On February 6, 2026, eight government departments i.e., the People’s Bank of China (PBOC), 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 (CSRC) and the State Administration of Foreign Exchange, jointly issued the Circular on Further Preventing and Handling the Risks Related to Virtual Currency (Yin Fa [2026] No. 42, “the Circular”), which took effect immediately upon its release.
The Circular was issued with the approval of the State Council after consensus was reached among the eight departments, along with the Cyberspace Administration of China (CAC), the Supreme People’s Court, and the Supreme People’s Procuratorate. It replaces the Circular on Further Preventing and Handling the Risks Concerning Speculation in Virtual Currency Trading (Yin Fa [2021] No. 237, “the 2021 Circular”) that was jointly issued in 2021 by ten government departments.
The Circular demonstrates the Chinese government’s stringent regulatory stance towards virtual currencies and signifies another round of crackdowns.
Compared to the 2021 Circular, the new key provisions introduced in this Circular include (i) prohibiting the provision of virtual currency-related services from overseas to domestic recipients in any form without authorization and (ii) bring real-world asset (RWA) tokenization businesses under regulatory oversight. RWA tokenization activities or the provision of any related services are prohibited within the PRC, unless they fall under those activities duly approved to be conducted based on specific financial infrastructure. Issuing overseas bonds by domestic entities or carrying out RWA tokenization business based on domestic assets also requires prior government approval or filing.
The following provides an introduction to the key contents of the Circular.
I.Virtual Currency Business
1.Virtual Currency Business Activity Constitutes Illegal Financial Activity. The Circular reiterates the provisions in the 2021 Circular, i.e., virtual currency does not possess legal status equivalent to fiat currency and should not, and cannot, be circulated as currency in the market. Business activity related to virtual currency constitutes illegal financial activity. Specifically, conducting virtual currency-related business within the PRC, such as exchanging fiat currency for virtual currency, exchanging virtual currencies with each other, acting as a central counterparty in virtual currency trading, providing information intermediation and pricing services for virtual currency transactions, conducting token issuance financing, and trading virtual currency-related financial products, constitute illegal financial activity, because they involve unauthorized issuance of token vouchers, unapproved public issuance of securities, illegal operation of securities or futures businesses, or illegal fundraising.
2.New Prohibitions on Providing Virtual Currency-related Services from Overseas to Domestic Recipients. The Circular specifies that overseas entities or individuals are prohibited from providing virtual currency-related services to domestic service recipients in any form, without authorization. This implies that cross-border virtual currency activities involving PRC investors will face more severe restrictions due to the tightening of the regulatory policies, and overseas entities or individuals engaged in related activities shall reassess their compliance risks under the PRC laws.
3.New Requirement: Approval is Needed for the Overseas Issuance of Virtual Currency by an Offshore Entity Controlled by a Domestic Entity. The Circular stipulates that, without approval according to laws and regulations, domestic entities or offshore entities controlled by domestic entities are prohibited from issuing virtual currency overseas. No domestic or overseas entity or individual is allowed to issue stablecoins pegged to the renminbi outside the PRC without approval. Both of these are newly introduced provisions.
II.RWA Tokenization Business
1.New Provision: Domestic RWA Tokenization Activities Are Prohibited. RWA tokenization refers to the use of encryption technology, distributed ledgers, or similar technologies to convert asset ownership or income rights into tokens (or token-like rights or debt instruments) and conduct issuance and trading activities. According to the Circular, engaging in RWA tokenization activities within the PRC, or providing related intermediary or information technology services, is prohibited, because it may involve illegal financial activity, including the unauthorized issuance of token vouchers, unapproved public issuance of securities, illegal operation of securities or futures businesses or illegal fundraising. The only exception is when such activities are duly approved according to laws and regulations to conduct based on specific financial infrastructure.
2.New Provision: Prohibition on RWA Tokenization Services Provided from Overseas to Domestic. Overseas entities and individuals are prohibited from providing any RWA tokenization-related services to domestic service recipients in any form without authorization.
3.New Restrictions on Domestic Institutions Providing RWA Tokenization-Related Services. Financial institutions are prohibited from providing custody, clearing, settlement or any other services for unapproved RWA tokenization-related businesses or financial products. Intermediary institutions or information technology service providers are also prohibited from offering intermediary or technical services for unapproved RWA tokenization-related businesses or financial products.
4.Domestic Entities’ Overseas Bond Issuance or Domestic Assets-based RWA Tokenization Requires Approval. Domestic entities conducting RWA tokenization activities overseas in the form of overseas bond issuance, or RWA tokenization businesses carried out overseas in various forms based on domestic asset ownership or income rights, are now subject to regulatory oversight. According to the Regulatory Guidelines for the Overseas Issuance of Asset-Backed Security Tokens Based on Domestic Assets, issued by the CSRC on the same day as the Circular, domestic entities that actually control underlying assets must file a report with the CSRC before engaging in the overseas issuance of asset-backed security tokens based on domestic assets. Intermediary institutions, or information technology service providers offering services for such businesses, must also seek approval or filing with the Chinese regulatory authorities regarding their operations.
The Circular requires that the overseas subsidiaries and branches of PRC financial institutions that provide RWA tokenization-related services overseas, must be integrated into the compliance and risk control management systems of their parent institutions in China.
III.Validity of Investment Activities
In line with the 2021 Circular, the new Circular stipulates that an investment in virtual currency, RWA token, or related financial product that violates public order and good customs shall render the civil legal acts invalid. This indicates that the validity of an investment activity depends on whether it contravenes public order and good customs. It is noteworthy that in judicial practice, the interpretation of what constitutes public order and good customs allows significant discretionary leeway for judicial authorities.
IV.Coordination and Collaboration Among Government Departments
Regarding specific measures to prevent and handling the risks related to virtual currencies and RWA tokenization, the Circular is largely consistent with the 2021 Circular, emphasizing coordination and collaboration among the various central government departments. However, in terms of leading agencies, the Circular distinguishes between virtual currency and RWA tokenization: for virtual currency, the PBOC takes the lead, while for RWA tokenization, the CSRC assumes the leading role.
Similar to the 2021 Circular, the Circular underscores the primary responsibility of provincial governments in coordinating the relevant matters within their respective administrative regions. Local financial regulatory departments will continue to take the lead, joined by financial regulatory authorities, telecommunications regulators, public security departments, and market regulation authorities, with collaboration from the local cyberspace authorities, the local courts and the procuratorates.
Our Observations
The Circular prohibits overseas entities or individuals from providing virtual currency-related services or RWA tokenization services to any PRC service recipients in any form without authorization. We recommend that overseas service providers engaged in these activities promptly and thoroughly assess and manage their compliance risks under the PRC laws associated with their operations involving any PRC investors or assets.
