China has rolled out one of its most comprehensive crypto regulatory updates to date, formally banning real world asset tokenization and tightening restrictions on stablecoins, while explicitly naming major digital assets as illegal within its financial system. The move reinforces Beijing’s long standing zero tolerance approach toward cryptocurrencies and expands oversight to cover offshore activity linked to Chinese entities.
The new framework was issued on February 6 through a directive signed by eight government bodies, led by the People’s Bank of China. The notice states that digital assets such as Bitcoin, Ethereum, and Tether do not have legal tender status and may not be used, traded, issued,d or promoted within China. Regulators stressed that crypto related activities now pose heightened risks to financial order and social stability.
A major development in the directive is the formal inclusion of real world asset tokenization among prohibited financial activities. Authorities defined RWA tokenization as the conversion of ownership or income rights tied to assets such as equities, real estate, or funds into digital tokens for issuance or trading. Any such activity conducted without explicit approval on state designated infrastructure is deemed illegal.
The rules significantly expand the scope of enforcement. Chinese companies, along with offshore subsidiaries and special purpose vehicles under their control, are prohibited from issuing virtual currencies or conducting tokenization projects without prior government authorization. The ban also applies to foreign firms offering crypto or tokenization services to Chinese residents, closing off cross border channels that regulators view as regulatory arbitrage.
Financial institutions face strict limitations under the new regime. Banks, insurers, and payment firms are barred from providing accounts, settlement, custody, insurance,e or other services connected to cryptocurrencies or tokenized products. Internet platforms are prohibited from hosting crypto services, facilitating transactio, ns or marketing virtual currency related offerings to users in China.
Mining restrictions have also been reinforced. Provincial governments have been instructed to eliminate any remaining mining operations and prevent the launch of new projects. Telecommunications authorities will assist in blocking access to crypto platforms, while law enforcement agencies are tasked with pursuing violations across both online and offline channels.
One of the most consequential elements of the directive is its extraterritorial reach. Regulators applied the same business, same risk, same rules principle, warning that Chinese citizens working for offshore crypto platforms may still face legal liability. Service providers that knowingly, or through negligence, enable illegal activity will be subject to prosecution regardless of where the company is registered.
The notice also explicitly bans the offshore issuance of yuan pegged stablecoins without approval. Regulators argued that stablecoins perform functions similar to sovereign money when circulated, posing risks to monetary control and capital management.
The directive takes immediate effect and replaces China’s 2021 crypto framework with broader and more detailed restrictions. Markets reacted swiftly, with bitcoin falling sharply following the announcement. The message from Beijing is clear that experimentation with crypto, stablecoins, and tokenized assets will not be tolerated without strict state oversight.
