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From tax-free havens to heavily taxed areas, a panoramic view of crypto taxation in Asia
Original title: Cryptocurrency Taxation in Asia: Bullish or Bearish?
Original source: Tiger Research
Original translation: TechFlow
TL;DR
· Tax policies in various countries take various forms, including tax exemptions, progressive tax systems, flat tax rates, transitional programs, and transaction-based taxation, which reflects the different economic strategies and policy priorities of each country.
· Governments hope to increase fiscal revenue through taxation, while investors are worried that excessive tax burdens will affect profitability. This contradiction has led to capital outflows to overseas exchanges.
· To achieve the success of cryptocurrency tax policies, balanced policies must be formulated that not only focus on tax revenue but also promote the healthy development of the market.
1. Cryptocurrency trading and taxation
Since the birth of the cryptocurrency market, the issue of taxation on its transactions has always been a focus of debate. The core contradiction lies in the different positions of the government and investors: the government hopes to increase fiscal revenue through taxation, while investors are worried that excessive tax burdens will reduce investment returns.
Nevertheless, as a core component of the modern economic system, taxation is not only an important source of government revenue, but also a key mechanism to promote market development. For the cryptocurrency market, taxation policies are highly expected, mainly reflected in the following three aspects:
First, taxation can help establish a standardized market. Taking the stock market as an example, the imposition of transaction or profit taxes often means that assets are officially recognized, thereby providing a stable basis for market activities.
Second, taxation can enhance investor protection. For example, the United States passed the Consumer Financial Protection Act in 2010 and established the Consumer Financial Protection Bureau (CFPB) to protect the rights and interests of investors. In the Web3 market, reasonable tax policies and regulations can limit arbitrary product issuance and misleading advertising, thereby reducing fraud and protecting the legitimate rights and interests of investors.
Finally, tax policies can accelerate the integration of cryptocurrencies with the traditional financial system by clarifying the legal status of cryptocurrencies. This integration helps to enhance market stability and investor trust.
However, due to the uniqueness of the cryptocurrency market, it is difficult to fully achieve these positive effects by simply drawing on the experience of the stock market. With the rapid expansion of the cryptocurrency market, many current tax systems have been criticized as "predatory" means of value extraction, which has also exacerbated the conflict between the government and investors.
Against this backdrop, this report will analyze the cryptocurrency tax policies of major Asian countries and explore the implementation of the above three roles (market standardization, investor protection, and system integration) in these countries. Through multi-angle analysis, this report hopes to provide a more comprehensive perspective for governments and investors.
2. Comparative Analysis of Cryptocurrency Taxation in Major Asian Markets
Source: X
After analyzing the cryptocurrency tax policies of major Asian countries, five different policy models can be found. These differences reflect different considerations in economic structure and policy priorities of various countries.
For example, Singapore exempts capital gains tax and only imposes a 17% income tax on cryptocurrencies that are recognized as business income. This flexible policy not only reduces the tax burden on investors, but also consolidates Singapore's position as a global cryptocurrency center. Similarly, Hong Kong is studying tax exemptions for investment income from hedge funds and family offices to further attract institutional investors.
In contrast, Japan has adopted a very different high tax rate policy, imposing a tax rate of up to 55% on cryptocurrency transactions in order to curb speculation in the market. However, as the market changes, Japan is also considering a proposal to reduce the tax rate to 20%, which may mark a change in the direction of its tax policy, and may pay more attention to the long-term development of the market in the future.
2.1. Tax-free countries: Singapore, Hong Kong, Malaysia
Singapore, Hong Kong and Malaysia, as important financial centers in Asia, have implemented tax exemption policies for capital gains on cryptocurrencies. This policy continues the consistent economic strategy of these countries.
The tax exemption policies of these countries are in line with the practices of their traditional financial systems. For a long time, they have attracted a large amount of international capital through low tax rates (such as exemption of capital gains tax on stock investment). Today, this policy has been extended to the field of cryptocurrency, reflecting the stability of the policy and adherence to economic principles.
This strategy has achieved remarkable results. For example, Singapore became the largest cryptocurrency trading center in Asia in 2021. Since investment income is tax-free, it has attracted a large number of investors to actively participate in the market, promoting the rapid development of the market.
However, the tax-free policy also faces certain challenges. First, the market may be overheated due to speculation, and second, the government's direct tax revenue may be reduced as a result. To cope with these problems, these countries have taken other measures, such as obtaining indirect tax revenue through the expansion of the financial services industry and ensuring the stability of the market through strict supervision of exchanges and financial institutions.
2.2. Countries with progressive tax systems: Japan and Thailand
Japan and Thailand adopt high progressive tax rates on cryptocurrency trading profits. This policy reflects a broader social goal of "wealth redistribution" by taxing high-income groups. In Japan, the highest tax rate is as high as 55%, which is consistent with the tax policy of traditional financial assets.
However, high tax rate policies also bring significant disadvantages. The most prominent problem is "capital flight", that is, investors transfer assets to tax-free areas such as Singapore, Hong Kong or Dubai. In addition, high tax burdens may inhibit market vitality and growth. These issues have attracted the attention of regulators and may prompt policy adjustments.
2.3. Countries with a uniform tax rate: India
Source: ISH News Youtube
India imposes a uniform tax rate of 30% on cryptocurrency trading profits. This policy is different from the progressive tax system in the traditional financial market, and is more based on administrative efficiency and market transparency.
This policy has brought the following significant effects. First, the tax system is simple and clear, which reduces the administrative burden on taxpayers and tax authorities. Second, all transactions are subject to the same tax rate, which effectively reduces the possibility of split transactions or tax evasion.
However, the uniform tax rate also has obvious shortcomings. For small investors, even small gains are subject to a 30% tax, which undoubtedly increases their investment burden. In addition, applying the same tax rate to high-income and low-income groups has also sparked controversy over tax fairness.
The Indian government has taken note of these issues and is exploring solutions. For example, the government is considering lowering the tax rate for small transactions or providing tax incentives for long-term holders. These adjustments are intended to retain the advantages of a unified tax system while promoting balanced market development.
2.4. Transitional Policy: South Korea
Source: Kyunghyang Shinmun
South Korea has taken a more cautious approach to cryptocurrency taxation, reflecting the high degree of uncertainty in the crypto market. For example, the financial investment income tax originally scheduled for 2021 was postponed to 2025, while the implementation of cryptocurrency taxation was further postponed to 2027.
This transitional policy shows obvious advantages. On the one hand, it provides time and space for the market to develop naturally; on the other hand, it also provides a valuable window for South Korea to observe the policy implementation effects of other countries and global regulatory trends. By analyzing the experiences of Japan and Singapore, South Korea hopes to establish a more complete tax system based on the lessons learned from others.
However, this strategy is also accompanied by certain challenges. During the period before the policy is implemented, the lack of a clear tax system may lead to increased uncertainty among market participants and may trigger speculative overheating. In addition, due to the imperfect regulatory infrastructure, the protection of investors' rights and interests may be affected, which may hinder the long-term healthy development of the market to a certain extent.
2.5. Transaction-based taxation: Indonesia
Indonesia has adopted a unique transaction-based taxation system, which is in sharp contrast to other Asian countries. The policy will be implemented from May 2022 and imposes 0.1% income tax and 0.11% value-added tax (VAT) on each transaction. This is part of the reforms to modernize Indonesia's financial markets.
This transaction-based tax system improves market transparency by simplifying tax procedures through a low and uniform tax rate and encouraging investors to use licensed exchanges. Since the policy was implemented, the trading volume of licensed exchanges has increased significantly, showing the positive effect of the policy.
However, this system also has its shortcomings. Similar to India, the flat tax rate imposes a greater burden on small-scale traders. For frequent traders, the cumulative tax costs may be quite high, raising concerns about reduced market liquidity.
To address these issues, the Indonesian government plans to further optimize the policy based on market feedback. Measures currently under consideration include reducing the tax rate for small transactions and providing tax incentives for long-term investors. These adjustments are intended to retain the advantages of transaction-based taxation while addressing its potential shortcomings.
3. Conflict between investors and governments
Although cryptocurrency tax policies vary from country to country, conflicts between governments and investors are a common problem. This conflict not only stems from taxation itself, but also reflects the different understandings of the nature of digital assets between the two parties.
Governments generally view cryptocurrency trading profits as a new source of tax revenue, especially as the COVID-19 pandemic exacerbates fiscal deficits. The rapid growth of the cryptocurrency market provides governments with an opportunity to obtain stable income. For example, Japan adopts a progressive tax rate of up to 55%, while India has a uniform tax rate of 30%, which shows that governments attach great importance to cryptocurrency taxation.
Source: GMB Labs
However, from an investor’s perspective, excessively high tax rates are seen as an impediment to market development. The higher tax burden compared to traditional financial products, coupled with the cumulative tax costs from frequent trading, together dampen investor enthusiasm. As a result, capital flight has become a major issue. Many investors have chosen to transfer their assets to overseas trading platforms such as Binance, or to tax-free areas such as Singapore and Hong Kong. This suggests that governments’ attempts to increase revenue through taxation may be counterproductive.
Furthermore, some countries have focused too much on taxation itself and neglected policies to support market development, further exacerbating the conflict. Investors often view this approach as short-sighted and overly restrictive.
Therefore, it is particularly important to find a new balance between governments and investors. Solving this problem requires not only adjusting tax rates, but also introducing innovative policies that can promote the healthy development of the market while ensuring reasonable tax revenue. How to achieve this balance will be a key challenge for governments in the coming years.
4. Market revitalization policies and activation strategies at the national level
Cryptocurrency taxation has both a promoting effect on market development and certain challenges. Some countries promote market institutionalization and innovation through tax policies, while others have led to market stagnation and talent loss due to high tax rates and complex regulations.
Singapore is a model of successful market activation. By exempting capital gains tax, Singapore not only provides systematic support for blockchain companies, but also provides a trial environment for innovative companies through regulatory sandboxes. This comprehensive policy has enabled Singapore to take a leading position in the Asian cryptocurrency market.
Hong Kong has also adopted an active market development strategy. While continuing to exempt individual investors from tax, Hong Kong has expanded the scope of licensing for digital asset management companies. In particular, from 2024, Hong Kong will allow qualified institutional investors to participate in the trading of cryptocurrency ETFs, which will help further attract market participants.
In contrast, the high tax rates and complex tax systems in some countries have become obstacles to market development. For example, many investors transfer their assets overseas due to excessive tax burdens, which not only leads to the loss of innovative companies and technical talents, but may also weaken the long-term competitiveness of these countries in the field of digital finance.
Therefore, a successful cryptocurrency tax policy needs to find a balance between tax revenue and market development. The government should not only focus on short-term tax goals, but also on how to build a healthy and sustainable market ecosystem. In the future, countries need to continuously adjust relevant policies based on market feedback to achieve this critical balance.
5. Conclusion
Taxation of cryptocurrencies is an inevitable process for the development of the digital asset market. However, whether tax policies can truly stabilize the market requires more prudent evaluation. Although some people believe that transaction taxes can curb speculative transactions and reduce market volatility, historical experience shows that these effects are often difficult to achieve.
A typical example is Sweden in 1986. At that time, the Swedish government increased the financial transaction tax from 50 basis points to 100 basis points (1 basis point is 0.01%), resulting in a large number of stock transactions shifting to the UK market. Specifically, 60% of the trading volume of 11 major Swedish stocks moved to London, a phenomenon that shows that if the tax policy is not designed properly, it may have an adverse impact on the domestic market.
Therefore, both the government and investors need to carefully evaluate the actual impact of tax policies. The government should go beyond the goal of simply pursuing tax revenue and pay more attention to how to cultivate a healthy and sustainable market environment. For investors, the implementation of tax policies can also be seen as an opportunity to promote a more institutionalized market, thereby promoting a more stable and mature investment environment.
Ultimately, the success of cryptocurrency tax policies depends on whether the government and market participants can find a balance. This is not just a matter of adjusting tax rates, but a major challenge regarding the long-term development direction of the digital asset market.
Disclaimer
This report is based on materials believed to be reliable. However, we cannot guarantee the accuracy, completeness and applicability of the information, either expressly or impliedly. We are not responsible for any losses arising from the use of this report or its contents. The conclusions and recommendations in this report are based on information at the time of preparation and may change without notice. All opinions, forecasts and targets in this report are subject to change at any time and may conflict with the opinions of other individuals or organizations.
This document is for reference only and should not be regarded as legal, business, investment or tax advice. Any securities or digital assets mentioned are for illustration only and do not constitute investment advice or an offer to provide investment services. This material is not intended for investors or potential investors.
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Foreword: Today, the People's Bank of China's website published the "Notice of the People's Bank of China, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration for Market Regulation, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, State Administration of Foreign Exchange on Further Preventing and Dealing with Risks Related to Virtual Currency and Others (Yinfa [2026] No. 42)", the latest regulatory requirements from the eight departments including the central bank, which are basically consistent with the regulatory requirements of recent years. The main focus of the regulation is on speculative activities such as virtual currency trading, exchanges, ICOs, overseas platform services, and this time, regulatory oversight of RWA has been added, explicitly prohibiting RWA tokenization, stablecoins (especially those pegged to the RMB). The following is the full text:
To the people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government, the Xinjiang Production and Construction Corps:
Recently, there have been speculative activities related to virtual currency and Real-World Assets (RWA) tokenization, disrupting the economic and financial order and jeopardizing the property security of the people. In order to further prevent and address the risks related to virtual currency and Real-World Assets tokenization, effectively safeguard national security and social stability, in accordance with the "Law of the People's Republic of China on the People's Bank of China," "Law of the People's Republic of China on Commercial Banks," "Securities Law of the People's Republic of China," "Law of the People's Republic of China on Securities Investment Funds," "Law of the People's Republic of China on Futures and Derivatives," "Cybersecurity Law of the People's Republic of China," "Regulations of the People's Republic of China on the Administration of Renminbi," "Regulations on Prevention and Disposal of Illegal Fundraising," "Regulations of the People's Republic of China on Foreign Exchange Administration," "Telecommunications Regulations of the People's Republic of China," and other provisions, after reaching consensus with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, and with the approval of the State Council, the relevant matters are notified as follows:
(I) Virtual currency does not possess the legal status equivalent to fiat currency. Virtual currencies such as Bitcoin, Ether, Tether, etc., have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed ledger or similar technology, existing in digital form, etc. They do not have legal tender status, should not and cannot be circulated and used as currency in the market.
The business activities related to virtual currency are classified as illegal financial activities. The exchange of fiat currency and virtual currency within the territory, exchange of virtual currencies, acting as a central counterparty in buying and selling virtual currencies, providing information intermediary and pricing services for virtual currency transactions, token issuance financing, and trading of virtual currency-related financial products, etc., fall under illegal financial activities, such as suspected illegal issuance of token vouchers, unauthorized public issuance of securities, illegal operation of securities and futures business, illegal fundraising, etc., are strictly prohibited across the board and resolutely banned in accordance with the law. Overseas entities and individuals are not allowed to provide virtual currency-related services to domestic entities in any form.
A stablecoin pegged to a fiat currency indirectly fulfills some functions of the fiat currency in circulation. Without the consent of relevant authorities in accordance with the law and regulations, any domestic or foreign entity or individual is not allowed to issue a RMB-pegged stablecoin overseas.
（II）Tokenization of Real-World Assets refers to the use of encryption technology and distributed ledger or similar technologies to transform ownership rights, income rights, etc., of assets into tokens (tokens) or other interests or bond certificates with token (token) characteristics, and carry out issuance and trading activities.
Engaging in the tokenization of real-world assets domestically, as well as providing related intermediary, information technology services, etc., which are suspected of illegal issuance of token vouchers, unauthorized public offering of securities, illegal operation of securities and futures business, illegal fundraising, and other illegal financial activities, shall be prohibited; except for relevant business activities carried out with the approval of the competent authorities in accordance with the law and regulations and relying on specific financial infrastructures. Overseas entities and individuals are not allowed to illegally provide services related to the tokenization of real-world assets to domestic entities in any form.
(III) Inter-agency Coordination. The People's Bank of China, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of virtual currency-related illegal financial activities.
The China Securities Regulatory Commission, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of illegal financial activities related to the tokenization of real-world assets.
(IV) Strengthening Local Implementation. The people's governments at the provincial level are overall responsible for the prevention and disposal of risks related to virtual currencies and the tokenization of real-world assets in their respective administrative regions. The specific leading department is the local financial regulatory department, with participation from branches and dispatched institutions of the State Council's financial regulatory department, telecommunications regulators, public security, market supervision, and other departments, in coordination with cyberspace departments, courts, and procuratorates, to improve the normalization of the work mechanism, effectively connect with the relevant work mechanisms of central departments, form a cooperative and coordinated working pattern between central and local governments, effectively prevent and properly handle risks related to virtual currencies and the tokenization of real-world assets, and maintain economic and financial order and social stability.
(5) Enhanced Risk Monitoring. The People's Bank of China, China Securities Regulatory Commission, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration of Foreign Exchange, Cyberspace Administration of China, and other departments continue to improve monitoring techniques and system support, enhance cross-departmental data analysis and sharing, establish sound information sharing and cross-validation mechanisms, promptly grasp the risk situation of activities related to virtual currency and real-world asset tokenization. Local governments at all levels give full play to the role of local monitoring and early warning mechanisms. Local financial regulatory authorities, together with branches and agencies of the State Council's financial regulatory authorities, as well as departments of cyberspace and public security, ensure effective connection between online monitoring, offline investigation, and fund tracking, efficiently and accurately identify activities related to virtual currency and real-world asset tokenization, promptly share risk information, improve early warning information dissemination, verification, and rapid response mechanisms.
(6) Strengthened Oversight of Financial Institutions, Intermediaries, and Technology Service Providers. Financial institutions (including non-bank payment institutions) are prohibited from providing account opening, fund transfer, and clearing services for virtual currency-related business activities, issuing and selling financial products related to virtual currency, including virtual currency and related financial products in the scope of collateral, conducting insurance business related to virtual currency, or including virtual currency in the scope of insurance liability. Financial institutions (including non-bank payment institutions) are prohibited from providing custody, clearing, and settlement services for unauthorized real-world asset tokenization-related business and related financial products. Relevant intermediary institutions and information technology service providers are prohibited from providing intermediary, technical, or other services for unauthorized real-world asset tokenization-related businesses and related financial products.
(7) Enhanced Management of Internet Information Content and Access. Internet enterprises are prohibited from providing online business venues, commercial displays, marketing, advertising, or paid traffic diversion services for virtual currency and real-world asset tokenization-related business activities. Upon discovering clues of illegal activities, they should promptly report to relevant departments and provide technical support and assistance for related investigations and inquiries. Based on the clues transferred by the financial regulatory authorities, the cyberspace administration, telecommunications authorities, and public security departments should promptly close and deal with websites, mobile applications (including mini-programs), and public accounts engaged in virtual currency and real-world asset tokenization-related business activities in accordance with the law.
(8) Strengthened Entity Registration and Advertisement Management. Market supervision departments strengthen entity registration and management, and enterprise and individual business registrations must not contain terms such as "virtual currency," "virtual asset," "cryptocurrency," "crypto asset," "stablecoin," "real-world asset tokenization," or "RWA" in their names or business scopes. Market supervision departments, together with financial regulatory authorities, legally enhance the supervision of advertisements related to virtual currency and real-world asset tokenization, promptly investigating and handling relevant illegal advertisements.
（IX） Continued Rectification of Virtual Currency Mining Activities. The National Development and Reform Commission, together with relevant departments, strictly controls virtual currency mining activities, continuously promotes the rectification of virtual currency mining activities. The people's governments of various provinces take overall responsibility for the rectification of "mining" within their respective administrative regions. In accordance with the requirements of the National Development and Reform Commission and other departments in the "Notice on the Rectification of Virtual Currency Mining Activities" (NDRC Energy-saving Building [2021] No. 1283) and the provisions of the "Guidance Catalog for Industrial Structure Adjustment (2024 Edition)," a comprehensive review, investigation, and closure of existing virtual currency mining projects are conducted, new mining projects are strictly prohibited, and mining machine production enterprises are strictly prohibited from providing mining machine sales and other services within the country.
（X） Severe Crackdown on Related Illegal Financial Activities. Upon discovering clues to illegal financial activities related to virtual currency and the tokenization of real-world assets, local financial regulatory authorities, branches of the State Council's financial regulatory authorities, and other relevant departments promptly investigate, determine, and properly handle the issues in accordance with the law, and seriously hold the relevant entities and individuals legally responsible. Those suspected of crimes are transferred to the judicial authorities for processing according to the law.
（XI） Severe Crackdown on Related Illegal and Criminal Activities. The Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, as well as judicial and procuratorial organs, in accordance with their respective responsibilities, rigorously crack down on illegal and criminal activities related to virtual currency, the tokenization of real-world assets, such as fraud, money laundering, illegal business operations, pyramid schemes, illegal fundraising, and other illegal and criminal activities carried out under the guise of virtual currency, the tokenization of real-world assets, etc.
（XII） Strengthen Industry Self-discipline. Relevant industry associations should enhance membership management and policy advocacy, based on their own responsibilities, advocate and urge member units to resist illegal financial activities related to virtual currency and the tokenization of real-world assets. Member units that violate regulatory policies and industry self-discipline rules are to be disciplined in accordance with relevant self-regulatory management regulations. By leveraging various industry infrastructure, conduct risk monitoring related to virtual currency, the tokenization of real-world assets, and promptly transfer issue clues to relevant departments.
（XIII） Without the approval of relevant departments in accordance with the law and regulations, domestic entities and foreign entities controlled by them may not issue virtual currency overseas.
（XIV） Domestic entities engaging directly or indirectly in overseas external debt-based tokenization of real-world assets, or conducting asset securitization activities abroad based on domestic ownership rights, income rights, etc. (hereinafter referred to as domestic equity), should be strictly regulated in accordance with the principles of "same business, same risk, same rules." The National Development and Reform Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other relevant departments regulate it according to their respective responsibilities. For other forms of overseas real-world asset tokenization activities based on domestic equity by domestic entities, the China Securities Regulatory Commission, together with relevant departments, supervise according to their division of responsibilities. Without the consent and filing of relevant departments, no unit or individual may engage in the above-mentioned business.
(15) Overseas subsidiaries and branches of domestic financial institutions providing Real World Asset Tokenization-related services overseas shall do so legally and prudently. They shall have professional personnel and systems in place to effectively mitigate business risks, strictly implement customer onboarding, suitability management, anti-money laundering requirements, and incorporate them into the domestic financial institutions' compliance and risk management system. Intermediaries and information technology service providers offering Real World Asset Tokenization services abroad based on domestic equity or conducting Real World Asset Tokenization business in the form of overseas debt for domestic entities directly or indirectly venturing abroad must strictly comply with relevant laws and regulations. They should establish and improve relevant compliance and internal control systems in accordance with relevant normative requirements, strengthen business and risk control, and report the business developments to the relevant regulatory authorities for approval or filing.
(16) Strengthen organizational leadership and overall coordination. All departments and regions should attach great importance to the prevention of risks related to virtual currencies and Real World Asset Tokenization, strengthen organizational leadership, clarify work responsibilities, form a long-term effective working mechanism with centralized coordination, local implementation, and shared responsibilities, maintain high pressure, dynamically monitor risks, effectively prevent and mitigate risks in an orderly and efficient manner, legally protect the property security of the people, and make every effort to maintain economic and financial order and social stability.
(17) Widely carry out publicity and education. All departments, regions, and industry associations should make full use of various media and other communication channels to disseminate information through legal and policy interpretation, analysis of typical cases, and education on investment risks, etc. They should promote the illegality and harm of virtual currencies and Real World Asset Tokenization-related businesses and their manifestations, fully alert to potential risks and hidden dangers, and enhance public awareness and identification capabilities for risk prevention.
(18) Engaging in illegal financial activities related to virtual currencies and Real World Asset Tokenization in violation of this notice, as well as providing services for virtual currencies and Real World Asset Tokenization-related businesses, shall be punished in accordance with relevant regulations. If it constitutes a crime, criminal liability shall be pursued according to the law. For domestic entities and individuals who knowingly or should have known that overseas entities illegally provided virtual currency or Real World Asset Tokenization-related services to domestic entities and still assisted them, relevant responsibilities shall be pursued according to the law. If it constitutes a crime, criminal liability shall be pursued according to the law.
(19) If any unit or individual invests in virtual currencies, Real World Asset Tokens, and related financial products against public order and good customs, the relevant civil legal actions shall be invalid, and any resulting losses shall be borne by them. If there are suspicions of disrupting financial order and jeopardizing financial security, the relevant departments shall deal with them according to the law.
This notice shall enter into force upon the date of its issuance. The People's Bank of China and ten other departments' "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (Yinfa [2021] No. 237) is hereby repealed.
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Foreword: Today, the People's Bank of China's website published the "Notice of the People's Bank of China, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration for Market Regulation, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, State Administration of Foreign Exchange on Further Preventing and Dealing with Risks Related to Virtual Currency and Others (Yinfa [2026] No. 42)", the latest regulatory requirements from the eight departments including the central bank, which are basically consistent with the regulatory requirements of recent years. The main focus of the regulation is on speculative activities such as virtual currency trading, exchanges, ICOs, overseas platform services, and this time, regulatory oversight of RWA has been added, explicitly prohibiting RWA tokenization, stablecoins (especially those pegged to the RMB). The following is the full text:
To the people's governments of all provinces, autonomous regions, and municipalities directly under the Central Government, the Xinjiang Production and Construction Corps:
Recently, there have been speculative activities related to virtual currency and Real-World Assets (RWA) tokenization, disrupting the economic and financial order and jeopardizing the property security of the people. In order to further prevent and address the risks related to virtual currency and Real-World Assets tokenization, effectively safeguard national security and social stability, in accordance with the "Law of the People's Republic of China on the People's Bank of China," "Law of the People's Republic of China on Commercial Banks," "Securities Law of the People's Republic of China," "Law of the People's Republic of China on Securities Investment Funds," "Law of the People's Republic of China on Futures and Derivatives," "Cybersecurity Law of the People's Republic of China," "Regulations of the People's Republic of China on the Administration of Renminbi," "Regulations on Prevention and Disposal of Illegal Fundraising," "Regulations of the People's Republic of China on Foreign Exchange Administration," "Telecommunications Regulations of the People's Republic of China," and other provisions, after reaching consensus with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, and with the approval of the State Council, the relevant matters are notified as follows:
(I) Virtual currency does not possess the legal status equivalent to fiat currency. Virtual currencies such as Bitcoin, Ether, Tether, etc., have the main characteristics of being issued by non-monetary authorities, using encryption technology and distributed ledger or similar technology, existing in digital form, etc. They do not have legal tender status, should not and cannot be circulated and used as currency in the market.
The business activities related to virtual currency are classified as illegal financial activities. The exchange of fiat currency and virtual currency within the territory, exchange of virtual currencies, acting as a central counterparty in buying and selling virtual currencies, providing information intermediary and pricing services for virtual currency transactions, token issuance financing, and trading of virtual currency-related financial products, etc., fall under illegal financial activities, such as suspected illegal issuance of token vouchers, unauthorized public issuance of securities, illegal operation of securities and futures business, illegal fundraising, etc., are strictly prohibited across the board and resolutely banned in accordance with the law. Overseas entities and individuals are not allowed to provide virtual currency-related services to domestic entities in any form.
A stablecoin pegged to a fiat currency indirectly fulfills some functions of the fiat currency in circulation. Without the consent of relevant authorities in accordance with the law and regulations, any domestic or foreign entity or individual is not allowed to issue a RMB-pegged stablecoin overseas.
（II）Tokenization of Real-World Assets refers to the use of encryption technology and distributed ledger or similar technologies to transform ownership rights, income rights, etc., of assets into tokens (tokens) or other interests or bond certificates with token (token) characteristics, and carry out issuance and trading activities.
Engaging in the tokenization of real-world assets domestically, as well as providing related intermediary, information technology services, etc., which are suspected of illegal issuance of token vouchers, unauthorized public offering of securities, illegal operation of securities and futures business, illegal fundraising, and other illegal financial activities, shall be prohibited; except for relevant business activities carried out with the approval of the competent authorities in accordance with the law and regulations and relying on specific financial infrastructures. Overseas entities and individuals are not allowed to illegally provide services related to the tokenization of real-world assets to domestic entities in any form.
(III) Inter-agency Coordination. The People's Bank of China, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of virtual currency-related illegal financial activities.
The China Securities Regulatory Commission, together with the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the State Administration of Foreign Exchange, and other departments, will improve the work mechanism, strengthen coordination with the Cyberspace Administration of China, the Supreme People's Court, and the Supreme People's Procuratorate, coordinate efforts, and overall guide regions to carry out risk prevention and disposal of illegal financial activities related to the tokenization of real-world assets.
(IV) Strengthening Local Implementation. The people's governments at the provincial level are overall responsible for the prevention and disposal of risks related to virtual currencies and the tokenization of real-world assets in their respective administrative regions. The specific leading department is the local financial regulatory department, with participation from branches and dispatched institutions of the State Council's financial regulatory department, telecommunications regulators, public security, market supervision, and other departments, in coordination with cyberspace departments, courts, and procuratorates, to improve the normalization of the work mechanism, effectively connect with the relevant work mechanisms of central departments, form a cooperative and coordinated working pattern between central and local governments, effectively prevent and properly handle risks related to virtual currencies and the tokenization of real-world assets, and maintain economic and financial order and social stability.
(5) Enhanced Risk Monitoring. The People's Bank of China, China Securities Regulatory Commission, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Public Security, State Administration of Foreign Exchange, Cyberspace Administration of China, and other departments continue to improve monitoring techniques and system support, enhance cross-departmental data analysis and sharing, establish sound information sharing and cross-validation mechanisms, promptly grasp the risk situation of activities related to virtual currency and real-world asset tokenization. Local governments at all levels give full play to the role of local monitoring and early warning mechanisms. Local financial regulatory authorities, together with branches and agencies of the State Council's financial regulatory authorities, as well as departments of cyberspace and public security, ensure effective connection between online monitoring, offline investigation, and fund tracking, efficiently and accurately identify activities related to virtual currency and real-world asset tokenization, promptly share risk information, improve early warning information dissemination, verification, and rapid response mechanisms.
(6) Strengthened Oversight of Financial Institutions, Intermediaries, and Technology Service Providers. Financial institutions (including non-bank payment institutions) are prohibited from providing account opening, fund transfer, and clearing services for virtual currency-related business activities, issuing and selling financial products related to virtual currency, including virtual currency and related financial products in the scope of collateral, conducting insurance business related to virtual currency, or including virtual currency in the scope of insurance liability. Financial institutions (including non-bank payment institutions) are prohibited from providing custody, clearing, and settlement services for unauthorized real-world asset tokenization-related business and related financial products. Relevant intermediary institutions and information technology service providers are prohibited from providing intermediary, technical, or other services for unauthorized real-world asset tokenization-related businesses and related financial products.
(7) Enhanced Management of Internet Information Content and Access. Internet enterprises are prohibited from providing online business venues, commercial displays, marketing, advertising, or paid traffic diversion services for virtual currency and real-world asset tokenization-related business activities. Upon discovering clues of illegal activities, they should promptly report to relevant departments and provide technical support and assistance for related investigations and inquiries. Based on the clues transferred by the financial regulatory authorities, the cyberspace administration, telecommunications authorities, and public security departments should promptly close and deal with websites, mobile applications (including mini-programs), and public accounts engaged in virtual currency and real-world asset tokenization-related business activities in accordance with the law.
(8) Strengthened Entity Registration and Advertisement Management. Market supervision departments strengthen entity registration and management, and enterprise and individual business registrations must not contain terms such as "virtual currency," "virtual asset," "cryptocurrency," "crypto asset," "stablecoin," "real-world asset tokenization," or "RWA" in their names or business scopes. Market supervision departments, together with financial regulatory authorities, legally enhance the supervision of advertisements related to virtual currency and real-world asset tokenization, promptly investigating and handling relevant illegal advertisements.
（IX） Continued Rectification of Virtual Currency Mining Activities. The National Development and Reform Commission, together with relevant departments, strictly controls virtual currency mining activities, continuously promotes the rectification of virtual currency mining activities. The people's governments of various provinces take overall responsibility for the rectification of "mining" within their respective administrative regions. In accordance with the requirements of the National Development and Reform Commission and other departments in the "Notice on the Rectification of Virtual Currency Mining Activities" (NDRC Energy-saving Building [2021] No. 1283) and the provisions of the "Guidance Catalog for Industrial Structure Adjustment (2024 Edition)," a comprehensive review, investigation, and closure of existing virtual currency mining projects are conducted, new mining projects are strictly prohibited, and mining machine production enterprises are strictly prohibited from providing mining machine sales and other services within the country.
（X） Severe Crackdown on Related Illegal Financial Activities. Upon discovering clues to illegal financial activities related to virtual currency and the tokenization of real-world assets, local financial regulatory authorities, branches of the State Council's financial regulatory authorities, and other relevant departments promptly investigate, determine, and properly handle the issues in accordance with the law, and seriously hold the relevant entities and individuals legally responsible. Those suspected of crimes are transferred to the judicial authorities for processing according to the law.
（XI） Severe Crackdown on Related Illegal and Criminal Activities. The Ministry of Public Security, the People's Bank of China, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, as well as judicial and procuratorial organs, in accordance with their respective responsibilities, rigorously crack down on illegal and criminal activities related to virtual currency, the tokenization of real-world assets, such as fraud, money laundering, illegal business operations, pyramid schemes, illegal fundraising, and other illegal and criminal activities carried out under the guise of virtual currency, the tokenization of real-world assets, etc.
（XII） Strengthen Industry Self-discipline. Relevant industry associations should enhance membership management and policy advocacy, based on their own responsibilities, advocate and urge member units to resist illegal financial activities related to virtual currency and the tokenization of real-world assets. Member units that violate regulatory policies and industry self-discipline rules are to be disciplined in accordance with relevant self-regulatory management regulations. By leveraging various industry infrastructure, conduct risk monitoring related to virtual currency, the tokenization of real-world assets, and promptly transfer issue clues to relevant departments.
（XIII） Without the approval of relevant departments in accordance with the law and regulations, domestic entities and foreign entities controlled by them may not issue virtual currency overseas.
（XIV） Domestic entities engaging directly or indirectly in overseas external debt-based tokenization of real-world assets, or conducting asset securitization activities abroad based on domestic ownership rights, income rights, etc. (hereinafter referred to as domestic equity), should be strictly regulated in accordance with the principles of "same business, same risk, same rules." The National Development and Reform Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange, and other relevant departments regulate it according to their respective responsibilities. For other forms of overseas real-world asset tokenization activities based on domestic equity by domestic entities, the China Securities Regulatory Commission, together with relevant departments, supervise according to their division of responsibilities. Without the consent and filing of relevant departments, no unit or individual may engage in the above-mentioned business.
(15) Overseas subsidiaries and branches of domestic financial institutions providing Real World Asset Tokenization-related services overseas shall do so legally and prudently. They shall have professional personnel and systems in place to effectively mitigate business risks, strictly implement customer onboarding, suitability management, anti-money laundering requirements, and incorporate them into the domestic financial institutions' compliance and risk management system. Intermediaries and information technology service providers offering Real World Asset Tokenization services abroad based on domestic equity or conducting Real World Asset Tokenization business in the form of overseas debt for domestic entities directly or indirectly venturing abroad must strictly comply with relevant laws and regulations. They should establish and improve relevant compliance and internal control systems in accordance with relevant normative requirements, strengthen business and risk control, and report the business developments to the relevant regulatory authorities for approval or filing.
(16) Strengthen organizational leadership and overall coordination. All departments and regions should attach great importance to the prevention of risks related to virtual currencies and Real World Asset Tokenization, strengthen organizational leadership, clarify work responsibilities, form a long-term effective working mechanism with centralized coordination, local implementation, and shared responsibilities, maintain high pressure, dynamically monitor risks, effectively prevent and mitigate risks in an orderly and efficient manner, legally protect the property security of the people, and make every effort to maintain economic and financial order and social stability.
(17) Widely carry out publicity and education. All departments, regions, and industry associations should make full use of various media and other communication channels to disseminate information through legal and policy interpretation, analysis of typical cases, and education on investment risks, etc. They should promote the illegality and harm of virtual currencies and Real World Asset Tokenization-related businesses and their manifestations, fully alert to potential risks and hidden dangers, and enhance public awareness and identification capabilities for risk prevention.
(18) Engaging in illegal financial activities related to virtual currencies and Real World Asset Tokenization in violation of this notice, as well as providing services for virtual currencies and Real World Asset Tokenization-related businesses, shall be punished in accordance with relevant regulations. If it constitutes a crime, criminal liability shall be pursued according to the law. For domestic entities and individuals who knowingly or should have known that overseas entities illegally provided virtual currency or Real World Asset Tokenization-related services to domestic entities and still assisted them, relevant responsibilities shall be pursued according to the law. If it constitutes a crime, criminal liability shall be pursued according to the law.
(19) If any unit or individual invests in virtual currencies, Real World Asset Tokens, and related financial products against public order and good customs, the relevant civil legal actions shall be invalid, and any resulting losses shall be borne by them. If there are suspicions of disrupting financial order and jeopardizing financial security, the relevant departments shall deal with them according to the law.
This notice shall enter into force upon the date of its issuance. The People's Bank of China and ten other departments' "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (Yinfa [2021] No. 237) is hereby repealed.
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