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Multicoin Capital 2025 Vision Part II: The Everlasting Narrative of the Crypto World
Original Title: Some Things Never Change, Even In 2025
Original Source: Multicoin Capital
Original Translation: Azuma, Odaily Planet Daily
Two days ago, Multicoin Capital published an article titled "Multicoin Capital's 2025 Vision: DePIN Robot Explosion; On-chain Securities Take Off", outlining the most uncertain yet imaginative narratives for 2025.
Today, Multicoin Capital has once again published an article, this time focusing on the most certain "eternal narratives."
Below is the full text from Multicoin Capital, translated by Odaily Planet Daily.
Amazon founder Jeff Bezos has a famous saying.
"The question I get most often is: 'Jeff, what's going'to change in the next 10 years?' But that's not the right question. The right question is: 'Jeff, what's not going to change in the next 10 years?' I can tell you that, the customer's desire for a lower price will never change. Their need for fast delivery will never change. They always want more selection … It's human nature. People will not say, 'Jeff, I love Amazon, but I wish the prices were a little higher.' It's impossible. Therefore, we need to put our energy into these things and make them better. Our energy investment in these things will pay off in 10 years. When you have something you know is true, even over the long term, you can afford to put a lot of energy into it."
Earlier this week, we published a typical VC article mainly about the new opportunities that the Multicoin Capital investment team expects to see in 2025. Following Bezos's logic, we also believe it is necessary to highlight trends that are commonly taken for granted but are still evolving. This provides us with a stable opportunity on which we can continue to invest.
Immutable Narrative 1: The Relentless Pursuit of Capital Efficiency
Presenter: Kyle Samani (Co-Founder, Multicoin Capital)
DeFi started with low capital efficiency. Uniswap's xy=k curve was infamous for its low capital efficiency.
Over the past 5 years, DeFi's capital efficiency has improved in various aspects. CLOB, looping/multiply products, concentrated liquidity, USDe-based derivative exchanges, borrowing against derivatives collateral, using LP positions as derivative collateral, and so on... The market has always relentlessly pursued capital efficiency.
This is the charm of DeFi. Permissionless innovation has driven all these improvements in capital efficiency.
We believe that Drift, a leading derivatives exchange on Solana, represents a focal point in DeFi's exploration of capital efficiency. A version of the logical endpoint. Spencer and David discussed these issues in their 2024 Multicoin Summit keynote.
Immutable Narrative 2: The Insatiable Novel Financial Game
Presenter: Tushar Jain
Humans always like to gamble, but the game is always evolving.
Meme tokens are the new generation of gambling games. The volatility of meme tokens is greater, making them more interesting than traditional casinos or sports betting. Compared to other forms of gambling, meme tokens offer a higher potential return, with their extreme volatility providing a level of excitement and risk exceeding that of traditional casino games or sports betting. The potential for huge returns, coupled with the inherent unpredictability of meme tokens, creates an experience that traditional gambling cannot match.
Meme tokens also have a unique social dimension. Abstracting internet culture into a meme token provides social attributes lacking in other forms of gambling. They are often linked to online culture and communities, fostering "consensus" among gamblers. This social aspect transforms meme token transactions into a communal activity, where individuals can connect through shared interests and experiences. This fosters a sense of belonging and shared identity, qualities that other forms of gambling lack.
Meme tokens represent a fusion of gambling, internet culture, and social interaction. They provide a high-stakes, high-reward experience that caters to the human desire for excitement, while also leveraging the social and communal nature of online communities. As internet culture continues to evolve, Meme tokens are likely to remain a significant part of the gambling industry, offering a unique and appealing experience for those willing to take risks.
The impulse for human gambling is eternal, but the games we play are ever-changing. Meme tokens represent the next step in this evolution, but they will not be the last.
Immutable Narrative Three: Financial Market Transparency
Narrator: Spencer Applebaum
In the TradFi trading market, brokers are able to offer retail investors zero-cost trading services because Citadel Securities, Susquehanna International, Wolverine Trading, and other high-frequency trading (HFT) firms competitively execute these orders. This is known as Payment for Order Flow (PFOF).
These firms are willing to competitively bid for large orders at the mid-price/near the mid-price. There is ample literature available on why PFOF is advantageous to the world rather than evil (though it often carries negative connotations).
The challenge with payment for order flow models like Robinhood and E-Trade is that they are opaque, with bidding limited to market makers working with the broker. Additionally, there are multiple layers of intermediaries such as clearinghouses, exchanges, brokers, all of which charge end users hidden fees often embedded within spreads.
About the opacity of PFOF, a research paper pointed out: "The agreements Robinhood made with wholesalers traded off price improvement for PFOF growth – precisely the conflict of interest SEC Chair Gensler worries about.… if consumers could easily discern differences in execution quality across brokers, this wouldn't be an issue. However, these differences are not inferable from current disclosure regimes."
The allure of DeFi is that it compresses settlement, exchange, custody, and execution into a single API, and all of it is transparent. This naturally presents a favorable condition for DeFi as markets always value transparency.
The project invested in by Multicoin, DFlow, is pioneering a concept called "conditional liquidity." This concept mandates that liquidity can only be matched when the counterparty is approved by the front end application as non-malicious (or the counterparty can get better pricing from the market maker through algorithms). Market makers can provide liquidity on on-chain Central Limit Order Books (CLOBs) like Phoenix or on-chain Automated Market Makers (AMMs) like Orca, offering better slippage performance for retail orders while avoiding exploitation by malicious counterparties.
The entire stack is open and transparent, leveraging "Conditional Liquidity" to build PFOF on top of it. It elegantly combines the best features of traditional finance and DeFi: the ability to split order flow and provide better quotes to retail, while also having the openness, transparency, and auditability provided by DeFi.
Invariable Narrative Four: Value Capture Mechanism will continue to Unbundle, Rebundle
Presenter: Shayon Sengupta
Last year, I published an article on the "Attention Theory of Value," where I described the core way of introducing cryptocurrency into consumer applications is through permissionless asset issuance and transactions in any interface and environment.
By 2024, asset issuance is concentrated in a few places, with pump.fun being the most prominent among them. These places dominate in asset issuance, but importantly, the assets are traded elsewhere — on Telegram bots, on aggregators like DexScreener and Birdeye, inside Phantom Wallet, and so on... Asset issuance and trading do not happen on the same "issuance platform/trading venue" but across a series of disparate venues. As long as the crypto capital market exists, asset issuance and trading have always been decoupled. Bitcoin was initially issued on a cryptography mailing list called metzdowd.com, but today, it trades on Nasdaq (via ETF). Tokens launched during the ICO era in 2017 are traded on major CEXs.
Therefore, while pump.fun won the issuance game last year, the trading game was taken by Telegram bots and retail aggregation products (new order flow sources). In the long run, I believe having the exchange or order flow will be the more lucrative business.
This is just the beginning of the issuance platform/trading venue split. Asset issuance and trading will be unbundled and rebundled in a thousand places a thousand times, as attention on the internet is not confined to a single app; it exists on forums, live streaming platforms, chat tools, and other interfaces we interact with, everywhere.
More importantly, I hope these apps can better realize that owning attention gives the opportunity to own order flow, which is a very profitable industry. Get ready to see wallets and trading functions embedded in more consumer apps by 2025.
Invariable Narrative Five: Capital Seeking Yield
Presenter: Eli Qian
Everyone is looking for ways to earn returns, preferably in a more straightforward manner.
Until recently, most sources of revenue were only open to seasoned market participants and investors. For example, if you deposit money into a savings account at a U.S. bank, you will earn a 0.01% annual interest rate (while the U.S. bank lends out your money at a 10% rate!). Only by purchasing money market funds could you achieve a more reasonable return. However, the demand for yield persisted, and products like ETFs (which abstract stock selection) and robo-advisors (which can manage your entire investment portfolio) made it easier for non-sophisticated market participants to access previously inaccessible yield.
The situation with cryptocurrency is similar. Earning returns through staking or lending is not easy and requires users to have a certain level of expertise. Products that simplify the process of earning returns will continue to emerge, ending the era where retail investors were passive in knowledge arbitrage. Now, with just a few simple clicks, you can log into a wallet or application with cryptocurrency and earn staking or lending rewards without needing much relevant knowledge. Solutions like Fuse Wallet and StakeKit can facilitate this. In the future, wallets and DeFi applications will automatically allocate and rebalance assets between validators, lending protocols, and liquidity pools to offer users around-the-clock optimal returns.
Immutable Narratives VI: Reducing Banking Costs Through Innovation
Presenter: Vishal Kankani
The Medici family led the development of modern banking in the 14th century. The banking business at that time was slow to evolve, heavily physical, costly, and required immense trust. Over time, the cost of accessing financial services plummeted. With blockchain, we can clearly see a 24/7, global, zero-dollar-cost banking operation.
No matter how sophisticated financial instruments become, the need for banking services persists. The rise of Banking as a Service (BaaS) occurred because, no matter how innovative the application layer, it was challenging to build fundamental financial components on the TradFi track; naturally, this modularization was achieved in software, leading to a separation of front end and back end. Today, the back end is referred to as BaaS.
BaaS providers license their infrastructure to fintechs, enabling companies to launch digital banks, corporate cards, and lending products in the least amount of time and cost. By offering these services through APIs, BaaS providers allow tech firms to focus on customer experience and products, while BaaS takes care of the "boring yet critical" back-end operations, including compliance, risk management, and fund flows.
The pre-blockchain era BaaS stack included banking infrastructure, KYC/AML compliance, payment processing, card issuance, and data aggregation. This system could run but was complex and inefficient because it was still rooted in traditional banking infrastructure established in the 1970s (SWIFT/ACH), costly, not always available, capital-inefficient, and not global.
Blockchain will disrupt modern BaaS as blockchain represents transformative innovation. By using blockchain-based assets and protocols, we can build a new BaaS model that is simpler, cheaper, faster, more global, and more transparent.
The post-blockchain era BaaS stack will include: self-custodial wallets like Squads, enhanced on-chain KYC and compliance protocols like zkMe, stablecoin payment infrastructure like Bridge, and DeFi protocols for lending (Kamino) and trading (Drift).
The evolution of BaaS towards a blockchain-based model is inevitable. As the infrastructure matures, we will see blockchain protocols replace every component in today's BaaS stack, creating a leaner, more efficient, and transparent model for financial services.
Squads is a Multicoin-backed project that focuses on providing Banking as a Service protocol on Solana, allowing businesses, individuals, and developers to create a secure account that can store value and be used for programmatic transactions. Squads is the first formally verified protocol on Solana and has processed over 1 billion stablecoin transactions. Assets collateralized using the Squads protocol are growing exponentially. We expect Squads to lead BaaS development in 2025.
Eternal Narrative Seven: Eliminate Friction, Increase Adoption
When you make things simpler by reducing costs and friction, people naturally use them more. Email changed how we communicate; the iPhone added convenience to taking photos and recording life; Amazon simplified how we shop online; and social media made content sharing smoother.
Obviously, if you make transactions and remittances easier, the same results will occur. Stablecoins may be one of the biggest financial innovations of this era. The ability for 24/7, nearly instantaneous settlement will have a profound impact. It will allow the US dollar to reach new markets and enter the hands of regular people in a way that the Treasury Department auctions cannot. It will make business operations more efficient, with no more downtime on nights, weekends, or holidays. It will reduce working capital needs and significantly lower the cost and time of cross-border transactions. The supply of stablecoins has reached new highs, the volume of stablecoin transactions has reached new highs, and as regulations clarify, the acceptance of stablecoins will also increase.
The development of stablecoins will further catalyze the concept of open finance. As transactions become easier, more transactions will occur. Those holding stablecoins will seek yield on these assets and gravitate towards platforms like Kamino and Drift, which facilitate autonomous matching of borrowers and lenders by reducing friction. Once on-chain, stablecoin holders will be just a few clicks away from earning yield on money market funds (such as Blackrock's BUIDL) and decentralized exchanges (such as Drift, Jupiter, Raydium, and Uniswap). With the continued growth of on-chain assets, undoubtedly, stablecoin holders will have an increasingly diverse set of assets to own and participate in. Stablecoins are the Trojan horse of on-chain economics, evolving into a more inclusive, open global financial system.
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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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