The central bank and seven other authorities: Virtual currency businesses and "mining" projects are strictly banned in China; RMB-pegged stablecoins are prohibited from being issued overseas without approval

The strictest ban comes in the crypto sector.

On February 6, eight authorities, including the People's Bank of China and the China Securities Regulatory Commission (CSRC), jointly issued the Notice on Further Preventing and Resolving the Risks Related to Virtual Currencies (hereinafter referred to as the "Notice"). The Notice once again makes clear that business activities related to virtual currencies are illegal financial activities and are strictly prohibited and resolutely banned in accordance with the law.

For the first time, the Notice explicitly states that, without approval from relevant authorities in accordance with laws and regulations, domestic entities and overseas entities under their control are prohibited from issuing any virtual currencies abroad. As stablecoins pegged to legal tender partially perform the functions of the latter during circulation and use and thus implicate monetary sovereignty, the Notice further emphasizes that, without approval from relevant authorities in accordance with laws and regulations, no entity or individual, whether domestic or overseas, is allowed to issue any RMB-pegged stablecoin abroad.

"Currently, some RMB-pegged stablecoins already exist in overseas markets. Some of them lack compliant issuance qualifications, have opaque fund-pool management, and may transmit risks into the domestic market through offshore channels," said Wang Pengbo, Chief Analyst at Botong Analysys. He mentioned that the rule prohibiting any domestic or overseas entity or individual from issuing RMB-pegged stablecoins abroad will directly cut off the issuance source of such stablecoins for institutions inside and outside China. It will impact the entire industry chain, covering issuance, circulation, and trading, leaving virtually no room for this business model to survive.

In addition to banning virtual currency-related businesses, the Notice also stresses the continued rectification of virtual currency "mining." The National Development and Reform Commission, together with relevant departments, will strictly control such "mining" activities and make continuous efforts to rectify them.

Wang Pengbo also pointed out that current issues mainly include some entities engaging in "mining" under the guise of data centers, some mining operators relocating their equipment across regions to evade local supervision, and certain mining activities being directly linked to virtual currency trading and speculation.

Furthermore, the Notice for the first time clarifies the compliance boundaries for the tokenization of real-world assets (RWA). RWA tokenization generally refers to the use of cryptography and distributed ledger or similar technologies to convert ownership rights, income rights, and other interests in assets into tokens (or token-like rights or bond certificates), followed by issuance and trading activities.

The Notice emphasizes that conducting RWA tokenization activities within China, as well as providing intermediary or information technology services for such activities, may constitute illegal financial activities and therefore such as illegal issuance of tokenized securities, unauthorized public offerings of securities, illegal securities or futures operations, and illegal fundraising, and should be prohibited.

However, the Notice also states that exceptions may apply to relevant business activities carried out in reliance on specific financial infrastructure and with approval from competent authorities in accordance with laws and regulations. In addition, on the evening of February 6, the CSRC issued the Regulatory Guidelines on the Overseas Issuance of Asset-Backed Securities Tokens by Domestic Assets (hereinafter referred to as the "Regulatory Guidelines"). The Regulatory Guidelines stipulates that before conducting related business, the domestic entity that actually controls the underlying assets must file with the CSRC and submit the required filing report, complete overseas issuance documents, and other relevant materials, for fully explaining the information on the domestic filing entity, the underlying assets, the token issuance plan, and related details.

Wang Pengbo mentioned that the Regulatory Guidelines leaves some room for the development of compliant RWA models. The core consideration is to balance strict regulation and financial innovation, preventing domestic assets from achieving regulatory arbitrage through overseas tokenization while guiding the RWA sector to explore development within a compliant framework. For companies along the RWA industry chain, leading ones with genuine, compliant underlying assets and standardized operational capabilities may obtain business development opportunities through filing, while those merely chasing market hype without real assets backing will be phased out.