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China's RWA Regulatory Framework: Document 42 Unpacked

· 9 min read
Dora Noda
Dora Noda
Software Engineer

On February 6, 2026, China unveiled one of the most significant cryptocurrency policy shifts since its 2021 blanket ban. But this wasn't a reversal—it was a recalibration. Document No. 42, jointly issued by eight ministries, creates a narrow compliance pathway for real-world asset (RWA) tokenization while cementing yuan-linked stablecoin bans. The message is clear: blockchain infrastructure is permitted, crypto speculation is not, and the state remains firmly in control.

What does this mean for enterprises navigating China's blockchain ecosystem? Let's break down the regulatory framework, the approval mechanisms, and the strategic divide between onshore and offshore operations.

The Eight-Ministry Framework: Who's Calling the Shots?​

Document 42 represents unprecedented regulatory coordination. The joint regulatory framework brings together:

  • People's Bank of China (PBOC) — Central bank overseeing monetary policy and the digital yuan (e-CNY)
  • National Development and Reform Commission — Strategic economic planning authority
  • Ministry of Industry and Information Technology — Technology standards and implementation
  • Ministry of Public Security — Criminal enforcement for unauthorized activities
  • State Administration for Market Regulation — Consumer protection and anti-fraud measures
  • State Financial Supervision Administration — Financial institution compliance
  • China Securities Regulatory Commission (CSRC) — Asset-backed security token oversight
  • State Administration of Foreign Exchange — Cross-border capital flow monitoring

This interagency coalition, approved by the State Council, signals that RWA regulation is a national strategic priority—not a peripheral fintech experiment.

What Exactly is RWA Under Chinese Law?​

For the first time, China has provided an official legal definition:

"Real-world asset tokenization refers to the activity of using cryptographic technology and distributed ledger or similar technologies to convert the ownership and income rights of assets into tokens or other rights or debt certificates with token characteristics, and then issuing and trading them."

This definition is deliberately broad, covering:

  • Tokenized securities and bonds
  • Supply chain finance instruments
  • Cross-border payment settlements
  • Asset-backed digital certificates

Critically, the document distinguishes RWA from cryptocurrencies. Bitcoin, Ethereum, and speculative tokens remain prohibited. RWA tokens backed by legitimate assets operating on approved infrastructure? Those now have a regulatory pathway.

The Compliance Pathway: Three Approval Mechanisms​

Document 42 establishes three tiers of compliance, depending on where assets are held and who controls them.

1. Onshore RWA: State-Controlled Infrastructure Only​

Domestic RWA issuance requires operation on "compliant financial infrastructure"—a term referring to state-sanctioned blockchain platforms like:

  • BSN (Blockchain-based Service Network) — The national blockchain infrastructure prohibiting independent cryptocurrencies but supporting permissioned applications
  • Digital Yuan Integration — Where blockchain services require payment functionality, the e-CNY becomes the default settlement layer

Financial institutions can participate in compliant RWA business, but only through these channels. Private blockchain deployments and foreign platforms are explicitly excluded.

2. Offshore Issuance with Domestic Assets: CSRC Filing System​

The most complex scenario involves tokenizing Chinese assets offshore. The CSRC filing system applies when:

  • The underlying assets are located in China
  • The token is issued in Hong Kong, Singapore, or other jurisdictions
  • Domestic entities control the underlying assets

Before launching such a business, domestic entities must file with the CSRC. This regulatory hook ensures that regardless of where the token is issued, Chinese authorities maintain oversight over domestic asset pools.

In practice, this means:

  • Pre-launch disclosure — Submit token structure, custodian arrangements, and asset verification mechanisms
  • Ongoing compliance — Regular reporting on asset backing, holder distributions, and cross-border flows
  • Enforcement jurisdiction — Chinese law applies to underlying assets, even if tokens trade offshore

3. Yuan-Pegged Stablecoins: Banned Without Exception​

The framework explicitly prohibits unauthorized issuance of yuan-linked stablecoins, both domestically and abroad. Key restrictions include:

The subtext: China will not cede monetary sovereignty to private stablecoin issuers. The e-CNY is the state's answer to dollar-denominated stablecoins like USDT and USDC.

Hong Kong vs. Mainland: The Strategic Divergence​

China's dual approach leverages Hong Kong as a regulatory sandbox while maintaining strict capital controls on the mainland.

Hong Kong's Permissive Framework​

Hong Kong has positioned itself as a crypto-friendly jurisdiction with:

  • Stablecoin licensing — The Stablecoin Bill passed May 21, 2025, creating regulated pathways for Hong Kong dollar stablecoins
  • Tokenized bonds — Government-backed pilot programs for debt issuance
  • Project Ensemble — Hong Kong Monetary Authority's initiative for wholesale stablecoin settlements

The Control Mechanism: Asset Location Trumps Issuance Location​

But here's the catch: China's core principle states that regardless of whether tokens are issued in Hong Kong or Singapore, as long as the underlying assets are located in China, Chinese regulation applies.

In January 2026, the CSRC directed mainland brokerages to pause RWA tokenization activities in Hong Kong, signaling centralized control over cross-border digital finance. The takeaway: Hong Kong's regulatory sandbox operates at Beijing's discretion, not as an independent jurisdiction.

Implications for Blockchain Builders​

What This Means for Infrastructure Providers​

Document 42 creates opportunities for compliant infrastructure players:

  • BSN ecosystem participants — Developers building on state-sanctioned networks gain legitimacy
  • Custody and asset verification services — Third-party attestation for asset-backed tokens becomes essential
  • Digital yuan integrations — Payment rails leveraging e-CNY for blockchain-based commerce

Strategic Trade-Offs: Onshore vs. Offshore​

For enterprises considering RWA tokenization:

Onshore advantages:

  • Direct access to China's domestic market
  • Integration with national blockchain infrastructure
  • Regulatory clarity through approved channels

Onshore constraints:

  • State control over infrastructure and settlement
  • No independent token issuance
  • Limited to e-CNY for payment functionality

Offshore advantages:

  • Access to global liquidity and investors
  • Choice of blockchain platforms (Ethereum, Solana, etc.)
  • Flexibility in token design and governance

Offshore constraints:

  • CSRC filing requirements for Chinese assets
  • Regulatory unpredictability (see Hong Kong brokerage pause)
  • Enforcement risk if non-compliant

The Bigger Picture: China's $54.5B Blockchain Bet​

Document 42 didn't emerge in a vacuum. It's part of China's National Blockchain Roadmap, a $54.5 billion infrastructure initiative running through 2029.

The strategy is clear:

  1. 2024-2026 (Pilot Phase) — Standardized protocols, identity systems, and regional pilots in key industries
  2. 2027-2029 (Full Deployment) — National integration of public and private data systems on blockchain infrastructure

The goal isn't to embrace decentralized finance—it's to use blockchain as a tool for state-managed financial infrastructure. Think central bank digital currencies, supply chain traceability, and cross-border payment settlements—all under regulatory oversight.

What Comes Next?​

Document 42 clarifies that RWA is no longer a gray area—but the compliance burden is steep. As of February 2026:

For enterprises, the decision matrix is stark: operate within China's state-controlled ecosystem and accept limited tokenization, or issue offshore with full CSRC disclosure and regulatory uncertainty.

China has drawn the line—not to ban blockchain, but to ensure it serves state priorities. For builders, that means navigating a framework where compliance is possible, but sovereignty is non-negotiable.

Sources​

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