In February 2026, Chinese regulators issued a major policy called Document No. 42, marking a structural shift in how China regulates digital finance. This isn’t just another momentary ban — it is a systematic, categorized regulatory regime that separates crypto, stablecoins, and tokenized real-world assets (RWA) into distinct legal buckets.
1. Virtual Currencies Still Fully Banned
China reaffirmed that virtual currencies have no legal status as money. Activities such as trading, exchange, intermediaries, price services, mining, and crypto financial services are explicitly prohibited. All crypto transactions and services are treated as illegal financial conduct.
2. Stablecoins Under Tight Lockdown
For the first time, China’s regulators expanded the ban to include unapproved stablecoins including yuan-pegged tokens, both domestic and offshore, unless explicitly approved. This closes regulatory loopholes that previously allowed offshore stablecoin projects to operate with partial uncertainty.
3. RWA Tokenization Gets Its Own Rules
The big difference with Document 42 is the formal regulatory boundary between crypto and RWA. Instead of lumping real-world asset tokenization in with speculative crypto, regulators now treat RWA as a distinct financial business — but only if it complies with approved financial infrastructure and licensing. Unauthorized tokenization of assets remains illegal.
4. Compliance Path for Tokenization
Document 42, paired with new regulatory guidelines, provides a framework for compliant RWA issuance using blockchain or distributed ledger technology. Domestic entities can engage in tokenization on approved infrastructure and with necessary filings, which is a major step from the old “one-size-fits-all ban.”
5. What This Means for the Market
China continues its zero-tolerance stance on private crypto, but simultaneously draws clear lines:
• Crypto remains prohibited.
• Stablecoins are tightly regulated and largely banned without approval.
• RWA can exist as regulated financial activity on approved systems.
China isn’t reluctantly enforcing a ban — it’s formalizing a legal system that controls digital assets strictly and categorically.
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