China's central bank issued comprehensive regulations on February 6 banning real-world asset tokenization and offshore issuance of yuan-pegged stablecoins.
The People's Bank of China explicitly named Bitcoin (BTC), Ethereum (ETH), and Tether (USDT) as lacking legal tender status in Notice No. 42, signed by eight government agencies including financial regulators and law enforcement.
The directive replaces China's 2021 crypto ban with expanded restrictions targeting both domestic entities and their offshore subsidiaries.
Chinese companies and the overseas vehicles they control cannot issue virtual currencies or conduct RWA tokenization without prior government approval. The ban extends to foreign entities providing crypto or RWA services to Chinese residents.
What Changed
Real-world asset tokenization joins cryptocurrency trading, mining, and exchanges on China's list of prohibited financial activities. The notice defines RWA tokenization as converting ownership or income rights into tokens for issuance and trading.
Any such activities without explicit approval on designated infrastructure constitute illegal financial activity.
The regulations prohibit financial institutions from providing accounts, payments, custody, or insurance for crypto-linked products. Internet platforms cannot host crypto services or provide marketing for virtual currency activities.
Provincial governments must shut down all existing mining operations and block new projects.
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Enforcement Scope
The "same business, same risk, same rules" principle applies extraterritorially. Chinese citizens working for offshore crypto platforms face legal liability.
Authorities warned that service providers who "knowingly or should have known" about illegal activities will be prosecuted, regardless of offshore company registration.
The regulations forbid any entity from issuing yuan-pegged stablecoins offshore without authorization. Stablecoins are described as "performing functions of legal tender" when used in circulation. The ban explicitly covers activities even when conducted through foreign subsidiaries controlled by Chinese entities.
Notice No. 42 takes immediate effect and simultaneously repeals the 2021 framework. Bitcoin traded around $66,000 following the announcement, down approximately 8% in 24 hours.
The directive requires coordination among financial regulators, telecommunications authorities, law enforcement, courts, and prosecutors to maintain what officials termed "economic and financial order and social stability."
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