In-depth Interpretation of China's Latest Virtual Asset Regulatory Framework: Paradigm Reconstruction and Strategic Implications Under the "Combination of Blocking and Channeling"

1. Comprehensive Upgrade and Precise Definition: Blocking All Pathways to Systemic Risk

This "Notice" first demonstrates a strategic expansion of the regulatory scope and an unprecedented strengthening of definitional force. Its most notable feature is the explicit inclusion of "Real World Asset Tokenization" (RWA) into the core of regulation, subjecting it to the same level of stringent scrutiny as virtual currencies. This move is both forward-looking and decisive. RWA, as a global fintech trend that digitizes and facilitates the trading of traditional assets (such as bonds, real estate income rights, commodities, etc.) via blockchain, is essentially an iteration of asset securitization technology. Left unchecked, it could easily evolve into a "technological backchannel" that bypasses core regulatory frameworks for securities issuance approval, information disclosure, and investor suitability management, breeding more complex issues like illegal fundraising, fraud, and cross-contagion of financial risks. The "Notice" clearly states that conducting unapproved RWA activities within China constitutes illegal financial activities, suspected of illegally issuing tokenized securities, unauthorized public securities offerings, and illegal futures operations. This definition thoroughly shatters any illusions of using "technological innovation" as a guise for "regulatory arbitrage," establishing the unshakable fundamental principle that "regardless of how technological forms change, financial activities must be licensed and must be brought under regulation."

Simultaneously, the "Notice" defines existing risks with greater resolve and thoroughness. It not only reiterates the non-monetary nature of virtual currencies like Bitcoin but also innovatively identifies "stablecoins pegged to fiat currency" as "de facto performing some functions of legal tender," strictly prohibiting the issuance of any unapproved RMB-pegged stablecoins. This clause demonstrates significant strategic foresight, aiming to preemptively counter any potential challenges that could erode the sovereign currency status of the Renminbi or establish parallel settlement systems in the digital space. By explicitly categorizing all virtual currency-related business activities (including exchange, market-making, information intermediation, derivatives trading, etc.) as "illegal financial activities" and revoking the 2021 notice, the regulators convey a firm determination to clear existing risks and leave no room for ambiguity.

2. Building a Full-Chain Penetrative "Firewall": Multi-Dimensional Isolation from Capital to Information

If defining the stance is about proclamation, then the regulatory enforcement framework constructed in the "Notice" demonstrates a powerful systematic capability to translate that stance into reality. It deploys a full-chain, penetrative regulatory network covering "capital flows, information flows, and technology flows," aimed at physically isolating risks.

At the capital flow level, regulatory requirements have reached an unprecedented level of strictness. All financial institutions and non-bank payment institutions are comprehensively prohibited from providing any form of service for related activities, from account opening, fund transfers, and clearing/settlement to product issuance, inclusion as collateral, and insurance services, achieving a complete shutdown of financial channels. This is equivalent to severing the "umbilical cord" between the digital asset sector and the mainstream financial system, preventing it from receiving legitimate liquidity input and credit support.

Regarding information flow and marketing, regulation is being applied simultaneously online and offline. Online, internet companies are strictly prohibited from providing online venues, commercial displays, marketing promotions, and paid traffic referrals, and are required to proactively report leads and provide technical assistance. Offline, market supervision departments are prohibiting the use of terms like "virtual currency" and "RWA" in company registration names and business scopes at the source, while strengthening advertising oversight. This combination of measures aims to eliminate the "visibility" and "implication of legitimacy" of digital assets in the public domain, reducing speculative fervor and participation willingness at the societal cognitive level—a form of risk prevention that delves into social psychology.

At the technological and physical layer, the crackdown on virtual currency "mining" activities continues to deepen, clearly assigning overall responsibility to provincial governments, strictly prohibiting new projects, and cleaning up existing ones. More crucially, the policy innovatively introduces a "blocking of overseas services" clause. It explicitly states that "overseas entities and individuals shall not provide virtual currency-related services to domestic entities in any form illegally," and stipulates that domestic facilitators will be held accountable. This clause, with extraterritorial effect, combined with strict controls on cross-border payment channels, essentially constructs a "financial digital border" against the global internet, posing a powerful legal deterrent to any overseas exchange or DeFi protocol attempting to serve Chinese users.

3. Opening the Sole "Compliance Narrow Door": The Strategic Intent of the CSRC's "Guidelines"

While the "Notice" builds a strict and high wall, the CSRC's "Guidelines" meticulously design and open a highly restricted yet profoundly significant "door." This door leads to only one specific destination: allowing the issuance of asset-backed security (ABS) tokens overseas, supported by domestic assets or cash flows.

This is by no means a lenient exception for virtual currency speculation but rather a precise act of "channeling." Its design reflects a high degree of strategic consideration. First, the business model is strictly limited: the underlying assets must be domestic physical assets or their income rights that generate stable cash flows (such as infrastructure toll rights, trade receivables, leasing assets, etc.); the issuance must be ABS tokens that comply with financial logic; and the issuance market and investors must be strictly limited to overseas. This ensures that this innovative activity is tightly anchored to the real economy, serves the genuine needs of cross-border corporate financing, and is completely isolated from the domestic retail speculative market.

Second, the regulatory approach is extremely strict: it adopts a model of "pre-event filing with the CSRC by domestic entities," rather than simple post-event reporting. The filing entity must submit the complete set of overseas issuance documents and undergo penetrative scrutiny regarding the authenticity of the underlying assets, compliance of the transaction structure, and effectiveness of risk isolation. This involves earlier and deeper regulatory intervention than traditional overseas bond issuance or listing, embodying the regulatory philosophy of "same business, same risk, same rules," ensuring innovation does not escape regulatory oversight.

The opening of this "narrow door" carries at least three strategic intentions: First, serving real economy financing: creating a pilot channel for high-quality domestic enterprises to utilize blockchain technology to enhance the efficiency and reduce the costs of cross-border asset securitization, directly reflecting fintech empowering the real economy. Second, accumulating regulatory experience and talent: within this risk-controlled "overseas sandbox," regulators, financial institutions, and legal intermediaries can closely observe, understand, and manage the entire process of asset tokenization, accumulating valuable regulatory experience and cultivating professional talent for potential larger-scale financial digital transformations in the future. Third, participating in shaping international rules: through proactive regulation and practice, China can accumulate influence in the global financial frontier of asset tokenization, avoiding passivity in the future formation of international rules—a profound layout in the context of great power financial competition.

4. The Emergence of a "Dual-Track" Ecosystem and Global Regulatory Divergence

The combined effect of the "Notice" and the "Guidelines" will profoundly shape China's future digital finance ecosystem and may accelerate the divergence of the global regulatory landscape.

Domestically in China, the outline of a clear "dual-track" digital finance ecosystem is emerging. The first track is the "completely closed retail track": any trading, financing, or derivative activities related to cryptocurrencies and speculative tokens targeting ordinary domestic investors will be prohibited long-term and thoroughly, forming a secure "internal circulation" zone largely isolated from the global public chain-dominated crypto ecosystem. The second track is the "limited-open institutional and cross-border track": applications based on consortium or permissioned blockchain technology, aimed at serving the real economy and cross-border capital flows, will be encouraged and developed. The research, development, and application of the digital yuan (e-CNY), as well as potential future state-led blockchain infrastructure for the registration, trading, and settlement of specific financial assets, will become the core pillars of this track. RWA innovation can only proceed strictly within this second track, following the path delineated by the "Guidelines."

From a global perspective, China's regulatory path represents a fundamental divergence from the compliance-oriented paths being explored by major economies like the US and the EU, which aim to "incorporate crypto-assets into existing securities or commodities regulatory frameworks." China has chosen a unique model of "sovereignty priority, risk isolation, and pilot innovation." This is not only due to financial stability considerations but also, at a deeper level, a defense of core national interests such as monetary sovereignty, capital account management, data security, and cross-border flows. This divergence suggests that the global digital asset market may become further fragmented, forming regional markets with differing technical standards, asset classes, and investor structures. China's choice provides another potential regulatory paradigm reference for other emerging economies that prioritize financial sovereignty and control capabilities.

5. Profound Impact and Future Outlook: Redefining Red Lines and Navigational Routes

In summary, the set of policy documents released in early 2026 has far-reaching and complex implications. For market participants, this is a final, clear "clearance signal." There is no longer any room for commercial operations related to virtual currencies and unapproved digital assets within China, and related individual participation faces extremely high legal and property risks. Fantasizing about a "policy thaw" is no longer realistic. Genuine opportunities exist only on one path: completely abandoning short-term speculative thinking, deeply understanding the national strategic intent, and engaging in long-term and arduous technological and model innovation in directions that serve the real economy, comply with cross-border capital management policies, and rely on officially endorsed technological pathways.

From a national strategic level, this policy combination is an active effort of "mine-clearing" and "foundation-laying" for financial infrastructure. It clears away "weeds" that could potentially disrupt the stability of the core financial system, erode monetary sovereignty, and trigger social risks with unprecedented force, thereby preparing the ground for the next step of "sowing" autonomous and controllable national-level financial digitalization infrastructure. The strictest prohibitions often foreshadow the most prudent preparations. It can be anticipated that China's future focus in the blockchain finance field will concentrate on "national team"-led areas such as central bank digital currency, trade finance blockchain platforms, and standardized asset digital trading.

Ultimately, this set of policies redefines the inviolable red lines for China amidst the turbulent global digital financial transformation—namely, national security, financial stability, and the safety of people's property. It also redefines the navigable routes for exploration—that technology must empower the real economy, innovation must submit to regulation, and development must serve strategy. It declares that China will independently shape the future landscape of its digital finance according to its own rhythm and logic. The establishment of this new paradigm is not merely an upgrade in regulation but a profound national financial strategic choice, the impact of which will continue to manifest over the next decade or even longer.