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 Click the blue words above to follow us    Bitcoin plummeted from US$120,000 to US$70,000, and countless RWA project parties deleted their Chinese white papers overnight. On February 6, the document issued by eight ministries and commissions at the same time caused a stir in the entire encryption circle. But if you think this is just another "one size fits all" regulation, then you are underestimating this rule penetration battle. Peng Wensheng, chief economist of China International Capital Corporation, said in his comments: "We must see through the phenomenon to see the essence. "This seemingly plain summary is precisely the key to understanding Chinese-style financial supervision - the whole world is discussing the game of technological innovation and supervision, and Chinese regulators have long given up chasing on the technical level and instead gone straight to the essence. No matter what vest you wear, what technology you use, or where you register, as long as you touch the core of financial risks, you cannot escape the grasp of the rules.  Three failures of "innovation"  In the past six months, those RWA project parties that tried to find a living space in the regulatory gray area have failed step by step. In August 2025, a leading project claimed to package domestic real estate income rights into tokens, issue them in Singapore, and target global investors - "domestic assets + overseas issuance + global sales" seemed to perfectly circumvent regulation. Within a week, window guidance arrived. The second attempt was more subtle. In November, the project party registered the legal entity in Hong Kong or Cayman, replaced the underlying assets with "accounts receivable" and "supply chain finance", and hired the Big Four to do audits. The risk warnings issued by seven industry associations on December 5 directly exposed: my country’s financial management department has not approved any RWA tokenization activities, no matter where you register, no matter what the name of the asset is. The third time was the most desperate - simply claiming that it was "not RWA", but "NFT digital collection", "on-chain debt certificate" and "blockchain certificate". This approach completely went bankrupt after the issuance of Document No. 42, because the definition of the new regulation is broad enough: "Activities that use encryption technology, distributed ledgers or similar technologies to convert the ownership and income rights of assets into tokens and conduct issuance and trading" - this frame is so large that it covers almost all vest-changing behaviors. Eight departments form a circle Why 8 departments? Because the regulators have finally seen through the essence of RWA: it is a currency issue, a securities issue, and a criminal issue. The traditional "one bank, three commissions" separate industry supervision is inadequate in the face of this kind of cross-border innovation, and the entire chain must be seamlessly connected. The central bank focuses on monetary sovereignty - if you dare to issue RMB stable currency, you are waiting to be classified as an illegal financial activity. The China Securities Regulatory Commission is focusing on asset securitization. As long as the token has the characteristics of an "investment contract", overseas issuance must also be registered in advance. The Ministry of Public Security focuses on criminal risks, and illegal fund-raising, fraud, and money laundering are also applicable in the blockchain era. The National Development and Reform Commission and the Foreign Exchange Bureau are focusing on cross-border debt. Do you think that issuing tokens overseas can bypass ODI approval? It’s a good idea. This multi-sector collaboration reflects the first level of penetration: technical penetration. Blockchain, smart contracts, distributed ledgers, these terms are just tools in the eyes of regulators. What really determines the nature is what you are doing - financing? securitization? cross-border transfer of funds? Technology has never been a passport for innovation. The second level is cross-border penetration. The most harsh part of Document No. 42 is Article 14: "Domestic entities that directly or indirectly go overseas to carry out real-world asset tokenization business in the form of foreign debt... shall be strictly supervised in accordance with laws and regulations in accordance with the principle of 'same business, same risks, same rules'..." "Translation: Don’t think that you can escape my jurisdiction by registering a Cayman company. As long as the underlying assets are in China, Chinese supervision will have long-arm control over you. The assets are in the country, the income rights are in the country, and the investors may be in the country, so why are the supervisory rights not in the country? This logic has long been precedented in traditional finance - Chinese concept stocks are listed in the United States, as long as they involve VIE structures and domestic entities, Chinese supervision can also control them. The third level is behavioral penetration. The new regulations do not kill all RWAs with a stick, but differentiate between scenarios: strictly prohibited within the country, strictly controlled overseas, and exceptions for specific infrastructure. Financing is financing, and asset securitization is asset securitization. It will not become a "technological innovation" just because you use blockchain. Ripple has been in business for 5 years, China only took 1 day The U.S. SEC’s lawsuit against Ripple lasted from December 2020 to August 2025, and it took nearly five years to settle. The SEC first accused Ripple of issuing XRP as unregistered securities and claimed US$2 billion. In July 2023, Judge Torres partially supported Ripple and determined that XRP trading in the secondary market did not constitute a securities issuance. Both parties continued to appeal and counterclaim, and finally exhausted themselves. Ripple paid US$125 million (less than 7% of the original claim) and ended hastily. This tug-of-war has exposed the dilemma of U.S. regulation: under the common law system, regulators must establish precedents through case-by-case litigation, and each judgment requires lengthy proofs, cross-examinations, and appeals. Former SEC Chairman Gary Gensler tried to use the "destroy through law enforcement" strategy to shock the industry, but the result was counterproductive - the partial victory in the Ripple case gave more crypto companies the confidence to fight. China is completely different. From the "Notice of Five Ministries and Commissions" in 2013, which made it clear that Bitcoin does not have currency status, to the "924 Notice" in 2021, which completely banned virtual currency transactions, and then to the 2026 Document No. 42, which targeted RWA, every move is a top-level design, multi-department linkage, and hits the key points. There are no lengthy lawsuits or individual case disputes. Once the regulatory rules are clarified, the market will implement them immediately. This is the fundamental difference between the two regulatory philosophies. The American logic is that "anything can be done without prohibition by law". First, let the market grow wildly, and then draw the boundaries through litigation if problems arise. This process may take ten years. China's logic is that "the law prohibits business without authorization." Especially in the financial field, you must first obtain a license before you can operate, and innovation must be within the regulatory framework. Whoever keeps the bottom line will keep his destiny Viewed from the perspective of international political economics, this new regulation on RWA is actually a microcosm of the financial game between major powers. In the context of the ebbing tide of globalization and geopolitical tensions, financial sovereignty has never been more important. The United States controls the global financial infrastructure through dollar hegemony and the SWIFT system, and can impose precise financial sanctions on any country. After Russia was kicked out of SWIFT in 2022, the ruble plummeted and foreign exchange reserves were frozen. China's position is very delicate: it must not only integrate into the global financial system, and the internationalization of the RMB and the opening of capital accounts are long-term goals; it must also strictly guard against financial risks and capital flight, and maintain the bottom line of "no systemic financial risks." Under this dilemma, regulatory vigilance has increased for financial innovations such as RWA, which are naturally cross-border. Imagine a scenario: What would happen if domestic real estate, accounts receivable and other assets were allowed to be issued as RWA tokens overseas at will? Capital outflow - investors transfer funds overseas by purchasing tokens, bypassing the annual foreign exchange purchase quota of US$50,000. Outflow of asset pricing power - China's high-quality assets are priced and traded on overseas platforms, and the proceeds fall into the pockets of foreign investors and intermediaries. Financial risk spillover - the plunge in token prices affects domestic underlying assets and real economic entities. During the 1997 Asian financial crisis, international speculators shorted the Thai baht and South Korean won through overseas markets, crushing the foreign exchange reserve systems of these countries. If Thailand and South Korea had stricter capital controls and financial supervision back then, they might not have lost so miserably. In the 2008 subprime mortgage crisis, structured products such as CDOs and CDS in the United States triggered a global financial tsunami. The essence was regulatory arbitrage - banks bypassed capital adequacy requirements through complex products, passed on risks layer by layer, and finally broke out in a concentrated manner. Document No. 42 seems to be suppressing financial innovation, but it is actually protecting the bottom line of financial security. The stock market crash in 2015, the P2P explosion in 2018, and the suspension of listing of Ant Financial in 2020 are all reminders: in the financial field, stability is always more important than innovation. Leave a narrow gap But the brilliance of Document No. 42 is that it does not close the door completely, but leaves a narrow gap - a dual-track system of "strict prohibition within the country and strict control outside the country." It is strictly prohibited within the territory. Any issuance, trading, and intermediary services of RWA tokens carried out within the territory are all illegal financial activities. The line is clear. The attitude towards overseas business supervision is "strict control" rather than "prohibition". The "Regulatory Guidelines on the Overseas Issuance of Asset-Backed Securities Tokens for Domestic Assets" issued by the China Securities Regulatory Commission actually provides a clear operational path for compliant cross-border RWA business: register with the China Securities Regulatory Commission in advance, submit a complete issuance plan, basic asset information, and risk disposal plan; overseas issuance can only be issued after the registration is passed; after the issuance is completed, major events must be continuously reported. The system design is very subtle. The "recording system" rather than the "approval system" is used, which means that as long as the conditions are met, the regulator will not reject it without reason, giving the market certain expectations. A clear negative list has been drawn up: not allowed to endanger national security, not allowed to have criminal offenses by the controller, not allowed to have disputed asset ownership, and not allowed to use high-risk speculative assets. "The combination of "negative list + positive filing" not only prevents bad money from driving out good money, but also leaves room for high-quality projects to exit. More importantly, this system leaves a special window for Hong Kong. Less than a month after the new regulations were released, the Hong Kong Monetary Authority announced that it would issue the first batch of stable currency licenses in March 2026, and the Hong Kong Securities and Futures Commission actively promoted the regulatory framework for virtual asset trading platforms. Mainland high-quality assets are tokenized through compliant RWA in the Hong Kong market, which not only meets the cross-border financing needs of enterprises, but also controls risks within a manageable range - this is the exquisite application of "one country, two systems" in the field of financial supervision. China's financial opening has always been a gradual reform. In the 1990s, the Shanghai and Shenzhen Stock Exchanges were established as a pilot project in the Special Economic Zone; in 2003, QFII introduced overseas capital and opened a small opening; in 2014, the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect in 2016 were gradually expanded within a controllable framework. RWA is likely to follow a similar path: first explore in Hong Kong, accumulate regulatory experience, and then consider further opening up when risks are controllable and rules mature. Supervision never asks "What can technology do?"" The biggest revelation from this RWA regulatory storm: Financial innovation is never a technical issue, but an institutional issue and a political issue. Blockchain technology itself is neutral and can improve financial efficiency, reduce transaction costs, and can also circumvent supervision and engage in illegal activities. What really determines its direction is the will of the rule makers. In the 16th century, the Dutch East India Company invented modern shareholding and securities trading, but its unregulated growth eventually led to the tulip bubble in 1637. In the 18th century, the British South Sea Company created the largest financial scam in history, prompting Parliament to pass the "Bubble Act" in 1720 to strictly restrict the establishment of joint-stock companies. After the Great Depression in the United States in 1929, Roosevelt's New Deal established a modern securities regulatory system, and the SEC became a curse on Wall Street. Every wave of financial innovation is accompanied by regulatory lag, confusion, awakening, and restructuring. Blockchain and cryptocurrencies are no exception. When Bitcoin was born in 2008, regulators around the world were confused and didn’t know who should control it. More than ten years have passed, and each country has finally established its own regulatory framework: the United States has decentralized multi-party supervision, the European Union has unified the MiCA Act, and China has a comprehensive ban and special scene franchising. China's choice has its own particularities. As a late-developing country, it will never catch up with the United States in financial innovation. If Wall Street financial engineers just come up with a new product, it may take us several years to understand it. Rather than being passively beaten, it is better to take the initiative to set up defenses - block out innovations that are difficult to understand, cannot be controlled, and have high risks, and only allow innovations that meet the needs of the real economy and have controllable risks to come in. This strategy may miss opportunities, but it can avoid catastrophe. Compared with the United States, they can tolerate Ripple's five-year lawsuit and FTX's sudden loss of tens of billions of dollars because they have a deep financial market foundation and a strong legal system to protect them. China does not have this luxury. The financial market is not mature enough, investor education is not sufficient, and the legal system is still improving, so it cannot withstand the big changes. Therefore, the word "stable" comes first. It is better to be slow than to be stable. Penetrating the surface is the wisdom of supervision Going back to Peng Wensheng's words of "seeing the essence through the phenomenon", the greatest value of the new RWA regulations this time is to clarify the regulatory logic: we do not oppose technological innovation, but oppose financial arbitrage under the banner of innovation; we do not refuse to open to the outside world, but ensure that opening up is on a controllable track; we do not adopt a one-size-fits-all approach, but implement classified policies and strike with precision. This penetrating regulatory wisdom is reflected in three levels: technical penetration - seeing through the financial essence under the cloak of blockchain; cross-border penetration - wherever the assets are, regulatory rights extend; behavioral penetration - no matter how you change your vest, the essential attributes cannot be escaped. The three dimensions form a strict supervision network, and any loophole behavior will be identified, characterized, and dealt with. If you want to do compliant RWA business, go through the registration channel and accept full-process supervision. If you want to engage in gray marginalia, give up as soon as possible, the price will be heavy. For ordinary investors, there is no need to worry about various "innovative" projects. Anyone who promotes RWA tokens in the country is 100% a scammer. This may not be the most conducive system for innovation, but at the current historical stage, it is the choice that best suits China's national conditions. The boundary of financial innovation is never what technology can do, but what regulation allows. In China, this boundary is: serving the real economy, preventing and controlling financial risks, and maintaining financial stability. Talking about innovation without these three principles is just a hooliganism. The eight departments jointly encircled and suppressed RWA. On the surface, it was an upgrade of supervision, but in essence, it was the defense of financial sovereignty. It was a vivid interpretation of the regulatory philosophy of "seeing the essence through the phenomenon". Today, as the global financial game becomes increasingly fierce, keeping this bottom line is the key to national financial security. As for those speculators wailing in the currency circle, it’s time to wake up – in China, financial innovation has always been about dancing with shackles. Want to fly freely? There is no lawlessness here. Past links: Valentine's Day: How a beheaded Roman priest turned into a $29.1 billion bill? The ink of the Tigris turned black twice: once by the Mongols and once by the AI code 28 years in prison! Reveal the cruel truth behind chasing gold at high prices: What you buy is not a safe haven, but an opportunity cost! 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