Author: Lawyer Liu Honglin
Original link: https://mp.weixin.qq.com/s/31WnxyVQcTQEedSappEhnw
Disclaimer: This article is a reprint. Readers can obtain more information through the original link. If the author has any objection to the reprint format, please contact us and we will modify it according to the author's request. This reprint is for information sharing only and does not constitute any investment advice, nor does it represent Wu Blockchain views or positions.
After two documents about cryptocurrencies were released last night, they practically flooded social media.
I've seen many colleagues writing articles to interpret RWA, and I've also seen short videos where discussions about RWA by various organizations or teams are becoming increasingly popular.
In the first half, everyone was focused on the fact that the entire crypto world was about to tighten up, collapse, or crash; in the second half, China celebrated the Lunar New Year, and some people said that China could finally issue its own cryptocurrency. There were quite a few different opinions.
Last night I recorded a short video in the office, discussing my basic viewpoint: strictly speaking, there has indeed been a clear contraction. Many crypto asset or Web3-related businesses that were previously operating in the cracks in China are now facing significant challenges to their survival, such as mining. I also mentioned that China has finally left an opening in the RWA (Responsive Wireless Solutions) area. Of course, this statement may not be entirely accurate, because according to the China Securities Regulatory Commission (CSRC), it is actually not RWA, but rather called security tokenization. However, from an industry perspective, security tokenization may be one type within the broader RWA framework we are discussing.
Therefore, I think we don't need to be too rigid about the literal meaning; it's enough that everyone understands what the China Securities Regulatory Commission (CSRC) is trying to convey. Some reporters have also interviewed me about my personal views on these two documents.
In yesterday's short video, I mainly talked about RWA, but I personally think there are still many aspects of this regulatory document that can be interpreted.
So this short video might take me a little longer. I'll just use a phone to look at the full text of both documents and share my perspective with you.
More importantly, for those of us working in this industry, and based on what I've seen about business practices, is it still possible for us to operate in mainland China? If not, what should we do? This is probably what I want to discuss with you in this short video.
This video might be a little long, so if you're really interested in this topic, I suggest you save it for later.
First, we can look at the relevant topic of cryptocurrency risk prevention and management issued by eight ministries including the People's Bank of China. This is a report from the *Daily Economic News*. We can examine its points one by one.
The first interesting point is that it directly defines the tokenization attribute of real-world assets at the outset, which is quite subtle. Those familiar with Chinese regulations on crypto assets know that much has already been said about this, such as the equivalence of virtual currencies to fiat currencies and the lack of legal protection.
However, this should be another instance where Chinese regulators have defined the tokenization of real-world assets at the beginning of an article or regulatory document. So this is actually quite strange; from a Web3 perspective, RWA may simply be a commercial sector, and even that commercial application globally isn't as good as one might imagine.
I've discussed this with you on many occasions: there are actually different types of RWAs worldwide.
The first type, perhaps represented by the US financial market, involves tokenizing traditional financial assets. The most typical example is US stocks. We see many exchanges promoting this, whether they are full spot exchanges or full derivatives exchanges. This allows users on cryptocurrency trading platforms to not only buy and sell traditional crypto assets, but also to buy a significant amount of US stocks.
This is actually a sector with relatively high certainty that we see. Because there are still a large number of people around the world who want to own assets in the US capital market, but they may not be able to enjoy them under traditional securities accounts. So this is a relatively common sector or direction, and I am personally quite optimistic about it.
Secondly, within the Hong Kong framework, starting from the year before last, we've seen examples like Ant Financial, Langxin, GCL, and Xunying, among others. These business service providers offer assets from mainland China to qualified investors or investment institutions in Hong Kong. Of course, this only remains in the primary market and hasn't yet created liquidity in the secondary market.
Thirdly, from the perspective of financial risk prevention, Chinese regulators should pay the most attention to the large amount of mainland assets, funds, and users active within China, through various tokens such as NFTs, digital collectibles, or those issued under the RWA name. This third category is precisely what regulators should focus on preventing.
So, after the regulatory document was released last night, I saw a lot of people in the RWA field cheering on social media and short video platforms, saying they were ready to regroup and that this day had finally come. I personally think this is premature. Because the methods and tactics these people or these teams used to operate and manage fall under the category of illegal financial activities explicitly defined in the regulatory document.
The fact that this regulatory document places RWA (Real Asset Tokenization) at the very beginning indicates that, from a financial risk prevention perspective, it is primarily aimed at the third group of people, making their cheers all the more intriguing.
Therefore, Attorney Honglin strongly advises everyone to exercise extreme caution when conducting any RWA-related activities in mainland China, whether it's providing end-to-end business consulting, offering so-called token issuance technology solutions, conducting marketing, or directly selling products to end users. This carries extremely high risks in China. Placing this at the beginning of this document certainly has significant value and reasons.
The second point concerns inter-departmental collaboration. I've previously discussed why there will be two documents defining stablecoins and RWA by the end of 2025. The core issue is that Chinese regulatory authorities need to reach a consensus on crypto assets and blockchain. From a judicial perspective, the legal treatment of the crypto world is currently fragmented: from a civil law perspective, it belongs to the private property of citizens and should be protected; however, courts and government departments in different regions may have inconsistent views and understandings. The same situation might be protected in Shanghai but not in some other inland cities. Therefore, collaboration among multiple departments is necessary.
The core message of this document is that a collaborative mechanism needs to be established among the procuratorate, courts, the Cyberspace Administration of China, and financial institutions. This means that in cases or projects involving crypto assets and blockchain, all departments need to maintain consistency in their statements and actions.
Taking another document No. 1 issued by the China Securities Regulatory Commission (CSRC) as an example, in addition to understanding the relevant products as part of the securities regulatory framework, they also need to meet other relevant requirements from the Cyberspace Administration of China, financial regulatory authorities, and other relevant departments. This can be considered a cautious innovation.
Strengthening risk prevention departments also brings China's foreign exchange management into the picture. As we know, especially after the regulatory definition of stablecoins at the end of the year, a crucial regulatory direction is concerning OTC merchants. I have been strongly advising my partners who previously ran OTC businesses to take a break recently. The core focus of domestic attention on cryptocurrencies has shifted from "issuing tokens and ICOs to raise funds" to "being wary of raising funds through RWA." This is a key focus on preventing illegal fundraising and financial risks.
Another point of primary concern for regulators is capital outflow. With traditional methods becoming increasingly restricted, many are turning to stablecoins like USDT for cross-border fund transfers. From a regulatory perspective, this is a key area of focus.
Furthermore, we understand that since last year, there have been related projects or research directions that aim to use on-chain tracking combined with off-chain interbank fund flows to conduct big data screening and monitoring, thereby identifying the paths of related fund outflows.
Therefore, we have always conservatively believed that mainland China will not actually open up the cryptocurrency market. A crucial point is the issue of capital management regulations, which is something that everyone in the industry needs to focus on right now.
From this perspective, whether you're narrowly defined as an OTC merchant, or if you have related business needs and are facilitating matchmaking, or if you're using exchanges to offer trading guidance or rebates to get users to buy crypto assets through your channels and then transfer them out or use them for other purposes, the risks are too high, and we strongly advise against doing so.
At the same time, we also see some restrictions on intermediaries and related service groups. I think this is quite business-oriented, because the reason why such a regulatory document is so detailed is because it focuses on and describes a large number of micro-level scenarios within the industry. For example, it even mentions that virtual currencies and related financial products cannot be included in the scope of collateral or pledges; and that insurance business related to virtual currencies cannot be carried out, etc.
I'm not sure how everyone will interpret this statement. Because we know that some people in the OTC market are using a different phrasing, saying, "I'm lending you money, but I'll use cryptocurrency as collateral." I don't know if everyone understands this meaning.
In traditional transactions, money is exchanged for goods on the spot; this applies to the buying and selling of crypto assets. However, some people are now more sophisticated and might want to make an adjustment: "I'm lending you money—a pure lending relationship—but I'm worried about your repayment risk. You happen to have some crypto assets with economic value, and you provide them to me as collateral through staking or other means. I'm not helping you exchange crypto assets for fiat currency; it's actually a lending relationship." This is a very subtle scenario.
But can you imagine? Such descriptions are directly included in regulatory documents. Therefore, from this perspective, we can understand, to some extent, that regulatory authorities are quite familiar with the practices and tactics of the entire cryptocurrency industry, especially in mainland China. Of course, this also means that many insiders or industry partners will describe and explain many business details when facing regulatory authorities. So don't think that you can outsmart the system and the relevant departments won't understand or see it; that's highly unlikely.
I think there are many points in this document that we can discuss and study in detail, which is why I'm using a relatively long short video to talk about this with everyone.
The seventh point is "strengthening the management of internet information content and access." This should be easy to understand, because currently, on many short video media platforms, such as Xiaohongshu, Douyin, and WeChat Video Channel, we see many overseas exchanges or project teams using numerous "alias" accounts to promote themselves, and even recruit. The platforms, in accordance with the requirements of the Cyberspace Administration of China, will periodically tighten restrictions on certain sensitive words and control related accounts. Regulatory authorities have already noticed this trend, and therefore, the regulatory requirements for these internet platforms are becoming increasingly stringent. When joint law enforcement is involved, relevant internet platforms or content platforms also need to cooperate.
The eighth point is "strengthening the registration and advertising management of business entities." Here, I'd like to discuss two details.
The first detail concerns Khorgos in Xinjiang. There is a free trade zone there. What I understand is that in the past two years, when the local management committee issued business licenses to some companies within its jurisdiction, the scope of their business included "judicial disposal of cryptocurrencies."
Therefore, such regulations or documents are specifically aimed at these kinds of details. Many free trade zones might believe they can pilot financial innovations within their zones. However, this document actually directly states a negative stance.
Another small detail is that we know a cryptocurrency investment product appeared on a certain e-commerce platform last year. Of course, it sold out immediately and was then removed from the platform. That product was essentially a mutual fund that invested in other assets. If I remember correctly, about 10% of its underlying assets were invested in Bitcoin ETFs and some crypto-asset stocks, such as Coinbase shares. So strictly speaking, it wasn't a cryptocurrency fund as we understand it. However, advertisements for investing in related assets through this multi-layered structure are subject to regulatory restrictions. Therefore, it was also removed from the platform and cannot be advertised or promoted.
The ninth point concerns the crackdown on cryptocurrency mining activities. A key point to note here is that, in addition to the ongoing emphasis since 2021 that any cryptocurrency mining discovered in mainland China must be shut down and no new mining operations are permitted, this also applies to other areas.
This is actually a response to the resurgence of cryptocurrency mining activities in mainland China over the past year. We know that mainland China once accounted for 70% of the global Bitcoin hashrate, with extremely high output. However, since 2021, theoretically, all of China's cryptocurrency mining has moved overseas.
However, based on lawyer Hong Lin's observations over the past two years, from a statistical perspective, China still possesses at least 20% of the computing power for Bitcoin mining. In the past six months, I've seen numerous people directly selling mining machines and even providing mining hosting services in news media, such as on social media platforms like Douyin, and in my WeChat Moments.
Of course, these things will be hidden quite well, for example, inside cloud computing centers and computing power centers in many places. Some might be more blatant, thinking that the country's attitude on this matter has softened. But in reality, this is a reiteration and reiteration: it's not allowed.
Another point I think everyone needs to pay special attention to is that mining machine manufacturers are strictly prohibited from providing mining machine sales and other services within China. This essentially means that mining is illegal, and selling mining machines within mainland China is also illegal. I often see people hawking mining machines on social media.
This means that mining machines can only be exported from now on, not sold in mainland China. Those selling mining machines or hardware on social media, or those selling so-called "nodes" or "servers" under the guise of "DePin," need to pay special attention. There's a common misconception that selling mining machines for other minor cryptocurrencies is acceptable, as long as it's not Bitcoin mining. However, regulators are aware of this and are determined to stop such borderline practices.
As mentioned later, aside from illegal financial activities, cases involving suspected criminal offenses will be handed over to the police; we won't elaborate on that. We also won't go into detail about strengthening industry self-regulation.
The fourth part, which is the main focus of our discussion, concerns RWA. This document explicitly states that if you are a domestic entity and wish to conduct activities under the name RWA within mainland China, this is not permitted. Similarly, if you are a domestic company or project and wish to issue related RW tokens directly overseas, this is also not allowed.
However, there's a small loophole: after obtaining approval from the relevant regulatory authorities, you can then conduct related operations overseas. This echoes or corresponds to the China Securities Regulatory Commission's (CSRC) Document No. 1 of 2026. This document states that if a domestic entity or project wants to issue RWA products overseas, firstly, it must file with the CSRC in China. While it's not an approval process, I think its authority is slightly weaker than approval, but the threshold and requirements are still quite high.
Secondly, if you want to issue RWA products overseas, you must go through the overseas subsidiaries or branches of domestic financial institutions. There will also be requirements regarding some details of the business, but I understand it's basically the same logic and standards as overseas bond issuance.
Therefore, these points clearly define the boundaries of what we can and cannot do in the RWA field within the Web3 industry.
The restrictions are as follows: If the assets are domestic, you cannot directly issue related tokens within China; if the assets are domestic, you cannot target mainland Chinese residents when issuing RWA tokens overseas; even if your project and assets are overseas, you cannot sell them to mainland Chinese residents.
The key advantage is that after registering with the China Securities Regulatory Commission (CSRC) in China, you can then find overseas subsidiaries or branches of domestic financial institutions to provide the relevant issuance services. Furthermore, all information throughout the product and project operation process needs to be promptly shared with the regulatory authorities.
This is actually what we see regarding what can and cannot be done in the RWA (Responsible Web Development) sector. Therefore, in the CSRC's Document No. 1, it also described some negative lists (i.e., what cannot be done, which companies cannot do, and which people cannot do). Although its wording and expression did not use the term "RWA" in its description, I understand this to be a cautious innovation.
This morning, a reporter interviewed me, asking for my views on this matter. I believe that, under the current circumstances, China wants to address the issue of high-quality assets on the mainland, or rather, it wants to prioritize development in certain areas. Through this method of security tokenization, on the one hand, it can support Hong Kong's financial innovation and industrial applications in Web3. On the other hand, it can also be considered a cautious financial innovation under the supervision of the China Securities Regulatory Commission (CSRC).
It's likely a very long and arduous journey from what our industry partners aspire to achieve. This is essentially not something small players or startups can do. Therefore, I believe that Ant Group, which has been working on things like this before, will likely collaborate with the China Securities Regulatory Commission (CSRC) again. It might be among the first in China to implement and launch applications in this direction.
Therefore, I believe that either a large enough internet company with fintech capabilities can undertake this task, or some domestic listed companies might allocate a portion of their projects for a pilot program. The initial compliance processes and costs are actually extremely high.
So I think if everyone is concerned about RWA, we can hold off for another six months or a year and see how things go before making any decisions.
Finally, regarding legal liability, this addresses a concern many have raised since this news broke. One key point is the legal risks faced by individual investors investing in crypto assets or related financial products. The answer is essentially the same: civil actions involving such investments are invalid. The risk is borne by the individual.
Another point here is that those suspected of disrupting financial order or endangering financial security will be investigated and dealt with by relevant departments in accordance with the law. There's a slightly nuanced aspect here: "financial order" actually includes systems like foreign exchange management. This means that if your personal cryptocurrency purchases are purely for personal cross-border use, there will still be significant legal risks if discovered. I think everyone understands this, so I'll leave it at that.
Besides individual players, we also know that a large number of KOLs and Chinese-speaking operational partners are actually active in mainland China. A friend told me that currently, 40% of global cryptocurrency trading volume takes place in mainland China. The exchanges that constantly talk about compliance, apart from the two in Hong Kong, mostly still conduct business face-to-face, a practice known as "selective compliance": applying for licenses overseas while simultaneously conducting business in China. We won't judge this now, but what I really want to emphasize is that KOLs or content distribution and traffic-generating partners who provide lead generation and promotion services for these institutions should pay attention.
I mentioned at an event recently that many people think it's harmless to post referral links on foreign media platforms like Twitter (formerly known as X) to encourage users to register and earn commissions. However, the reality is that the content and information we publish on foreign media platforms will be noticed. You should understand what I mean.
Therefore, for those of us in mainland China, whether it's through events or links, helping some non-compliant overseas exchanges (here, "compliant" is a gray area term) attract customers is a matter of probability and luck if it's a major, core platform. However, if it's a smaller platform, people are drawn to its high commission rates and promote it extensively. If, during subsequent law enforcement proceedings, the platform is found to be operating illegally or even involved in gambling-related content, the criminal risks for those attracting customers are extremely high.
Therefore, in terms of legal liability, in addition to focusing on individual holdings and investments, we also need to pay close attention to the partners who drive traffic and promote these trading institutions or OTC merchants. This is something we need to focus on.
That concludes my nearly half-hour discussion of this regulatory document, along with my personal views in conjunction with the CSRC's Document No. 1. Of course, I didn't prepare a written transcript, so the expression may not be entirely precise, but I believe the core points and meanings have been conveyed.
Original link: https://mp.weixin.qq.com/s/31WnxyVQcTQEedSappEhnw
Disclaimer: This article is a reprint. Readers can obtain more information through the original link. If the author has any objection to the reprint format, please contact us and we will modify it according to the author's request. This reprint is for information sharing only and does not constitute any investment advice, nor does it represent Wu Blockchain views or positions.
After two documents about cryptocurrencies were released last night, they practically flooded social media.
I've seen many colleagues writing articles to interpret RWA, and I've also seen short videos where discussions about RWA by various organizations or teams are becoming increasingly popular.
In the first half, everyone was focused on the fact that the entire crypto world was about to tighten up, collapse, or crash; in the second half, China celebrated the Lunar New Year, and some people said that China could finally issue its own cryptocurrency. There were quite a few different opinions.
Last night I recorded a short video in the office, discussing my basic viewpoint: strictly speaking, there has indeed been a clear contraction. Many crypto asset or Web3-related businesses that were previously operating in the cracks in China are now facing significant challenges to their survival, such as mining. I also mentioned that China has finally left an opening in the RWA (Responsive Wireless Solutions) area. Of course, this statement may not be entirely accurate, because according to the China Securities Regulatory Commission (CSRC), it is actually not RWA, but rather called security tokenization. However, from an industry perspective, security tokenization may be one type within the broader RWA framework we are discussing.
Therefore, I think we don't need to be too rigid about the literal meaning; it's enough that everyone understands what the China Securities Regulatory Commission (CSRC) is trying to convey. Some reporters have also interviewed me about my personal views on these two documents.
In yesterday's short video, I mainly talked about RWA, but I personally think there are still many aspects of this regulatory document that can be interpreted.
So this short video might take me a little longer. I'll just use a phone to look at the full text of both documents and share my perspective with you.
More importantly, for those of us working in this industry, and based on what I've seen about business practices, is it still possible for us to operate in mainland China? If not, what should we do? This is probably what I want to discuss with you in this short video.
This video might be a little long, so if you're really interested in this topic, I suggest you save it for later.
First, we can look at the relevant topic of cryptocurrency risk prevention and management issued by eight ministries including the People's Bank of China. This is a report from the *Daily Economic News*. We can examine its points one by one.
The first interesting point is that it directly defines the tokenization attribute of real-world assets at the outset, which is quite subtle. Those familiar with Chinese regulations on crypto assets know that much has already been said about this, such as the equivalence of virtual currencies to fiat currencies and the lack of legal protection.
However, this should be another instance where Chinese regulators have defined the tokenization of real-world assets at the beginning of an article or regulatory document. So this is actually quite strange; from a Web3 perspective, RWA may simply be a commercial sector, and even that commercial application globally isn't as good as one might imagine.
I've discussed this with you on many occasions: there are actually different types of RWAs worldwide.
The first type, perhaps represented by the US financial market, involves tokenizing traditional financial assets. The most typical example is US stocks. We see many exchanges promoting this, whether they are full spot exchanges or full derivatives exchanges. This allows users on cryptocurrency trading platforms to not only buy and sell traditional crypto assets, but also to buy a significant amount of US stocks.
This is actually a sector with relatively high certainty that we see. Because there are still a large number of people around the world who want to own assets in the US capital market, but they may not be able to enjoy them under traditional securities accounts. So this is a relatively common sector or direction, and I am personally quite optimistic about it.
Secondly, within the Hong Kong framework, starting from the year before last, we've seen examples like Ant Financial, Langxin, GCL, and Xunying, among others. These business service providers offer assets from mainland China to qualified investors or investment institutions in Hong Kong. Of course, this only remains in the primary market and hasn't yet created liquidity in the secondary market.
Thirdly, from the perspective of financial risk prevention, Chinese regulators should pay the most attention to the large amount of mainland assets, funds, and users active within China, through various tokens such as NFTs, digital collectibles, or those issued under the RWA name. This third category is precisely what regulators should focus on preventing.
So, after the regulatory document was released last night, I saw a lot of people in the RWA field cheering on social media and short video platforms, saying they were ready to regroup and that this day had finally come. I personally think this is premature. Because the methods and tactics these people or these teams used to operate and manage fall under the category of illegal financial activities explicitly defined in the regulatory document.
The fact that this regulatory document places RWA (Real Asset Tokenization) at the very beginning indicates that, from a financial risk prevention perspective, it is primarily aimed at the third group of people, making their cheers all the more intriguing.
Therefore, Attorney Honglin strongly advises everyone to exercise extreme caution when conducting any RWA-related activities in mainland China, whether it's providing end-to-end business consulting, offering so-called token issuance technology solutions, conducting marketing, or directly selling products to end users. This carries extremely high risks in China. Placing this at the beginning of this document certainly has significant value and reasons.
The second point concerns inter-departmental collaboration. I've previously discussed why there will be two documents defining stablecoins and RWA by the end of 2025. The core issue is that Chinese regulatory authorities need to reach a consensus on crypto assets and blockchain. From a judicial perspective, the legal treatment of the crypto world is currently fragmented: from a civil law perspective, it belongs to the private property of citizens and should be protected; however, courts and government departments in different regions may have inconsistent views and understandings. The same situation might be protected in Shanghai but not in some other inland cities. Therefore, collaboration among multiple departments is necessary.
The core message of this document is that a collaborative mechanism needs to be established among the procuratorate, courts, the Cyberspace Administration of China, and financial institutions. This means that in cases or projects involving crypto assets and blockchain, all departments need to maintain consistency in their statements and actions.
Taking another document No. 1 issued by the China Securities Regulatory Commission (CSRC) as an example, in addition to understanding the relevant products as part of the securities regulatory framework, they also need to meet other relevant requirements from the Cyberspace Administration of China, financial regulatory authorities, and other relevant departments. This can be considered a cautious innovation.
Strengthening risk prevention departments also brings China's foreign exchange management into the picture. As we know, especially after the regulatory definition of stablecoins at the end of the year, a crucial regulatory direction is concerning OTC merchants. I have been strongly advising my partners who previously ran OTC businesses to take a break recently. The core focus of domestic attention on cryptocurrencies has shifted from "issuing tokens and ICOs to raise funds" to "being wary of raising funds through RWA." This is a key focus on preventing illegal fundraising and financial risks.
Another point of primary concern for regulators is capital outflow. With traditional methods becoming increasingly restricted, many are turning to stablecoins like USDT for cross-border fund transfers. From a regulatory perspective, this is a key area of focus.
Furthermore, we understand that since last year, there have been related projects or research directions that aim to use on-chain tracking combined with off-chain interbank fund flows to conduct big data screening and monitoring, thereby identifying the paths of related fund outflows.
Therefore, we have always conservatively believed that mainland China will not actually open up the cryptocurrency market. A crucial point is the issue of capital management regulations, which is something that everyone in the industry needs to focus on right now.
From this perspective, whether you're narrowly defined as an OTC merchant, or if you have related business needs and are facilitating matchmaking, or if you're using exchanges to offer trading guidance or rebates to get users to buy crypto assets through your channels and then transfer them out or use them for other purposes, the risks are too high, and we strongly advise against doing so.
At the same time, we also see some restrictions on intermediaries and related service groups. I think this is quite business-oriented, because the reason why such a regulatory document is so detailed is because it focuses on and describes a large number of micro-level scenarios within the industry. For example, it even mentions that virtual currencies and related financial products cannot be included in the scope of collateral or pledges; and that insurance business related to virtual currencies cannot be carried out, etc.
I'm not sure how everyone will interpret this statement. Because we know that some people in the OTC market are using a different phrasing, saying, "I'm lending you money, but I'll use cryptocurrency as collateral." I don't know if everyone understands this meaning.
In traditional transactions, money is exchanged for goods on the spot; this applies to the buying and selling of crypto assets. However, some people are now more sophisticated and might want to make an adjustment: "I'm lending you money—a pure lending relationship—but I'm worried about your repayment risk. You happen to have some crypto assets with economic value, and you provide them to me as collateral through staking or other means. I'm not helping you exchange crypto assets for fiat currency; it's actually a lending relationship." This is a very subtle scenario.
But can you imagine? Such descriptions are directly included in regulatory documents. Therefore, from this perspective, we can understand, to some extent, that regulatory authorities are quite familiar with the practices and tactics of the entire cryptocurrency industry, especially in mainland China. Of course, this also means that many insiders or industry partners will describe and explain many business details when facing regulatory authorities. So don't think that you can outsmart the system and the relevant departments won't understand or see it; that's highly unlikely.
I think there are many points in this document that we can discuss and study in detail, which is why I'm using a relatively long short video to talk about this with everyone.
The seventh point is "strengthening the management of internet information content and access." This should be easy to understand, because currently, on many short video media platforms, such as Xiaohongshu, Douyin, and WeChat Video Channel, we see many overseas exchanges or project teams using numerous "alias" accounts to promote themselves, and even recruit. The platforms, in accordance with the requirements of the Cyberspace Administration of China, will periodically tighten restrictions on certain sensitive words and control related accounts. Regulatory authorities have already noticed this trend, and therefore, the regulatory requirements for these internet platforms are becoming increasingly stringent. When joint law enforcement is involved, relevant internet platforms or content platforms also need to cooperate.
The eighth point is "strengthening the registration and advertising management of business entities." Here, I'd like to discuss two details.
The first detail concerns Khorgos in Xinjiang. There is a free trade zone there. What I understand is that in the past two years, when the local management committee issued business licenses to some companies within its jurisdiction, the scope of their business included "judicial disposal of cryptocurrencies."
Therefore, such regulations or documents are specifically aimed at these kinds of details. Many free trade zones might believe they can pilot financial innovations within their zones. However, this document actually directly states a negative stance.
Another small detail is that we know a cryptocurrency investment product appeared on a certain e-commerce platform last year. Of course, it sold out immediately and was then removed from the platform. That product was essentially a mutual fund that invested in other assets. If I remember correctly, about 10% of its underlying assets were invested in Bitcoin ETFs and some crypto-asset stocks, such as Coinbase shares. So strictly speaking, it wasn't a cryptocurrency fund as we understand it. However, advertisements for investing in related assets through this multi-layered structure are subject to regulatory restrictions. Therefore, it was also removed from the platform and cannot be advertised or promoted.
The ninth point concerns the crackdown on cryptocurrency mining activities. A key point to note here is that, in addition to the ongoing emphasis since 2021 that any cryptocurrency mining discovered in mainland China must be shut down and no new mining operations are permitted, this also applies to other areas.
This is actually a response to the resurgence of cryptocurrency mining activities in mainland China over the past year. We know that mainland China once accounted for 70% of the global Bitcoin hashrate, with extremely high output. However, since 2021, theoretically, all of China's cryptocurrency mining has moved overseas.
However, based on lawyer Hong Lin's observations over the past two years, from a statistical perspective, China still possesses at least 20% of the computing power for Bitcoin mining. In the past six months, I've seen numerous people directly selling mining machines and even providing mining hosting services in news media, such as on social media platforms like Douyin, and in my WeChat Moments.
Of course, these things will be hidden quite well, for example, inside cloud computing centers and computing power centers in many places. Some might be more blatant, thinking that the country's attitude on this matter has softened. But in reality, this is a reiteration and reiteration: it's not allowed.
Another point I think everyone needs to pay special attention to is that mining machine manufacturers are strictly prohibited from providing mining machine sales and other services within China. This essentially means that mining is illegal, and selling mining machines within mainland China is also illegal. I often see people hawking mining machines on social media.
This means that mining machines can only be exported from now on, not sold in mainland China. Those selling mining machines or hardware on social media, or those selling so-called "nodes" or "servers" under the guise of "DePin," need to pay special attention. There's a common misconception that selling mining machines for other minor cryptocurrencies is acceptable, as long as it's not Bitcoin mining. However, regulators are aware of this and are determined to stop such borderline practices.
As mentioned later, aside from illegal financial activities, cases involving suspected criminal offenses will be handed over to the police; we won't elaborate on that. We also won't go into detail about strengthening industry self-regulation.
The fourth part, which is the main focus of our discussion, concerns RWA. This document explicitly states that if you are a domestic entity and wish to conduct activities under the name RWA within mainland China, this is not permitted. Similarly, if you are a domestic company or project and wish to issue related RW tokens directly overseas, this is also not allowed.
However, there's a small loophole: after obtaining approval from the relevant regulatory authorities, you can then conduct related operations overseas. This echoes or corresponds to the China Securities Regulatory Commission's (CSRC) Document No. 1 of 2026. This document states that if a domestic entity or project wants to issue RWA products overseas, firstly, it must file with the CSRC in China. While it's not an approval process, I think its authority is slightly weaker than approval, but the threshold and requirements are still quite high.
Secondly, if you want to issue RWA products overseas, you must go through the overseas subsidiaries or branches of domestic financial institutions. There will also be requirements regarding some details of the business, but I understand it's basically the same logic and standards as overseas bond issuance.
Therefore, these points clearly define the boundaries of what we can and cannot do in the RWA field within the Web3 industry.
The restrictions are as follows: If the assets are domestic, you cannot directly issue related tokens within China; if the assets are domestic, you cannot target mainland Chinese residents when issuing RWA tokens overseas; even if your project and assets are overseas, you cannot sell them to mainland Chinese residents.
The key advantage is that after registering with the China Securities Regulatory Commission (CSRC) in China, you can then find overseas subsidiaries or branches of domestic financial institutions to provide the relevant issuance services. Furthermore, all information throughout the product and project operation process needs to be promptly shared with the regulatory authorities.
This is actually what we see regarding what can and cannot be done in the RWA (Responsible Web Development) sector. Therefore, in the CSRC's Document No. 1, it also described some negative lists (i.e., what cannot be done, which companies cannot do, and which people cannot do). Although its wording and expression did not use the term "RWA" in its description, I understand this to be a cautious innovation.
This morning, a reporter interviewed me, asking for my views on this matter. I believe that, under the current circumstances, China wants to address the issue of high-quality assets on the mainland, or rather, it wants to prioritize development in certain areas. Through this method of security tokenization, on the one hand, it can support Hong Kong's financial innovation and industrial applications in Web3. On the other hand, it can also be considered a cautious financial innovation under the supervision of the China Securities Regulatory Commission (CSRC).
It's likely a very long and arduous journey from what our industry partners aspire to achieve. This is essentially not something small players or startups can do. Therefore, I believe that Ant Group, which has been working on things like this before, will likely collaborate with the China Securities Regulatory Commission (CSRC) again. It might be among the first in China to implement and launch applications in this direction.
Therefore, I believe that either a large enough internet company with fintech capabilities can undertake this task, or some domestic listed companies might allocate a portion of their projects for a pilot program. The initial compliance processes and costs are actually extremely high.
So I think if everyone is concerned about RWA, we can hold off for another six months or a year and see how things go before making any decisions.
Finally, regarding legal liability, this addresses a concern many have raised since this news broke. One key point is the legal risks faced by individual investors investing in crypto assets or related financial products. The answer is essentially the same: civil actions involving such investments are invalid. The risk is borne by the individual.
Another point here is that those suspected of disrupting financial order or endangering financial security will be investigated and dealt with by relevant departments in accordance with the law. There's a slightly nuanced aspect here: "financial order" actually includes systems like foreign exchange management. This means that if your personal cryptocurrency purchases are purely for personal cross-border use, there will still be significant legal risks if discovered. I think everyone understands this, so I'll leave it at that.
Besides individual players, we also know that a large number of KOLs and Chinese-speaking operational partners are actually active in mainland China. A friend told me that currently, 40% of global cryptocurrency trading volume takes place in mainland China. The exchanges that constantly talk about compliance, apart from the two in Hong Kong, mostly still conduct business face-to-face, a practice known as "selective compliance": applying for licenses overseas while simultaneously conducting business in China. We won't judge this now, but what I really want to emphasize is that KOLs or content distribution and traffic-generating partners who provide lead generation and promotion services for these institutions should pay attention.
I mentioned at an event recently that many people think it's harmless to post referral links on foreign media platforms like Twitter (formerly known as X) to encourage users to register and earn commissions. However, the reality is that the content and information we publish on foreign media platforms will be noticed. You should understand what I mean.
Therefore, for those of us in mainland China, whether it's through events or links, helping some non-compliant overseas exchanges (here, "compliant" is a gray area term) attract customers is a matter of probability and luck if it's a major, core platform. However, if it's a smaller platform, people are drawn to its high commission rates and promote it extensively. If, during subsequent law enforcement proceedings, the platform is found to be operating illegally or even involved in gambling-related content, the criminal risks for those attracting customers are extremely high.
Therefore, in terms of legal liability, in addition to focusing on individual holdings and investments, we also need to pay close attention to the partners who drive traffic and promote these trading institutions or OTC merchants. This is something we need to focus on.
That concludes my nearly half-hour discussion of this regulatory document, along with my personal views in conjunction with the CSRC's Document No. 1. Of course, I didn't prepare a written transcript, so the expression may not be entirely precise, but I believe the core points and meanings have been conveyed.
