry and forcing related operations overseas.
Prior investigations showed that before the ban, schemes selling mining rigs, offering overseas “hosted mining,” or promoting so-called “cloud computing power” were rampant—often illegal activities masquerading as crypto ventures.
Mining’s heavy energy consumption also raised environmental and regulatory concerns, particularly in hydropower-rich regions such as Sichuan and Yunnan. On February 4, for example, the Butuo County government in Liangshan Yi Autonomous Prefecture issued a fresh notice banning mining, reinforcing local enforcement across power, telecom, and administrative authorities.
Wang Pengbo notes that mining not only wastes energy but underpins speculative trading and can breed illegal electricity use, money laundering, and illicit capital flows. With clearer rules, regulators can cut off token production at the source, compress speculative space, and promote more rational energy use.
RWA Regulation: Blocking Illegality While Preserving Compliance
A Narrow Compliance Path via Filing Mechanisms
The Notice also draws clear compliance boundaries for RWA tokenization for the first time.
RWA tokenization refers to using cryptographic and distributed-ledger technologies to convert ownership or income rights of real-world assets into tokens or token-like instruments for issuance and trading. While such models have grown rapidly worldwide, the Notice states that conducting RWA tokenization domestically—or providing related intermediary or IT services—may constitute illegal financial activities and must be banned, unless conducted with approval via designated financial infrastructure.
On the same day, the China Securities Regulatory Commission released regulatory guidelines requiring domestic entities controlling underlying assets to file with the CSRC before issuing asset-backed security tokens overseas, detailing asset information, issuance plans, and full documentation.
Unlike the blanket ban on virtual currencies, regulators are adopting a differentiated approach to RWA: “blocking the illegal while leaving room for compliance.” Industry veterans view the filing system as a cautiously opened compliance channel.
Previously, both compliant and non-compliant RWA projects operated without clear guidance. Now, detailed filing requirements provide a concrete compliance pathway—widely seen as a positive signal. Still, the bar is high: only projects with real, lawful underlying assets and strong operational capabilities are likely to qualify.
Legal experts note that RWA remains, in essence, a securities-like business requiring appropriate qualifications—favoring institutions with strengths in regulated financial innovation, particularly in mainland China and Hong Kong.
For the broader industry, this means contraction and differentiation. Many advisory or knowledge-based operations serving overseas exchanges may vanish domestically, while compliant securities-oriented institutions could gain new opportunities—albeit under strict approval regimes.
Regulatory Upgrade
From Domestic Bans to Full Cross-Border Chain Control
China’s crypto crackdown is not new. In 2021, multiple agencies jointly targeted trading and speculation, achieving notable results. Yet renewed speculative activity and evolving RWA narratives have introduced new risks.
To address these challenges, eight departments—including 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—updated prior rules to form the new Notice.
The document makes clear that violations will be punished, with criminal liability pursued where applicable. Investments in virtual currencies or RWA tokens that violate public order and good customs are deemed legally invalid, with losses borne by investors themselves.
Experts view the policy as a precise regulatory reinforcement—extending oversight from domestic markets to overseas activities of domestic entities, and incorporating RWA into a unified framework. The message is unmistakable: arbitrage through offshore structures or “outer shell, inner use” models is over.
Looking ahead, analysts expect China’s domestic crypto market to enter a deep freeze, marked by shrinking DeFi activity and tighter compliance-oriented finance. Illegal activities such as money laundering and illicit capital transfers will face intensified deterrence.
For institutions, the guidance is clear: immediately halt any user-facing crypto promotion or technical matchmaking targeting domestic users. For investors, vigilance is critical—schemes branded as “RWA innovation” or “offshore stablecoins” carry extreme legal and liquidity risks within China’s regulatory environment.
Beijing Business Daily reporters Liu Sihong, Liao Meng
