On February 6, 2026, the People's Bank of China and eight other departments jointly issued a notice titled "Notice on Further Preventing and Handling Risks Related to Virtual Currencies," tightening regulatory bolts once again. The notice delivered three heavy blows at the textual level: first, it clarified that "virtual currencies do not have the status of legal tender," completely denying their monetary attributes; second, it required financial institutions and payment institutions to refrain from providing related services, attempting to cut off funding sources and payment channels; third, it included activities related to the "tokenization of real-world assets" in the prohibited scope, blocking financial innovations that attempt to circumvent regulations under the guise of tokenization. The main contradiction of regulatory upgrades has also become prominent: on one side, the global crypto industry is rushing towards institutionalization, while on the other side, local regulations are tightening further, leading to a direct collision of these two forces.
From Assets to "Accounting Digits": The End of Monetary Imagination
● The legal meaning of currency qualification: The notice reiterates and strengthens the position that "virtual currencies do not have the same legal status as legal tender and should not be used as currency in the market," further compressing them from "assets that could be misunderstood as alternative currencies" to a non-payment accounting digit. This means that regardless of how the technological form evolves, they are excluded from the currency and quasi-currency system within China, making it difficult to obtain any legitimacy of legal tender endorsement or payment scenarios.
● Differences from previous statements: Compared to the previous regulatory documents' principled reminder that "they should not circulate as currency in the market," this notice is more resolute in its wording, denying both "legal tender status" and "currency function," while adding a governance framework for "risk prevention and handling." The expression has upgraded from "warning and discouragement" to "qualification and handling," signaling that this is no longer an observation period for emerging assets, but has entered a stage of long-term stable denial-based regulatory consensus.
● Constraints on over-the-counter trading and payments: Under this qualification, the gray area of over-the-counter trading is further squeezed. OTC merchants that imply in their promotions that they have payment or value-preserving attributes will be more easily seen as misleading or even illegal. Various scenarios such as "scan to pay for coins" and "coin-based settlement services" are also included in the risk zone due to their high correlation with "currency use." On the enterprise side, even if internal accounting or hedging considerations involve related tokens, it will be difficult to find a legitimate position in auditing, compliance, and tax standards, and they can only be viewed as high-risk investment targets rather than tools that can be included in the mainstream financial asset pool.
● The boundary of investor self-risk responsibility: The notice clearly states that "the risks of virtual currency investment will be borne by the investors themselves," which delineates the boundary of responsibility between regulation and the market, and also draws a starkly different compliance line between institutions and retail investors. For retail investors, this means that once they participate, it will be difficult to seek relief on the grounds of "regulatory ambiguity" or "information asymmetry"; for institutions, "self-risk" does not mean relaxation, but will instead be interpreted in internal control and compliance assessments as a lack of regulatory protection, thereby reducing their risk limits and willingness to allocate in crypto assets.
Banks and Brokers Cut Off: The Question of Where Compliant Funds Go
● The business extension of the prohibition on providing services: The notice's statement that "financial institutions and payment institutions are prohibited from providing services related to virtual currencies" extends far beyond simple buying and selling facilitation. For traditional banks, businesses related to account opening, fund transfers, payment settlements, custody, and pledge financing that are directly or indirectly associated with tokens will theoretically face strict scrutiny; for brokers and asset management institutions, this includes issuing or selling wealth management and structured products linked to certain token prices, as well as providing related consulting and research services, all of which may be seen as "facilitating their provision."
● Direct impact on banks, brokers, and payment institutions: If commercial banks and payment institutions previously introduced on-chain assets as bridges in cross-border settlements and technical pilots, they will have to quickly disassemble and rectify related paths to avoid being identified as participating in or supporting prohibited activities. Brokers and fund companies need to reassess whether there are yield certificates or index tracking schemes linked to related tokens in product design, and clean up promotional materials that may be seen as "guiding participation." For custodians, even if they only provide cold wallet storage or key management services, once viewed as supporting the operation of related businesses, they risk being included in the regulatory rectification scope.
● Potential flow of compliant funds after being blocked: When the formal channels of banks, brokers, and payment institutions are cut off, compliant funds attempting to allocate crypto-related risk positions will be forced to seek alternative paths. One possibility is to completely turn to overseas institutional accounts, indirectly accessing derivatives or crypto equity targets through overseas brokers and asset management platforms; another is to slide into more secretive on-chain and off-chain networks, such as transferring funds through friends and family accounts or overseas shell companies. Regulators are clearly aware of this, thus in the combination of "prevention and handling," they emphasize institutional compliance responsibilities while also managing signals to compress the gray area.
● Constraints on institutional allocation and product design: Under this red line, local institutions will face high compliance scrutiny for any categories directly linked to token prices in their asset allocation tables. Even products named "blockchain theme" or "Web3 concept" need to carefully exclude any components that could be interpreted as token investments, and are more likely to shift towards underlying technology equity, computing power services, and compliant infrastructure. In structured product design, the space for introducing related indices or prices as linked targets is significantly compressed, leaving institutions with the option of exploratory layouts through overseas parent companies or independent sub-platforms.
A Blanket Ban on Real Asset Tokenization: The Chinese Version of the RWA Narrative's Termination
● Definition of RWA and the logic of prohibition: The notice clearly states for the first time at the regulatory level that activities involving the issuance and trading of tokens based on real-world assets such as securities, debts, real estate, and commodities are considered "real-world asset tokenization" and are included in the prohibited scope. The reason for the blanket ban is that such tokens often functionally point to securitization and equity certificates, easily circumventing existing securities issuance, registration, custody, information disclosure, and investor suitability systems, thus creating a shadow securities market and blurring the legal and regulatory boundaries.
● Strong contrast with overseas RWA trends: In the U.S. and some European markets, RWA and tokenized government bonds are seen as experimental grounds for the integration of traditional finance and on-chain infrastructure, with mainstream institutions exploring the mapping of government bonds, money market instruments, and real estate trusts onto the blockchain to enhance liquidity and transparency. In contrast, this round of notices in China clearly closes off similar paths, choosing to view tokenization as a potential regulatory arbitrage tool rather than a means of upgrading financial infrastructure. This difference in attitude further widens the cognitive gap between China and abroad on "how to utilize on-chain accounting and settlement technology."
● Impact on domestic RWA exploration and chain reform cooperation: Over the past two years, some institutions have attempted to promote the on-chain of real estate income rights, cultural copyright income, and supply chain receivables under the framework of "consortium chain + tokenized equity certificates," hoping to find a balance between compliance regulation and technological innovation. After the notice directly includes RWA in the prohibited scope, such pilot projects must revert to traditional share certificates and registration system upgrades and other milder directions. The potential interface cooperation between public chains and consortium chains has also been dismantled due to the removal of the key bridge of "tokenization," losing institutional space.
● Deep risks that regulators are concerned about: From a regulatory perspective, once real assets are tokenized and can circulate across borders, it may trigger multiple risks: first, on-chain issuance and trading can easily create a regulatory vacuum, making it difficult to penetrate to the ultimate holders; second, arbitrageurs can exploit the qualitative differences of tokens in different jurisdictions to package assets that should be subject to strict approval as "technological innovation products" for sale to retail investors; third, RWA tokens with cross-border transferability may become tools for capital outflow and hedging, undermining the effectiveness of foreign exchange and capital project management. Before these concerns are institutionalized and resolved, a comprehensive ban becomes the lowest-cost option.
The Shadow of Mining Lingers: Dual Compression of Off-Chain Computing Power and On-Chain Leverage
● Continuity of the policy to "continue to rectify mining": The notice again mentions "continuing to rectify virtual currency 'mining' activities," emphasizing "continuing" rather than "first," pointing to a regulatory mainline that has not been interrupted since previous rounds of rectification. Regulation has not declared a phased victory due to the large-scale migration of computing power but views mining as a long-term governance object intertwined with financial risks, energy structure, and industrial policy, defining it as a normal rectification task.
● Background of past rectification and computing power migration: Previous concentrated rectification of mining directly led to a large amount of computing power migrating from within the country to North America, Central Asia, and other places, with mining machines and operational teams flowing out, forcing the entire industry chain from "electricity—mining farms—mining pools—financial services" to globalize. This background determines that today's reiteration of "continuing rectification" is more about "repairing the net" on the existing pattern rather than triggering another industrial shock of the same scale, but it also means that the remaining computing power and hidden mining sites within the country are still under high pressure.
● Reemphasizing the symbolic significance of rectification: Under the premise that the scale of mining has significantly migrated, reiterating the inclusion of mining in the notice has a clear posture and signaling function. On one hand, it releases a unified tone to local governments and energy companies, preventing the disguised resurgence under the guise of "computing power economy" or "data centers"; on the other hand, in the context of rising global disputes over green transformation and energy consumption, it indicates that regulators do not intend to yield on this issue due to international competition in computing power. This symbolic reinforcement provides value and public opinion support for the subsequent overall tightening of on-chain activities.
● The chain reaction of simultaneous pressure on mining and high-leverage speculation: As mining activities are continuously squeezed off-chain, while high leverage and speculative trading on-chain are also impacted by regulatory statements and the severing of financial services, overall risk appetite is bound to be systematically lowered. Miners find it difficult to obtain support for electricity and infrastructure locally, while speculators struggle to find smooth fiat currency entry and exit points, leading to a simultaneous contraction of risk chains on both ends. The result is that various "quick money-making" models built around token price fluctuations will accelerate their retreat, risk premiums will rise, and participants will be forced to make more structural choices between technology research and development, compliance services, or complete overseas expansion.
The Regulatory Iron Curtain Falls, Institutions De-Leverage and Exchanges Self-Rescue
● The atmospheric effect of de-leveraging rumors: Research briefs mention that rumors have emerged in the market about "a large institution recently conducting de-leveraging operations," but the related information is still in a verification state, lacking specific data and public disclosure. In this context, the rumor reflects more of an emotion and expectation—institutions, sensing regulatory winds and macro uncertainties, tend to proactively reduce leverage and risk exposure rather than waiting for rules to be implemented and adjusting passively; this atmosphere itself will have a contraction effect on market pricing and liquidity.
● Defensive actions of institutions under new regulatory pressure: In the face of the combination of denial of monetary attributes, severing of financial services, and prohibition of tokenization, local and cross-border institutions are more likely to adopt a series of contextual defensive strategies: including reducing positions and leverage multiples of related tokens in proprietary and market-making businesses, proactively shrinking balance sheets or cleaning up product lines directly linked to token prices, suspending the issuance of new related structured tools, and increasing the weight of compliance and reputational risks in internal control processes. Cross-border institutions may control potential risks by migrating some businesses to overseas entities, adjusting client communication tones, and compressing product exposure targeting Chinese residents.
● The industry narrative shifts from expansion to compliance survival: Notably, on the same day the notice was released, the CEO of Gate Exchange publicly discussed the importance of "compliance development" at the annual meeting, focusing future efforts on communication with regulators, strengthening risk control, and technical compliance. This temporal juxtaposition reinforces the sense of a turning point in the industry narrative: shifting from an emphasis on scale, liquidity, and innovation speed to emphasizing survival, compliance, and the coexistence of regulatory space. Leading platforms no longer simply see themselves as "asset matchmakers," but are forced to play dual roles as "compliance interfaces" and "technical service providers."
● Divergence of Strategies for Exchanges and Service Providers: Under high regulatory pressure, the strategic choices of exchanges and surrounding service providers will show significant differentiation. One path is to completely go overseas, establishing entities in friendly jurisdictions and leaving major businesses and high-risk products in foreign markets, maximizing disconnection from local regulations; another is to transform into a technology outsourcing provider for institutions and traditional finance, offering on-chain data analysis, compliance risk control tools, custody technology, etc., without directly engaging in token trading itself; the third path is to actively seek participation in various compliance sandboxes and pilot projects, exploring directions such as digital infrastructure, consortium chain transformation, and regulatory technology within strict rules, while retaining as much technical and business discourse power as possible.
The Game Behind Regulatory Walls: Redrawing the Map of China's Crypto Landscape
● Three Red Lines Reshape the Landscape: By denying monetary attributes, cutting off financial services, and prohibiting the tokenization of real assets, regulation has effectively completed a structural redrawing of China's crypto landscape. The imagination of payment, investment, and asset securitization centered around tokens has been concentrated and compressed, leaving more space focused on low-financial-sensitivity areas such as underlying technology research, consortium chain applications, and cross-border technological cooperation. The path originally hoped to cultivate a complete "on-chain financial ecosystem" domestically has been almost declared terminated.
● Migration Paths Under the "Tight Inside, Loose Outside" Pattern: In contrast to tightening domestic rules and the accelerated institutionalization of crypto finance in some overseas markets, domestic funds and projects are likely to experience dual migration: on one hand, teams and capital capable of going overseas will be more inclined to establish entities abroad and participate in the construction of RWA, derivatives, and compliant trading platforms; on the other hand, the technology and talent remaining domestically may turn to provide R&D, risk control, and compliance technology services for overseas platforms and institutions, forming a division of labor pattern of "technology inside, business outside." Some funds may also shift from direct token holding to investing in overseas related equity or fund products, participating indirectly.
● Reassessing Risks and Participation Methods Under Strong Regulation: For institutions and retail investors, this round of new regulations forces all participants to re-examine the risk-return ratio and participation logic. Institutions need to incorporate regulatory and reputational risks into their pricing models, factoring in the costs of "being unable to legally operate domestically" into their decision-making, shifting from "allocating a new asset" to "betting on a restricted business abroad." Retail investors need to realize that under the framework of "investment risks borne by themselves," any fantasies about regulatory ambiguity become more dangerous, and participation methods are more likely to shift towards learning technology, focusing on compliant products, or simply seeking alternatives for risk exposure through compliant financial markets.
● The Unresolved Institutionalization Proposition: As major global financial centers advance the institutionalization of crypto finance along different paths, China has chosen to significantly tighten regulations at this stage, leaving the market with an open question that has yet to be answered: will this regulatory wall become a long-term "high-pressure norm," or a phase of tightening after a certain risk cycle? Is it possible in the future to open limited windows for specific scenarios and specific institutions under a clearer legal framework? In this long-term game surrounding technology, capital, and regulatory sovereignty, the narrative of crypto in China may not have ended; it has merely been temporarily pressed on the institutional "pause button."
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