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Global Liquidity Reconfiguration: How Does RWA Eats Up Traditional Finance's "Latency Arbitrage" Cake?
Original Article Title: "RWA: The Elephant in the Room"
Author: Zeke, YBB Capital
Foreword
"The tokenization of Real World Assets (RWA) aims to enhance liquidity, transparency, and accessibility, allowing a wider range of individuals to access high-value assets," this is Coinbase's explanation of the term RWA, and also a common explanation of RWA in educational articles. However, in my opinion, this sentence is neither clear nor entirely correct. This article will attempt to interpret RWA in the context of this era from my personal perspective.
1. A Fragmented Prism
The combination of crypto and real-world assets can be traced back to over a decade ago with Colored Coins on Bitcoin, which added metadata to Bitcoin UTXOs to achieve "coloring," giving specific Satoshis the attributes representing external assets, thus marking and managing real-world assets (such as stocks, bonds, real estate) on the Bitcoin chain. This protocol, similar to ERC-20, was humanity's first systematic attempt to achieve non-monetary functionality on a blockchain, and also marked the beginning of blockchain's move towards smart contracts. However, limited by Bitcoin script's restricted opcodes, Colored Coins' asset rules needed to be interpreted by third-party wallets, requiring users to trust these tools' definition logic of UTXO "coloring." Centralized trust mixed with factors like liquidity constraints led to the initial conceptual validation of RWA ending in failure.
In the following years, with Ethereum as a turning point, blockchain ushered in the era of Turing completeness. There have been crazy moments for various narratives, but RWA, apart from fiat-backed stablecoins, has always been thunderous yet drizzly over the past decade. Why is this?
I still remember writing in an article about stablecoins that there has never been a real dollar on the blockchain. The essence of USDT or USDC is just a "digital bond" issued by a private company to you, and USDT is much more fragile theoretically compared to the dollar. The reason Tether can succeed is actually due to the urgent need in the blockchain world for a stable value medium that cannot be created.
In the world of RWA, there is no such thing as decentralization; the trust assumption must be built on a centralized entity, and the risk control of this entity can only rely on regulation. The inherent anarchism in the DNA of crypto is fundamentally contradictory to this idea; the underlying architecture of any public chain is designed to resist regulation. The difficulty of regulation above the public chain is the primary reason why RWA has never succeeded.
The second point is asset complexity. Although RWA encompasses the Tokenization of all real-world assets, we can still roughly divide it into two categories: financial assets and non-financial assets. For financial assets, they inherently possess homogenized attributes, and the link between the underlying asset and the Token can be established through regulated custody institutions. For non-financial assets, the issue is much more complex, and the solution basically relies on IoT systems, but still cannot address sudden factors such as human malicious actions and natural disasters. Therefore, in my understanding, RWA as a prism of real-world assets can only reflect limited light. In the future, non-financial assets that want to persist on the chain must inevitably meet the two prerequisites of homogenization and easy valuation.
Thirdly, compared to highly volatile digital assets, it is basically difficult to find real-world assets with a comparable level of volatility. Moreover, it is even more challenging to find assets in the real world that can achieve APY in the tens or even hundreds as seen in DeFi ─ making TradFi pale in comparison. Low returns and a lack of motivation to participate are another pain point for RWA.
If that's the case, why is the crypto community once again focusing on this narrative?
II. Policy Up Top
As mentioned earlier, regulatory advancement is a key factor for RWA to exist in TradFi, and the concept can only move forward when the trust assumption is established. Currently, regions that are friendly to the development of Web3, such as Hong Kong, Dubai, Singapore, etc., have recently successively implemented RWA regulatory frameworks. Therefore, when this starting point emerges, the journey of RWA is just beginning. However, the current situation shows that regulatory fragmentation and TradFi's high alertness to risks have shrouded this track in a layer of fog.
Here are the details of the regulatory frameworks for RWA in major jurisdictions globally as of April 2025:
United States:
Regulatory Agencies: SEC (Securities and Exchange Commission), CFTC (Commodity Futures Trading Commission)
Key Regulations:
· Security Tokens: Need to undergo the Howey Test to determine if they are securities, subject to registration or exemption clauses under the Securities Act of 1933 (such as Reg D, Reg A+).
· Commodity Tokens: Regulated by CFTC, Bitcoin, Ethereum, etc., are explicitly classified as commodities.
Key Measures:
1. KYC/AML: BlackRock's BUIDL Fund is only open to accredited investors (net worth ≥ $1 million), with mandatory on-chain identity verification (such as Circle Verite).
2. Security Tokenization Expansion: Any RWA involving dividends may be classified as a security. For example: SEC's penalty against tokenization real estate platform Securitize (2024 for unregistered security issuance).
Hong Kong:
Regulatory Bodies: Hong Kong Monetary Authority (HKMA), Securities and Futures Commission (SFC)
Core Framework:
· The Securities and Futures Ordinance regulates security token offerings, requiring compliance with investor suitability, disclosure, and anti-money laundering requirements.
· Non-security tokens (such as commodity tokens) are governed by the Anti-Money Laundering Ordinance.
Key Measures:
1. Ensemble Sandbox Program: Testing dual-currency settlement for tokenized bonds (Hong Kong Dollar/Offshore Renminbi), cross-border real estate collateralization (in collaboration with the Bank of Thailand), participating institutions include HSBC, Standard Chartered, AntChain, etc.;
2. Stablecoin Gateway Policy: Only approved HKMA stablecoins (such as HKDg, CNHT) are allowed, while unregistered coins like USDT are prohibited.
European Union:
Regulatory Body: ESMA (European Securities and Markets Authority)
Core Regulations:
· MiCA (Markets in Crypto-Assets Regulation): Effective 2025, requires RWA issuers to establish an EU entity, submit a whitepaper, and undergo an audit.
· Token Categories: Asset-Referenced Tokens (ARTs), Electronic Money Tokens (EMTs), and other crypto assets.
Key Measures:
1. Liquidity Restrictions: Secondary market trading needs licensing, and DeFi platforms may be classified as Virtual Asset Service Providers (VASPs).
2. Compliance Shortcut: Luxembourg Fund Structure (such as Tokeny Gold Token) becomes a low-cost issuance channel, with small RWA platforms expecting a 200% increase in compliance costs.
Dubai:
Regulatory Authority: DFSA (Dubai Financial Services Authority)
Core Framework:
· Tokenization Sandbox (launching in March 2025): Two phases (Intent Application, ITL Test Group), allowing the testing of security tokens (stocks, bonds) and derivative tokens.
· Compliance Pathway: Exemption from some capital and risk control requirements, formal license application possible after 6-12 months of testing.
Advantages: Equivalent to EU regulation, supports Distributed Ledger Technology (DLT) applications, reduces financing costs.
Singapore:
· Security Tokens included in the Securities and Futures Act, subject to exemptions (small issuance ≤ S$5 million, private placement ≤ 50 persons).
· Utility Tokens must comply with anti-money laundering regulations, MAS (Monetary Authority of Singapore) drives pilots through sandboxes.
Australia:
ASIC (Australian Securities and Investments Commission) classifies revenue-bearing RWA tokens as financial products, requiring a Financial Services License (AFSL) and risk disclosure.
In conclusion, while European and American countries focus on compliance thresholds, regions such as Asia and the Middle East attract projects through experimental policies, but compliance thresholds remain high. Therefore, the current status of RWAs is that they can exist on public chains but must be supplemented with various compliance modules to fit within the regulatory framework. These compliance protocols cannot directly interact with traditional DeFi protocols. Furthermore, based on different legal jurisdictions, a protocol that complies with the Hong Kong regulatory framework cannot interact with compliance protocols in other regions. From the current perspective, RWA protocols do not have sufficient accessibility and severely lack interoperability, resembling a "island" and deviating from the ideal form.
So, is there really no way to find a path back to decentralization within these frameworks? Actually, there is. Taking the Ondo protocol as an example within the RWA space, the team has built a lending protocol called Flux Finance, allowing users to use open tokens such as USDC and restricted tokens such as OUSG as collateral for borrowing. Lend out a tokenized anonymous promissory note called USDY (a compounding stablecoin). Designed with a 40-50 day lock-up period, this token avoids being classified as a security.
According to the Howey Test standard by the U.S. SEC, a security must meet conditions such as "investment of money in a common enterprise with an expectation of profits primarily from the efforts of others." USDY's earnings come from the automatic compounding of underlying assets (such as government bond interest), allowing users to passively hold it without relying on active management by the Ondo team, thus not meeting the "efforts of others" element. Ondo further simplifies the circulation of USDY on public blockchains through a cross-chain bridge, ultimately establishing a pathway for interaction with the DeFi world.
However, such a complex and unidirectional approach may not be the desired Real World Asset (RWA) we seek. Another key success factor of fiat-backed stablecoins today is excellent accessibility, achieving widespread financial inclusion at a low real-world threshold. Regarding the islanding issue of RWA, TardFi and project teams still need to explore how to first achieve interconnection within different legal jurisdictions and interact with the on-chain world to some extent. Only then can it truly align with the broad interpretation of the term RWA as stated earlier.
Three, Assets and Earnings
According to rwa.xyz (a professional RWA analysis website), the total value of on-chain RWA assets today is $206.9 billion (excluding stablecoins), primarily composed of private loans, U.S. bonds, commodities, real estate, and equity securities.
In terms of asset categories, it is not difficult to see that the main target group of RWA protocols is actually not native DeFi users but traditional financial users. Top RWA protocols such as Goldfinch, Maple Finance, Centrifuge, predominantly cater to small and medium-sized enterprises and institutional users. So why move this to the blockchain? (The following four points are just examples based on these protocols' advantages)
1. 24/7 instant settlement: This is one of the pain points of traditional finance relying on centralized systems, which blockchain addresses by providing a round-the-clock transaction system. It also enables instant redemption, T+0 lending, and other operations;
2. Geographical liquidity fragmentation: The blockchain forms a global financial network, allowing small and medium enterprises in third-world countries to attract external investor funds at minimal costs by bypassing local institutions through this network;
3. Reduced marginal service costs: Through smart contract management, the cost of servicing a pool of assets for 100 companies is nearly the same as servicing 10,000 companies;
4. Serving mining companies and small to medium exchanges: Such enterprises typically lack traditional credit records and struggle to obtain loans from banking institutions. By following traditional supply chain finance logic, they can leverage assets like equipment and accounts receivable for financing;
5. Lowering the Barrier to Entry: While early successful RWA protocols were generally designed for enterprises, institutions, or high-net-worth individuals, today, with the introduction of regulatory frameworks, many RWA protocols are also attempting to securitize financial assets to lower the investment threshold for investors.
For Crypto, if RWA can succeed, it indeed holds a Trillion-level imagination space. Moreover, I believe RWAFi will eventually emerge. For DeFi protocols, the underlying assets, after the addition of Tokens with real yields, will become more robust. For DeFi native users, this will introduce new options in asset selection and allocation. Especially in today's geopolitically turbulent and economically uncertain world, some real-world assets may be a lower-risk option than simply holding onto U for wealth management.
Here, I provide some existing RWA product choices and potential future choices: for example, gold has seen an increase of 80% from the beginning of 23 to this month of 25; the Ruble's fixed deposit rates in Russia are 20.94% for a 3-month period, 21.19% for a 6-month period, and 20.27% for a 1-year period; energy assets in sanctioned countries typically trade at over a 40% discount; short-term US Treasury bond yields are at 4%-5%; various stocks on the Nasdaq that have undergone significant corrections may have a stronger fundamental value proposition than your altcoin; further narrowing down to options such as charging stations or even blind boxes from Pop Mart may also be good choices.
IV. Swordholder
In the Three-Body world, Luo Ji, using his life as a trigger mechanism, deployed a nuclear bomb in the solar orbit, building a deterrence system against the Trisolaran civilization based on the Dark Forest theory. In the world of humanity, he is the Swordholder of Earth.
The "Dark Forest" is also the alias for blockchain used by most people in the industry. This is also the "original sin" inherent in decentralization. For some specific areas, RWA may serve as the Swordholder of this parallel world. Although the era of PFP avatars and GameFi stories has now faded away, looking back to the crazy times three or four years ago, we once gave birth to projects like Bored Ape Yacht Club, Azuki, and Pudgy that rivaled traditional IPs. But did we really acquire the IP intellectual property? The fact is, we never did. NFTs, to some extent, are more like consumer goods, and the definition of a 10K PFP on the blockchain is very vague. It indeed created some brilliant and short-lived IPs by lowering the investment threshold, but when it comes to returns and project development, the "Three-Body People" hold all the power.
Let's take Bored Ape Yacht Club as an example. The original intellectual property of the Bored Ape Yacht Club clearly belongs to its issuer, Yuga Labs LLC. According to the user agreement and official information, Yuga Labs, as the project's operating entity, holds the core intellectual property rights such as the copyright and trademark rights of the Bored Ape works. Holders purchasing NFTs only acquire ownership and usage rights to a specific numbered avatar, not the copyright itself.
When it comes to decision-making, Yuga Labs' direction for the Bored Ape Yacht Club design is the Metaverse, leveraging infinite issuance of sub-IPs in exchange for funding, detaching from the original luxury narrative. In this regard, NFT holders have neither the right to be informed, nor decision-making power, nor revenue rights. In the traditional world, when investing in an IP, investors usually have direct usage rights to the entire IP, direct revenue sharing, participation in decision-making, and even development leadership.
Yuga Labs is at least among the top PFP projects, while many other NFT projects have had more chaotic rights distribution. When faced with a looming threat, will they choose to show more respect for their community?
Part V: Above the Medium
In summary, RWAs have the potential to reshape finance and can also bring real-world opportunities to the blockchain, perhaps providing a new way to address the chaos in the blockchain space. However, constrained by the current regulatory framework in TradFi, its form still resembles a private protocol on a public chain, unable to unleash its full imaginative potential. Over time, I hope there will be a guide or alliance in the future to break through this barrier.
Assets on different mediums can unleash unimaginable brilliance. From the bronze inscriptions of the Western Zhou Dynasty to the fish scale pattern books of the Ming Dynasty, asset ownership has ensured the stability and development of society. What would it look like if RWAs could reach their ultimate form? I could buy Nasdaq stocks in Hong Kong during the day, deposit money into the Russian Federation Savings Bank in the early hours, and the next day, I could invest in real estate in Dubai with hundreds of shareholders from around the world who do not know each other's names.
Yes, the world operating on a vast public ledger is the RWA.
This article is contributed content and does not represent the views of BlockBeats.
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China's Central Bank and Eight Other Departments' Latest Regulatory Focus: Key Attention to RWA Tokenized Asset Risk
Foreword: Today, the People's Bank of China's website published the "Notice of the People's Bank of China, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration for Market Regulation, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, State Administration of Foreign Exchange on Further Preventing and Dealing with Risks Related to Virtual Currency and Others (Yinfa [2026] No. 42)", the latest regulatory requirements from the eight departments including the central bank, which are basically consistent with the regulatory requirements of recent years. The main focus of the regulation is on speculative activities such as virtual currency trading, exchanges, ICOs, overseas platform services, and this time, regulatory oversight of RWA has been added, explicitly prohibiting RWA tokenization, stablecoins (especially those pegged to the RMB). The following is the full text:
To the people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government, the Xinjiang Production and Construction Corps:
Recently, there have been speculative activities related to virtual currency and Real-World Assets (RWA) tokenization, disrupting the economic and financial order and jeopardizing the property security of the people. In order to further prevent and address the risks related to virtual currency and Real-World Assets tokenization, effectively safeguard national security and social stability, in accordance with the "Law of the People's Republic of China on the People's Bank of China," "Law of the People's Republic of China on Commercial Banks," "Securities Law of the People's Republic of China," "Law of the People's Republic of China on Securities Investment Funds," "Law of the People's Republic of China on Futures and Derivatives," "Cybersecurity Law of the People's Republic of China," "Regulations of the People's Republic of China on the Administration of Renminbi," "Regulations on Prevention and Disposal of Illegal Fundraising," "Regulations of the People's Republic of China on Foreign Exchange Administration," "Telecommunications Regulations of the People's Republic of China," and other provisions, after reaching consensus with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, and with the approval of the State Council, the relevant matters are notified as follows:
(I) Virtual currency does not possess the legal status equivalent to fiat currency. Virtual currencies such as Bitcoin, Ether, Tether, etc., have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed ledger or similar technology, existing in digital form, etc. They do not have legal tender status, should not and cannot be circulated and used as currency in the market.
The business activities related to virtual currency are classified as illegal financial activities. The exchange of fiat currency and virtual currency within the territory, exchange of virtual currencies, acting as a central counterparty in buying and selling virtual currencies, providing information intermediary and pricing services for virtual currency transactions, token issuance financing, and trading of virtual currency-related financial products, etc., fall under illegal financial activities, such as suspected illegal issuance of token vouchers, unauthorized public issuance of securities, illegal operation of securities and futures business, illegal fundraising, etc., are strictly prohibited across the board and resolutely banned in accordance with the law. Overseas entities and individuals are not allowed to provide virtual currency-related services to domestic entities in any form.
A stablecoin pegged to a fiat currency indirectly fulfills some functions of the fiat currency in circulation. Without the consent of relevant authorities in accordance with the law and regulations, any domestic or foreign entity or individual is not allowed to issue a RMB-pegged stablecoin overseas.
（II）Tokenization of Real-World Assets refers to the use of encryption technology and distributed ledger or similar technologies to transform ownership rights, income rights, etc., of assets into tokens (tokens) or other interests or bond certificates with token (token) characteristics, and carry out issuance and trading activities.
Engaging in the tokenization of real-world assets domestically, as well as providing related intermediary, information technology services, etc., which are suspected of illegal issuance of token vouchers, unauthorized public offering of securities, illegal operation of securities and futures business, illegal fundraising, and other illegal financial activities, shall be prohibited; except for relevant business activities carried out with the approval of the competent authorities in accordance with the law and regulations and relying on specific financial infrastructures. Overseas entities and individuals are not allowed to illegally provide services related to the tokenization of real-world assets to domestic entities in any form.
(III) Inter-agency Coordination. The People's Bank of China, together with 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 China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of virtual currency-related illegal financial activities.
The China Securities Regulatory Commission, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of illegal financial activities related to the tokenization of real-world assets.
(IV) Strengthening Local Implementation. The people's governments at the provincial level are overall responsible for the prevention and disposal of risks related to virtual currencies and the tokenization of real-world assets in their respective administrative regions. The specific leading department is the local financial regulatory department, with participation from branches and dispatched institutions of the State Council's financial regulatory department, telecommunications regulators, public security, market supervision, and other departments, in coordination with cyberspace departments, courts, and procuratorates, to improve the normalization of the work mechanism, effectively connect with the relevant work mechanisms of central departments, form a cooperative and coordinated working pattern between central and local governments, effectively prevent and properly handle risks related to virtual currencies and the tokenization of real-world assets, and maintain economic and financial order and social stability.
(5) Enhanced Risk Monitoring. The People's Bank of China, China Securities Regulatory Commission, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration of Foreign Exchange, Cyberspace Administration of China, and other departments continue to improve monitoring techniques and system support, enhance cross-departmental data analysis and sharing, establish sound information sharing and cross-validation mechanisms, promptly grasp the risk situation of activities related to virtual currency and real-world asset tokenization. Local governments at all levels give full play to the role of local monitoring and early warning mechanisms. Local financial regulatory authorities, together with branches and agencies of the State Council's financial regulatory authorities, as well as departments of cyberspace and public security, ensure effective connection between online monitoring, offline investigation, and fund tracking, efficiently and accurately identify activities related to virtual currency and real-world asset tokenization, promptly share risk information, improve early warning information dissemination, verification, and rapid response mechanisms.
(6) Strengthened Oversight of Financial Institutions, Intermediaries, and Technology Service Providers. Financial institutions (including non-bank payment institutions) are prohibited from providing account opening, fund transfer, and clearing services for virtual currency-related business activities, issuing and selling financial products related to virtual currency, including virtual currency and related financial products in the scope of collateral, conducting insurance business related to virtual currency, or including virtual currency in the scope of insurance liability. Financial institutions (including non-bank payment institutions) are prohibited from providing custody, clearing, and settlement services for unauthorized real-world asset tokenization-related business and related financial products. Relevant intermediary institutions and information technology service providers are prohibited from providing intermediary, technical, or other services for unauthorized real-world asset tokenization-related businesses and related financial products.
(7) Enhanced Management of Internet Information Content and Access. Internet enterprises are prohibited from providing online business venues, commercial displays, marketing, advertising, or paid traffic diversion services for virtual currency and real-world asset tokenization-related business activities. Upon discovering clues of illegal activities, they should promptly report to relevant departments and provide technical support and assistance for related investigations and inquiries. Based on the clues transferred by the financial regulatory authorities, the cyberspace administration, telecommunications authorities, and public security departments should promptly close and deal with websites, mobile applications (including mini-programs), and public accounts engaged in virtual currency and real-world asset tokenization-related business activities in accordance with the law.
(8) Strengthened Entity Registration and Advertisement Management. Market supervision departments strengthen entity registration and management, and enterprise and individual business registrations must not contain terms such as "virtual currency," "virtual asset," "cryptocurrency," "crypto asset," "stablecoin," "real-world asset tokenization," or "RWA" in their names or business scopes. Market supervision departments, together with financial regulatory authorities, legally enhance the supervision of advertisements related to virtual currency and real-world asset tokenization, promptly investigating and handling relevant illegal advertisements.
（IX） Continued Rectification of Virtual Currency Mining Activities. The National Development and Reform Commission, together with relevant departments, strictly controls virtual currency mining activities, continuously promotes the rectification of virtual currency mining activities. The people's governments of various provinces take overall responsibility for the rectification of "mining" within their respective administrative regions. In accordance with the requirements of the National Development and Reform Commission and other departments in the "Notice on the Rectification of Virtual Currency Mining Activities" (NDRC Energy-saving Building [2021] No. 1283) and the provisions of the "Guidance Catalog for Industrial Structure Adjustment (2024 Edition)," a comprehensive review, investigation, and closure of existing virtual currency mining projects are conducted, new mining projects are strictly prohibited, and mining machine production enterprises are strictly prohibited from providing mining machine sales and other services within the country.
（X） Severe Crackdown on Related Illegal Financial Activities. Upon discovering clues to illegal financial activities related to virtual currency and the tokenization of real-world assets, local financial regulatory authorities, branches of the State Council's financial regulatory authorities, and other relevant departments promptly investigate, determine, and properly handle the issues in accordance with the law, and seriously hold the relevant entities and individuals legally responsible. Those suspected of crimes are transferred to the judicial authorities for processing according to the law.
（XI） Severe Crackdown on Related Illegal and Criminal Activities. The Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, as well as judicial and procuratorial organs, in accordance with their respective responsibilities, rigorously crack down on illegal and criminal activities related to virtual currency, the tokenization of real-world assets, such as fraud, money laundering, illegal business operations, pyramid schemes, illegal fundraising, and other illegal and criminal activities carried out under the guise of virtual currency, the tokenization of real-world assets, etc.
（XII） Strengthen Industry Self-discipline. Relevant industry associations should enhance membership management and policy advocacy, based on their own responsibilities, advocate and urge member units to resist illegal financial activities related to virtual currency and the tokenization of real-world assets. Member units that violate regulatory policies and industry self-discipline rules are to be disciplined in accordance with relevant self-regulatory management regulations. By leveraging various industry infrastructure, conduct risk monitoring related to virtual currency, the tokenization of real-world assets, and promptly transfer issue clues to relevant departments.
（XIII） Without the approval of relevant departments in accordance with the law and regulations, domestic entities and foreign entities controlled by them may not issue virtual currency overseas.
（XIV） Domestic entities engaging directly or indirectly in overseas external debt-based tokenization of real-world assets, or conducting asset securitization activities abroad based on domestic ownership rights, income rights, etc. (hereinafter referred to as domestic equity), should be strictly regulated in accordance with the principles of "same business, same risk, same rules." The National Development and Reform Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other relevant departments regulate it according to their respective responsibilities. For other forms of overseas real-world asset tokenization activities based on domestic equity by domestic entities, the China Securities Regulatory Commission, together with relevant departments, supervise according to their division of responsibilities. Without the consent and filing of relevant departments, no unit or individual may engage in the above-mentioned business.
(15) Overseas subsidiaries and branches of domestic financial institutions providing Real World Asset Tokenization-related services overseas shall do so legally and prudently. They shall have professional personnel and systems in place to effectively mitigate business risks, strictly implement customer onboarding, suitability management, anti-money laundering requirements, and incorporate them into the domestic financial institutions' compliance and risk management system. Intermediaries and information technology service providers offering Real World Asset Tokenization services abroad based on domestic equity or conducting Real World Asset Tokenization business in the form of overseas debt for domestic entities directly or indirectly venturing abroad must strictly comply with relevant laws and regulations. They should establish and improve relevant compliance and internal control systems in accordance with relevant normative requirements, strengthen business and risk control, and report the business developments to the relevant regulatory authorities for approval or filing.
(16) Strengthen organizational leadership and overall coordination. All departments and regions should attach great importance to the prevention of risks related to virtual currencies and Real World Asset Tokenization, strengthen organizational leadership, clarify work responsibilities, form a long-term effective working mechanism with centralized coordination, local implementation, and shared responsibilities, maintain high pressure, dynamically monitor risks, effectively prevent and mitigate risks in an orderly and efficient manner, legally protect the property security of the people, and make every effort to maintain economic and financial order and social stability.
(17) Widely carry out publicity and education. All departments, regions, and industry associations should make full use of various media and other communication channels to disseminate information through legal and policy interpretation, analysis of typical cases, and education on investment risks, etc. They should promote the illegality and harm of virtual currencies and Real World Asset Tokenization-related businesses and their manifestations, fully alert to potential risks and hidden dangers, and enhance public awareness and identification capabilities for risk prevention.
(18) Engaging in illegal financial activities related to virtual currencies and Real World Asset Tokenization in violation of this notice, as well as providing services for virtual currencies and Real World Asset Tokenization-related businesses, shall be punished in accordance with relevant regulations. If it constitutes a crime, criminal liability shall be pursued according to the law. For domestic entities and individuals who knowingly or should have known that overseas entities illegally provided virtual currency or Real World Asset Tokenization-related services to domestic entities and still assisted them, relevant responsibilities shall be pursued according to the law. If it constitutes a crime, criminal liability shall be pursued according to the law.
(19) If any unit or individual invests in virtual currencies, Real World Asset Tokens, and related financial products against public order and good customs, the relevant civil legal actions shall be invalid, and any resulting losses shall be borne by them. If there are suspicions of disrupting financial order and jeopardizing financial security, the relevant departments shall deal with them according to the law.
This notice shall enter into force upon the date of its issuance. The People's Bank of China and ten other departments' "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (Yinfa [2021] No. 237) is hereby repealed.
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Foreword: Today, the People's Bank of China's website published the "Notice of the People's Bank of China, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration for Market Regulation, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, State Administration of Foreign Exchange on Further Preventing and Dealing with Risks Related to Virtual Currency and Others (Yinfa [2026] No. 42)", the latest regulatory requirements from the eight departments including the central bank, which are basically consistent with the regulatory requirements of recent years. The main focus of the regulation is on speculative activities such as virtual currency trading, exchanges, ICOs, overseas platform services, and this time, regulatory oversight of RWA has been added, explicitly prohibiting RWA tokenization, stablecoins (especially those pegged to the RMB). The following is the full text:
To the people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government, the Xinjiang Production and Construction Corps:
Recently, there have been speculative activities related to virtual currency and Real-World Assets (RWA) tokenization, disrupting the economic and financial order and jeopardizing the property security of the people. In order to further prevent and address the risks related to virtual currency and Real-World Assets tokenization, effectively safeguard national security and social stability, in accordance with the "Law of the People's Republic of China on the People's Bank of China," "Law of the People's Republic of China on Commercial Banks," "Securities Law of the People's Republic of China," "Law of the People's Republic of China on Securities Investment Funds," "Law of the People's Republic of China on Futures and Derivatives," "Cybersecurity Law of the People's Republic of China," "Regulations of the People's Republic of China on the Administration of Renminbi," "Regulations on Prevention and Disposal of Illegal Fundraising," "Regulations of the People's Republic of China on Foreign Exchange Administration," "Telecommunications Regulations of the People's Republic of China," and other provisions, after reaching consensus with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, and with the approval of the State Council, the relevant matters are notified as follows:
(I) Virtual currency does not possess the legal status equivalent to fiat currency. Virtual currencies such as Bitcoin, Ether, Tether, etc., have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed ledger or similar technology, existing in digital form, etc. They do not have legal tender status, should not and cannot be circulated and used as currency in the market.
The business activities related to virtual currency are classified as illegal financial activities. The exchange of fiat currency and virtual currency within the territory, exchange of virtual currencies, acting as a central counterparty in buying and selling virtual currencies, providing information intermediary and pricing services for virtual currency transactions, token issuance financing, and trading of virtual currency-related financial products, etc., fall under illegal financial activities, such as suspected illegal issuance of token vouchers, unauthorized public issuance of securities, illegal operation of securities and futures business, illegal fundraising, etc., are strictly prohibited across the board and resolutely banned in accordance with the law. Overseas entities and individuals are not allowed to provide virtual currency-related services to domestic entities in any form.
A stablecoin pegged to a fiat currency indirectly fulfills some functions of the fiat currency in circulation. Without the consent of relevant authorities in accordance with the law and regulations, any domestic or foreign entity or individual is not allowed to issue a RMB-pegged stablecoin overseas.
（II）Tokenization of Real-World Assets refers to the use of encryption technology and distributed ledger or similar technologies to transform ownership rights, income rights, etc., of assets into tokens (tokens) or other interests or bond certificates with token (token) characteristics, and carry out issuance and trading activities.
Engaging in the tokenization of real-world assets domestically, as well as providing related intermediary, information technology services, etc., which are suspected of illegal issuance of token vouchers, unauthorized public offering of securities, illegal operation of securities and futures business, illegal fundraising, and other illegal financial activities, shall be prohibited; except for relevant business activities carried out with the approval of the competent authorities in accordance with the law and regulations and relying on specific financial infrastructures. Overseas entities and individuals are not allowed to illegally provide services related to the tokenization of real-world assets to domestic entities in any form.
(III) Inter-agency Coordination. The People's Bank of China, together with 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 China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of virtual currency-related illegal financial activities.
The China Securities Regulatory Commission, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of illegal financial activities related to the tokenization of real-world assets.
(IV) Strengthening Local Implementation. The people's governments at the provincial level are overall responsible for the prevention and disposal of risks related to virtual currencies and the tokenization of real-world assets in their respective administrative regions. The specific leading department is the local financial regulatory department, with participation from branches and dispatched institutions of the State Council's financial regulatory department, telecommunications regulators, public security, market supervision, and other departments, in coordination with cyberspace departments, courts, and procuratorates, to improve the normalization of the work mechanism, effectively connect with the relevant work mechanisms of central departments, form a cooperative and coordinated working pattern between central and local governments, effectively prevent and properly handle risks related to virtual currencies and the tokenization of real-world assets, and maintain economic and financial order and social stability.
(5) Enhanced Risk Monitoring. The People's Bank of China, China Securities Regulatory Commission, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration of Foreign Exchange, Cyberspace Administration of China, and other departments continue to improve monitoring techniques and system support, enhance cross-departmental data analysis and sharing, establish sound information sharing and cross-validation mechanisms, promptly grasp the risk situation of activities related to virtual currency and real-world asset tokenization. Local governments at all levels give full play to the role of local monitoring and early warning mechanisms. Local financial regulatory authorities, together with branches and agencies of the State Council's financial regulatory authorities, as well as departments of cyberspace and public security, ensure effective connection between online monitoring, offline investigation, and fund tracking, efficiently and accurately identify activities related to virtual currency and real-world asset tokenization, promptly share risk information, improve early warning information dissemination, verification, and rapid response mechanisms.
(6) Strengthened Oversight of Financial Institutions, Intermediaries, and Technology Service Providers. Financial institutions (including non-bank payment institutions) are prohibited from providing account opening, fund transfer, and clearing services for virtual currency-related business activities, issuing and selling financial products related to virtual currency, including virtual currency and related financial products in the scope of collateral, conducting insurance business related to virtual currency, or including virtual currency in the scope of insurance liability. Financial institutions (including non-bank payment institutions) are prohibited from providing custody, clearing, and settlement services for unauthorized real-world asset tokenization-related business and related financial products. Relevant intermediary institutions and information technology service providers are prohibited from providing intermediary, technical, or other services for unauthorized real-world asset tokenization-related businesses and related financial products.
(7) Enhanced Management of Internet Information Content and Access. Internet enterprises are prohibited from providing online business venues, commercial displays, marketing, advertising, or paid traffic diversion services for virtual currency and real-world asset tokenization-related business activities. Upon discovering clues of illegal activities, they should promptly report to relevant departments and provide technical support and assistance for related investigations and inquiries. Based on the clues transferred by the financial regulatory authorities, the cyberspace administration, telecommunications authorities, and public security departments should promptly close and deal with websites, mobile applications (including mini-programs), and public accounts engaged in virtual currency and real-world asset tokenization-related business activities in accordance with the law.
(8) Strengthened Entity Registration and Advertisement Management. Market supervision departments strengthen entity registration and management, and enterprise and individual business registrations must not contain terms such as "virtual currency," "virtual asset," "cryptocurrency," "crypto asset," "stablecoin," "real-world asset tokenization," or "RWA" in their names or business scopes. Market supervision departments, together with financial regulatory authorities, legally enhance the supervision of advertisements related to virtual currency and real-world asset tokenization, promptly investigating and handling relevant illegal advertisements.
（IX） Continued Rectification of Virtual Currency Mining Activities. The National Development and Reform Commission, together with relevant departments, strictly controls virtual currency mining activities, continuously promotes the rectification of virtual currency mining activities. The people's governments of various provinces take overall responsibility for the rectification of "mining" within their respective administrative regions. In accordance with the requirements of the National Development and Reform Commission and other departments in the "Notice on the Rectification of Virtual Currency Mining Activities" (NDRC Energy-saving Building [2021] No. 1283) and the provisions of the "Guidance Catalog for Industrial Structure Adjustment (2024 Edition)," a comprehensive review, investigation, and closure of existing virtual currency mining projects are conducted, new mining projects are strictly prohibited, and mining machine production enterprises are strictly prohibited from providing mining machine sales and other services within the country.
（X） Severe Crackdown on Related Illegal Financial Activities. Upon discovering clues to illegal financial activities related to virtual currency and the tokenization of real-world assets, local financial regulatory authorities, branches of the State Council's financial regulatory authorities, and other relevant departments promptly investigate, determine, and properly handle the issues in accordance with the law, and seriously hold the relevant entities and individuals legally responsible. Those suspected of crimes are transferred to the judicial authorities for processing according to the law.
（XI） Severe Crackdown on Related Illegal and Criminal Activities. The Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, as well as judicial and procuratorial organs, in accordance with their respective responsibilities, rigorously crack down on illegal and criminal activities related to virtual currency, the tokenization of real-world assets, such as fraud, money laundering, illegal business operations, pyramid schemes, illegal fundraising, and other illegal and criminal activities carried out under the guise of virtual currency, the tokenization of real-world assets, etc.
（XII） Strengthen Industry Self-discipline. Relevant industry associations should enhance membership management and policy advocacy, based on their own responsibilities, advocate and urge member units to resist illegal financial activities related to virtual currency and the tokenization of real-world assets. Member units that violate regulatory policies and industry self-discipline rules are to be disciplined in accordance with relevant self-regulatory management regulations. By leveraging various industry infrastructure, conduct risk monitoring related to virtual currency, the tokenization of real-world assets, and promptly transfer issue clues to relevant departments.
（XIII） Without the approval of relevant departments in accordance with the law and regulations, domestic entities and foreign entities controlled by them may not issue virtual currency overseas.
（XIV） Domestic entities engaging directly or indirectly in overseas external debt-based tokenization of real-world assets, or conducting asset securitization activities abroad based on domestic ownership rights, income rights, etc. (hereinafter referred to as domestic equity), should be strictly regulated in accordance with the principles of "same business, same risk, same rules." The National Development and Reform Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other relevant departments regulate it according to their respective responsibilities. For other forms of overseas real-world asset tokenization activities based on domestic equity by domestic entities, the China Securities Regulatory Commission, together with relevant departments, supervise according to their division of responsibilities. Without the consent and filing of relevant departments, no unit or individual may engage in the above-mentioned business.
(15) Overseas subsidiaries and branches of domestic financial institutions providing Real World Asset Tokenization-related services overseas shall do so legally and prudently. They shall have professional personnel and systems in place to effectively mitigate business risks, strictly implement customer onboarding, suitability management, anti-money laundering requirements, and incorporate them into the domestic financial institutions' compliance and risk management system. Intermediaries and information technology service providers offering Real World Asset Tokenization services abroad based on domestic equity or conducting Real World Asset Tokenization business in the form of overseas debt for domestic entities directly or indirectly venturing abroad must strictly comply with relevant laws and regulations. They should establish and improve relevant compliance and internal control systems in accordance with relevant normative requirements, strengthen business and risk control, and report the business developments to the relevant regulatory authorities for approval or filing.
(16) Strengthen organizational leadership and overall coordination. All departments and regions should attach great importance to the prevention of risks related to virtual currencies and Real World Asset Tokenization, strengthen organizational leadership, clarify work responsibilities, form a long-term effective working mechanism with centralized coordination, local implementation, and shared responsibilities, maintain high pressure, dynamically monitor risks, effectively prevent and mitigate risks in an orderly and efficient manner, legally protect the property security of the people, and make every effort to maintain economic and financial order and social stability.
(17) Widely carry out publicity and education. All departments, regions, and industry associations should make full use of various media and other communication channels to disseminate information through legal and policy interpretation, analysis of typical cases, and education on investment risks, etc. They should promote the illegality and harm of virtual currencies and Real World Asset Tokenization-related businesses and their manifestations, fully alert to potential risks and hidden dangers, and enhance public awareness and identification capabilities for risk prevention.
(18) Engaging in illegal financial activities related to virtual currencies and Real World Asset Tokenization in violation of this notice, as well as providing services for virtual currencies and Real World Asset Tokenization-related businesses, shall be punished in accordance with relevant regulations. If it constitutes a crime, criminal liability shall be pursued according to the law. For domestic entities and individuals who knowingly or should have known that overseas entities illegally provided virtual currency or Real World Asset Tokenization-related services to domestic entities and still assisted them, relevant responsibilities shall be pursued according to the law. If it constitutes a crime, criminal liability shall be pursued according to the law.
(19) If any unit or individual invests in virtual currencies, Real World Asset Tokens, and related financial products against public order and good customs, the relevant civil legal actions shall be invalid, and any resulting losses shall be borne by them. If there are suspicions of disrupting financial order and jeopardizing financial security, the relevant departments shall deal with them according to the law.
This notice shall enter into force upon the date of its issuance. The People's Bank of China and ten other departments' "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (Yinfa [2021] No. 237) is hereby repealed.
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