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China's Eight-Department RWA Ban: The Narrow Corridor for State-Controlled Tokenization

· 11 min read
Dora Noda
Dora Noda
Software Engineer

On February 6, 2026, China didn't just update its crypto ban—it redefined the rules of engagement for real-world asset tokenization. Eight government departments, led by the People's Bank of China and the China Securities Regulatory Commission, jointly issued regulations that simultaneously slam the door on unauthorized stablecoins while cracking open a tightly controlled window for compliant RWA.

The message is unmistakable: China is constructing its own version of a tokenized future—one in which the state, rather than the market, defines the boundaries of participation.

The Regulatory Earthquake: What Just Changed​

For the first time, China has explicitly codified the distinction between virtual currency (still banned) and real-world asset tokenization (conditionally permitted). This marks a fundamental shift from blanket prohibition to categorized regulation.

The eight departments—including the PBOC, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration for Market Regulation, National Financial Regulatory Administration, CSRC, and State Administration of Foreign Exchange—issued two critical documents:

  1. The Circular on Further Preventing and Handling the Risks Related to Virtual Currency (Document 42)
  2. Regulatory Guidelines on the Overseas Issuance of Asset-Backed Security Tokens Backed by Domestic Assets

Together, these regulations establish a compliance framework that distinguishes between prohibited crypto activities and permissible RWA tokenization. For virtual currency, the PBOC takes the lead. For RWA tokenization, the CSRC assumes control.

Yuan-Pegged Stablecoins: The Red Line​

Perhaps the most striking element of the new framework is the absolute prohibition on yuan-pegged stablecoins. No entity or individual, inside or outside China, may issue offshore stablecoins pegged to the renminbi without explicit government approval. This includes overseas branches of domestic firms.

The timing reveals strategic intent. Beginning January 1, 2026, the PBOC began paying interest on digital yuan (e-CNY) wallet balances—a 0.05% annual rate matching standard domestic savings accounts. By offering returns comparable to demand deposits, the central bank transformed the e-CNY from a simple payment tool into a competitive financial product designed to capture market share that might otherwise flow to stablecoins.

The global context underscores the stakes: monthly stablecoin transaction volumes reached $10 trillion by January 2026. China views unauthorized yuan-backed stablecoins as a direct threat to monetary sovereignty—creating parallel payment systems beyond central bank oversight that could undermine capital controls and policy effectiveness.

As the regulations state explicitly: stablecoins pegged to legal tender perform currency-like functions and therefore implicate monetary sovereignty, making them subject to strict state control.

The CSRC Filing Regime: Threading the Needle​

While stablecoins face an iron wall, real-world asset tokenization has been granted a narrow, heavily regulated pathway forward. The CSRC's Regulatory Guidelines define "asset-backed security tokens backed by domestic assets" as tokenized rights certificates issued overseas using cash flows from domestic assets as repayment support, leveraging cryptographic and distributed ledger technologies.

The compliance requirements are extensive:

Mandatory Filing Before Issuance​

Domestic entities that control underlying assets must file a report with the CSRC before engaging in overseas issuance of asset-backed security tokens. This filing must be submitted to the Asset Management Association of China (AMAC) within five working days of establishing a special purpose vehicle (SPV).

Comprehensive Disclosure Requirements​

The filing must include detailed documentation on:

  • Asset ownership and cash flow structure
  • Tokenization technology and security protocols
  • Offshore issuance jurisdiction and applicable laws
  • Financial and technical partners' compliance credentials
  • Risk management and investor protection mechanisms

Negative List Restrictions​

While the full negative list hasn't been publicly detailed, the regulations explicitly exclude certain asset categories. The framework allows "genuine, compliant underlying assets" but targets regulatory arbitrage schemes—companies chasing market hype without real asset backing face exclusion.

Onshore Prohibition, Offshore Conditionality​

Onshore RWA tokenization activities are prohibited unless conducted through approved financial infrastructure with regulatory consent. However, authorities now allow companies to issue tokens overseas using Chinese assets as backing—opening a legal path for blockchain-based asset management, provided CSRC filing requirements are met.

Who Wins in This New Regime?​

The regulatory architecture creates clear winners and losers:

State-Owned Enterprises and Financial Institutions​

The biggest beneficiaries are entities with established regulatory relationships and proven compliance capabilities. Leading companies with genuine, compliant underlying assets and standardized operational capabilities may obtain business development opportunities through filing.

Major Chinese banks and SOEs can now explore tokenized bond issuance, asset-backed securities, and cross-border settlement using blockchain rails—provided they navigate the CSRC's stringent approval process.

Foreign Institutions with Chinese Asset Exposure​

Investment banks and asset managers holding Chinese real estate, infrastructure debt, or trade receivables can tokenize these assets offshore, potentially unlocking liquidity in traditionally illiquid markets. However, they must partner with compliant Chinese entities and satisfy disclosure requirements that effectively grant regulators visibility into every transaction layer.

Crypto Natives and DeFi Protocols​

The losers are decentralized finance protocols, algorithmic stablecoins, and permissionless tokenization platforms. The regulations make clear that RWA tokenization must occur on approved financial infrastructure, not public blockchains beyond state oversight.

Companies operating in gray areas—using Hong Kong or Singapore entities to tokenize mainland assets without CSRC approval—now face explicit prohibition and potential enforcement.

The Strategic Calculus: Why Now?​

China's timing reflects three converging pressures:

1. The E-CNY Competitive Imperative​

With interest-bearing digital yuan wallets launched in January 2026, the PBOC needs to eliminate competing payment alternatives. The Project mBridge platform has seen transaction volume surge to $55.49 billion, with digital yuan making up over 95% of settlement volume. Unauthorized yuan stablecoins threaten this momentum.

2. The Global RWA Boom​

The tokenized asset market has exploded, with projections estimating the sector could reach $10 trillion by 2030. China cannot afford to sit out this market entirely—but it also cannot tolerate uncontrolled tokenization of domestic assets that enables capital flight.

3. Regulatory Arbitrage Prevention​

Before these regulations, companies could technically tokenize Chinese real estate or trade invoices through offshore SPVs in Hong Kong or the Cayman Islands, effectively circumventing mainland oversight. The new CSRC filing requirement closes this loophole by requiring disclosure and approval regardless of offshore structuring.

Compliance in Practice: The Narrow Corridor​

What does the path forward actually look like for companies attempting compliant RWA issuance?

Step 1: Asset Qualification​

Confirm that your underlying assets are not on the negative list and generate verifiable cash flows. Speculative assets, virtual currencies as collateral, and structures designed primarily for regulatory arbitrage will be rejected.

Step 2: Establish SPV and File with AMAC​

Create a special purpose vehicle and file with the Asset Management Association of China within five working days. This filing replaces the historical CSRC approval requirement but still requires extensive documentation.

Step 3: CSRC Disclosure​

Submit comprehensive disclosure to the CSRC detailing asset ownership, tokenization technology, offshore jurisdiction, partner compliance credentials, and investor protection mechanisms.

Step 4: Approved Infrastructure​

Execute tokenization exclusively on infrastructure approved by Chinese regulators. Public blockchains like Ethereum or Solana do not qualify; regulated platforms with identity verification and transaction monitoring do.

Step 5: Ongoing Compliance and Reporting​

Maintain continuous reporting to the CSRC on issuance volume, secondary market trading, and investor composition. Be prepared for audits and heightened scrutiny if cross-border capital flows spike.

Implications for the Global Tokenization Market​

China's approach represents a third path distinct from both U.S. securities regulation and crypto-native permissionless models. Rather than treating tokenized assets as securities requiring full SEC-style registration or allowing DeFi protocols to operate freely, China opts for a state-supervised filing regime that grants conditional permission within tightly defined boundaries.

This model may appeal to other jurisdictions seeking to balance innovation with control—particularly emerging markets wary of capital flight but eager to tap global liquidity. We may see similar frameworks emerge in Southeast Asia, the Middle East, and Latin America.

For global asset managers, the message is clear: tokenizing Chinese assets is possible, but only through channels that grant Beijing full visibility and veto power. The "narrow corridor" is open—but it's very narrow indeed.

The Future: Supervised Tokenization as the New Normal?​

China's eight-department framework marks a decisive shift from prohibition to selective permission. The regulations signal that China shifts to categorized regulation, maintaining crackdown on virtual currency while integrating RWA into the formal financial system.

The core bet is that state-supervised tokenization can deliver blockchain's efficiency benefits—programmable settlement, fractional ownership, 24/7 markets—without ceding monetary sovereignty or enabling capital flight. Whether this vision proves sustainable depends on execution: Can the CSRC filing regime process applications efficiently? Will compliant RWA platforms attract genuine market adoption? Can China prevent offshore arbitrage while allowing legitimate cross-border flows?

Early indications suggest cautious optimism among institutional players. While China still blocks these activities domestically, authorities now allow companies to issue tokens overseas using Chinese assets as backing—opening a clear and legal path for businesses and investment banks to grow in blockchain-based asset management.

For builders in the RWA space, the calculus is straightforward: China represents the world's second-largest economy and a massive pool of tokenizable assets. Access to this market requires compliance with the CSRC framework—no shortcuts, no gray areas, and no illusions about operating beyond state oversight.

The eight-department ban didn't close the door on tokenization. It just made very clear who holds the keys.

Sources​

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