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External Innovation vs. Internal Dilemma: Crypto Sailing Through the Fog
Original Title: External Innovations and Internal Dilemmas: Crypto Navigating Through Uncertainty
Original Author: YBB Capital Researcher Zeke
Chapter 1: AI is Inevitable, but Crypto x AI?
At the beginning of 2025, the DeepSeek created by Magic Square Quantification dropped a "nuclear bomb" on the AI community. A Chinese AI model, using only 2048 NVIDIA H800 GPUs with a training cost of $5.58 million (about one-tenth of Meta's), directly outperformed GPT-4o and Llama 3.1 in benchmark tests such as MMLU and GPQA, even slightly surpassing these top-tier Silicon Valley models in areas such as complex reasoning and Chinese semantic understanding. Despite the U.S.'s years-long chip blockade against China, the American fortress faced a dramatic deconstruction in the horsepower battlefield of DeepSeek. Under siege, the Chinese-style AI finally developed a technology path that was in line with the national conditions yet rivalled cutting-edge capabilities. An open-source, cost-effective, homogenous combination swiftly breached America's computational moat.
I have always had a stereotypical impression that Chinese tech products, which perennially lag behind the U.S. in performance, are cheap and imitative. I believe this is also the intuitive perception of most people regarding Chinese internet products. However, this time, DeepSeek is indeed exceptional. Let's put aside, for now, whether the user experience is superior to subjective sensations like ChatGPT. Merely from the tense reactions in American politics and from the frequent mentions by tech giants, it is apparent that China is no longer playing the role of a mere technology follower this time. The global shockwave triggered by this event is also very strong.
Although my wallet was the first to be affected, to a certain extent, this was indeed a misjudgment of traditional AI development. Nevertheless, I would like to share my thoughts, particularly on DeepSeek's impact on Crypto.
1. NVIDIA suffered the most in this event. Firstly, its AI computing power demand was questioned, and secondly, NVIDIA's software-hardware unified computing architecture "CUDA" was bypassed. Friends familiar with the AI field should be no strangers to CUDA, which is one of the key cornerstones driving modern AI development. When developers of large models use NVIDIA GPUs, they generally do so based on CUDA. The use of CUDA lowers the bar for developers because some functions are already encapsulated in CUDA, obviating the need to worry about many details during use, although it certainly sacrifices execution efficiency.
Since CUDA is a general-purpose programming framework, it can lead to some loss of flexibility when training models. DeepSeek's approach is to directly use PTX (NVIDIA's intermediate instruction set architecture designed for the GPU) to bypass hardware limitations on training speed, which can shorten the training time. While other model training may take 10 days, DeepSeek can complete it in 5 days. This also means that if DeepSeek intends to adapt to domestically produced GPUs in the future, it will be more adept at hardware adaptation, potentially shaking NVIDIA's AI chip dominance. (This paragraph is taken from Future Asset Securities' analysis of DeepSeek's training process)
In addition to the impact of a stock price drop on the cryptocurrency market strongly associated with the U.S. stock market, I personally believe that, in the long run, it is actually a good thing for decentralized computing power projects. First, more individual GPUs will be able to contribute to the ecosystem in the future. Second, if DeepSeek's small yet powerful open-source model approach proves successful, it will force many AI companies to open-source their technologies. The demand for computing power for local deployment and secondary development will continue to grow. Looking at the hardware requirements of DeepSeek R1 ranging from a minimum of NVIDIA GeForce GTX 1660 Super to the 40 series, 50 series, and professional-grade A100, H800 GPUs, there will be opportunities to contribute excess computing power. For currently transparent decentralized computing power projects with somewhat redundant capacity, this may be an opportunity for a turnaround (of course, provided that the latency is low enough).
2. AI framework projects were the most hotly anticipated emerging track within Crypto before DeepSeek dropped its "nuclear bomb," and it was the last track I wrote about before the Spring Festival. Now, under the bombardment of DeepSeek, almost all of them are heading towards zero. After all, others can compete head-to-head with OpenAI for less than 6 million, while our leading projects worth tens of billions have not yet produced any AI Agents with practical value.
Since the era of inscriptions, we have almost obsessively pursued securitization. Currently, the cryptocurrency community's tolerance for securitization is quite open. AI framework projects that are not completely on-chain only need an open-source Github code repository and a social account to create a token. The cost of such "library coin" is that one must be prepared to accept the reduction blow of a traditional AI company's foil one day.
In the golden age of AI development, traditional internet companies will not only have DeepSeek as their trump card. The development of AI between the U.S. and China will only accelerate, and Crypto's integration into the upstream and downstream of AI will showcase the advantages of decentralization. Figuring out which direction to combine Crypto with AI to highlight decentralization's strengths and not be suddenly defeated by some mysterious AOE is the key issue. Broadly categorizing the Crypto x AI technical stack, we can divide it into the computing power layer, data layer, middleware layer, and application layer.
In the current landscape, I have always failed to see the necessity of Crypto's existence. However, looking from a future perspective, privacy and security could be a good angle to consider. After all, AI agents replacing or assisting human work has already become a reality today. The issue of how AI processes work data and personal data while ensuring privacy may be a problem that traditional internet companies cannot solve. Furthermore, if an AI agent has payment capabilities, ensuring the security of the wallet would also become a concern. Using blockchain as a compliance and audit layer for AI models should be our main direction for future development.
On the other hand, the question is what to incentivize and in which direction to incentivize. Incentives not only drive the computational layer and model sharing but also teach AI how to interact with the virtual world. Unlike language models trained on decades of worldwide internet textual data, teaching AI how to act correctly requires continuous human annotation. It's like teaching a vision model to recognize what is an animal and what is a car. This task cannot be accomplished simply by outsourcing to a group of college students. Fostering an AI agent capable of interacting with the virtual world requires a complex decentralized network, where numerous individual humans teach AI. This is also a direction. I have elaborated more on this point in my previous articles. What else can be done around incentives?
Combining DeFi with AI to teach intelligent agents to interact with reality, incentivizing AI to gain attention, incentivizing AI-related creations (such as Bittensor's incentive mechanism is a good example), and having a token incentive mechanism automatically adjusted by AI (derived from a question I raised in a previous article, where I stated: When a decentralized project becomes massive and enters the mainstream. concerning its inflation-deflation mechanism, should it rely on code with simple rules, listen to a few or dozens of project members, or listen to those influential figures? Oh, right, we also have governance tokens. However, governance tokens are meaningless before solving the Sybil problem. Democratic voting can never truly reflect governance proposals, as a few wallets held by a16z can veto a large community's approval votes. Then what's the point of voting? etc.)
We indeed cannot aggregate a group of top-tier AI talents like traditional internet companies, purchase or rent a large-scale GPU cluster for training, and dream of recreating a DeepMind within the blockchain space. The meaning of Crypto's existence lies in bestowing another field with the irreplaceable decentralized attribute, much like how we once endowed finance with freedom. AI is humanity's inevitable narrative, but what role can Crypto truly play in it?
3. This is the first time I have mentioned Wordcoin in an article. The cryptographic utopia project initiated by Sam Altman seems somewhat absurd even now when I think about it. Whether to input your iris seems to mean you need to make a choice between national surveillance and corporate surveillance, as if you were in the Matrix deciding whether to take the red pill or the blue pill.
However, the concept of universal basic income or inclusive finance no longer seems like a joke at this stage. The ability to locally deploy DeepSeek, which rivals cutting-edge large models, has already enabled AI to appear in Chinese hospitals and government agencies. According to McKinsey's 2024 forecast report, up to 50% of jobs could be replaced by AI in the next six years. Future versions of Wordcoin might even be issued by the government, and if this trend intensifies, the related tokens for inclusive finance could also see widespread adoption and repeated hype. Considering a window of five to six years, which coincides with Trump's term, could this crypto president issue a similar token? I believe it is highly possible.
4. Based on recent statements by Elon Musk, AI may dominate the Nobel Prize for the next 25 years. Therefore, I find it more interesting and effective to drive AI research through blockchain fundraising (or even contribute resources such as computing power, storage, methods, etc.) than the current DeSci. Perhaps I could call it Decentralized AI Science? That is, DeAIS.
II. Meme Coin is No Longer Just a Meme
Previously, our analysis of Meme Coins revolved around subcultures, community consensus, and virality. However, as I sit in front of GMGN, my daily analysis now focuses on conspiracy groups, rug pulls, and developer exit scams. When a contract address is shared in various community groups, it's a moment of reckoning. Today's meme culture is more absurd than ever before, and in the current Pump.fun environment, it's challenging to find a token that allows you to sleep soundly. You might just step away for a moment, and the chart will plummet.
The continuously simplified asset issuance process and the high degree of anonymity in blockchain have fueled this frenzied gambling culture, where an unknown project team can treat the crypto world as an ATM. The evolution of memes has become increasingly arbitrary, covering not only meme coins based on algorithms but anything from events to individuals and even AI.
Without a cultural core and consensus cohesion, so-called pioneering projects can be forgotten in just a few weeks. The wave of celebrity coins starting from Trump lasted only a month. Following a tweet from President Mile, billions of funds once again flowed out of Sol to the outside world, marking the beginning of the meme culture's decline. President Mile's response to this was simple: delete the tweet and reply to everyone, "I have no knowledge of this."
The rapid development of AI has taken away too much attention from this world, making it difficult for technocrats to progress. Retail investors who have abandoned value investing can only gamble in a bear trap, believing they are among the few lucky ones. The increasingly scarce liquidity is repeatedly drained, reflected in the continual red candles on both Cex and Dex platforms, as well as the disdain of traditional capital and outsiders towards altcoins.
III. Continuing to Dig for Abandoned Swords
The periodic law has clearly failed, and all efforts to dig for the sword have been in vain. A bull run for BTC does not mean a bull run for altcoins, but a bear run for BTC definitely means a bear run for altcoins. Our understanding of altcoins must be revolutionized; the altcoin market is no longer one that can be supported by just a whitepaper. A large project listed on a top-tier CEX must be mature enough to sustain its own price.
Reflecting on the seven years of token growth, in 2017, there were fewer than 2,000 listed tokens in the market, while in 2024, the number of listed tokens has approached 25,000 (data from CoinGecko, including delisted tokens). The exponential expansion of tokens is essentially the irreversible evolution of the blockchain's low-entropy value system into a high-entropy noise system. While in 2017, each token embodied the ideal of "disrupting the world," by 2024, tokens have evolved into chips for liquidity exit. The emergence of more tokens has not brought about more innovation and real-world adoption, but the sky-high valuations of flagship projects have exponentially increased the market's liquidity demands.
As mentioned earlier, without recognition from the external world, retail investors cannot support the valuations of these projects. The listing of most altcoin projects often marks the historical all-time high, with Binance being the final stop. The crypto space needs an innovation; flagship projects should be able to justify their massive funding, and Bybit's experiment with publicly disclosing project financial reports may be a solution. However, in my humble opinion, the market needs a deep bear market to reshape the valuation system and listing standards of current altcoin projects.
IV. Confusion
I once saw a glimmer of light on Ton, thinking that the beginning of consumer-grade Crypto applications had arrived. However, this brief light faded away and vanished with the trend of Tap to Earn. Five years ago, the liquidity mining derived from DeFi brought the crypto space to an unparalleled peak, yet after five years, our only successful area is still DeFi.
The topics of conversation among insiders today are very simple: Have you bought BTC? Have you shorted? Give me a CA. Everyone is perplexed; we can no longer find the right direction. Aside from BTC, holding any token causes sleepless nights. Diamond Hands is not a term of praise today; if you don't buy BTC, it's more like a synonym for a fool.
When I open various crypto media on my phone, it feels like reading The New York Times and tabloids, with all phenomena reflecting that most of the hope in this circle has been placed on policies and eyeballs. From a VC's perspective, we may only invest in utility products in the future, where an asset issuance platform becomes a tool vendor, a rent collector, just to survive.
Epilogue
Clearly, this is not the situation we would like to see. Although the current state of Crypto seems to be lost in a fog of uncertainty, the success of DeepSeek has proven to us that innovation is still the most effective way to break through the current dilemma. Crypto is currently in the best-ever policy environment, with the highest level of attention, funding, and robust infrastructure. In the near future, there will be many more altcoin ETFs that can inject liquidity back into the market. We are clearly in the mainstream, but we are trapped within our own walls. The ebb of the Meme Coin wave may be hiding a turning point, and the future of humanity may not be just AI.
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China's Central Bank and Eight Other Departments' Latest Regulatory Focus: Key Attention to RWA Tokenized Asset Risk
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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