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Binance Research: Analysis of the Impact of Tariff Escalation on the Crypto Market
Original Source: Binance Research
Original Author: Moulik Nagesh
Key Points
By 2025, U.S.-led trade protectionism made a strong comeback. Since Donald Trump's reinauguration as President in January 2025, the U.S. has triggered global trade war concerns by implementing a series of large-scale new tariffs—targeting specific countries and industries. Just in the past week, the U.S. has rolled out a new round of "reciprocal" tariffs, and other countries have announced retaliatory measures.
This report will analyze how these tariffs (the most aggressive tariff measures since the 1930s) have impacted the macroeconomy and the crypto market. We will examine the tariff levels, macroeconomic trends (including inflation, growth, interest rates, and the Fed's outlook), and their effects on crypto asset performance, volatility, and correlation based on data. Finally, we will explore key future observations and the market prospects that crypto assets may face in an environment of stagflation and protectionism.
2025 Tariff Comeback
After years of relative trade peace, a rapid reversal occurred in 2025. President Trump, in the initial days of his return to the White House, began fulfilling his campaign promises by levying tariffs on a wide range of imported goods based on emergency authorizations—covering specific countries and industries.
The trade tension escalated on April 2nd. On that day, the U.S. announced the rollout of comprehensive "reciprocal" tariffs and named it "Liberation Day," marking the latest turning point in this global trade war cycle. Many countries that previously had normalized trade relations with the U.S. have now undergone fundamental shifts. Key events of the past week include:
● Base Tariffs: The U.S. announced a new 10% uniform tariff on all imported goods, reversing decades of trade liberalization processes. This base tax rate took effect on April 5th.
● Targeted Tariffs: On top of the base tax rate, additional country-specific tariffs were imposed. President Trump referred to these as "reciprocal" tariffs aimed at countries that have erected high barriers to American products. Notably, Chinese goods will face an additional 34% tariff—adding to the existing 20%, resulting in a combined tariff rate of 54%. Other countries' targeted tariffs include: EU goods at 20%, Japan at 24%, Vietnam at 46%, and a 25% tariff on car imports. Canada and Mexico were not included in the new list as they were already subjected to a 20% tariff in February.
● Global Countermeasures: The United States' trading partners swiftly responded. As of mid-February, several countries that were early subjects of tariffs have announced retaliatory measures. Canada, unable to secure a tariff delay from the United States, decided to impose a 25% tariff on all U.S. imports. China also responded early on and further escalated on April 4th by announcing a 34% tariff on all U.S. imports.
With the implementation of "mirror" tariffs and the escalation of trade tensions, it is expected that more countries will introduce their own retaliatory measures. The European Union has expressly stated its intention to respond promptly, and several other major economies have drafted related counterattack plans. While the full extent of the global response is not yet clear, all current indications point to a broad trade war unfolding on multiple fronts.
Chart 1: Liberation Day Tariffs on April 2, 2025, cover up to 60 countries, including several of the United States' key trading partners. Note: The table reflects the "mirror" tariffs imposed by the U.S. on its top ten import sources as of April 2nd.
These policies have pushed U.S. import tariff rates to their highest levels since the implementation of the Smoot-Hawley Tariff Act of 1930, which levied comprehensive tariffs on thousands of goods during the Great Depression. According to current data, the U.S.' average tariff rate has risen to around 18.8%, with some estimates as high as 22%—a drastic increase compared to 2.5% in 2024.
For reference, over the past few decades, the U.S.' average tariff rate has typically remained between 1–2%; even during the U.S.-China trade tensions of 2018 to 2019, it only rose to around 3%. Therefore, the measures in 2025 represent an unprecedented tariff shock in modern history—almost equivalent to a return to 20th-century protectionism of the 1930s.
Chart 2: U.S. Tariff Rebound Raises Import Rates to Nearly Century-High Levels
Market Impact: Cooling Demand, Risk Aversion, and Soaring Volatility
1. Cooling Demand and Rising Risk Aversion
Market sentiment has notably shifted to caution, with investors exhibiting typical "risk-off" behavior in response to the tariff announcements. The total market capitalization of the crypto market has dropped by around 25.9% from its January peak, wiping out nearly $1 trillion, underscoring its high sensitivity to macroeconomic instability factors.
Cryptocurrencies and the stock market have experienced highly correlated trends, both facing cooling demand, widespread selling, and entering a correction phase. In contrast, traditional safe-haven assets such as bonds and gold have shown strong performance, with gold hitting consecutive all-time highs, becoming investors' go-to safe haven in times of rising macro uncertainty.
Chart 3: Since the initial tariff announcement, the cryptocurrency market has dropped by 25.9%, the S&P 500 has dropped by 17.1%, while gold has risen by 10.3%, hitting consecutive all-time highs
The sharp market reaction also highlights the performance characteristics of cryptocurrencies during periods of intense "risk-off" sentiment: Bitcoin (BTC) has dropped by 19.1%, with most mainstream altcoins experiencing similar or even larger declines. Ethereum (ETH) has plummeted by over 40%, and high-beta sectors (such as meme coins and AI-related tokens) have seen crashes of over 50%. This sell-off has wiped out much of the gains seen in the crypto market since the beginning of the year, with even BTC's year-to-date (YTD) returns turning negative as of early April—despite its strong performance in 2024.
Chart 4: Amid the macro uncertainty sparked by tariffs, altcoins have seen more significant declines compared to Bitcoin, exacerbating market pessimism
As the cryptocurrency market increasingly exhibits characteristics of a risk asset, if the trade war persists, it may continue to dampen inflows, temporarily suppressing demand for digital assets. Funds may remain cautious, either staying on the sidelines or shifting to gold and other assets seen as safer. This sentiment is also reflected in a recent fund manager survey, where only 3% of respondents indicated they would allocate to Bitcoin in the current environment, while 58% showed a stronger preference for gold.
Chart 5: Only 3% of global fund managers view Bitcoin as their preferred asset class in a trade war scenario
2. Soaring Volatility
The market's sensitivity to tariff policies is very apparent, with every major announcement causing significant price fluctuations. Over the past few months, BTC has experienced several significant price swings—including one of the largest single-day drops since the 2020 COVID-19 market crash. At the end of February 2025, when Trump suddenly announced plans to impose tariffs on Canada and the EU, BTC dropped by around 15% in the following days, with its actual volatility also increasing significantly. ETH followed a similar path, with its one-month volatility soaring from around 50% to over 100%.
These market behaviors highlight the extreme sensitivity of the crypto market to sudden policy changes in the current highly uncertain macro environment. In the near future, if the policy direction remains unclear or if the trade war escalates further, the market will maintain high volatility. Historical experience also indicates that only when the market fully digests and prices in the new tariff policies, volatility may gradually decrease.
Chart 6: At this stage, BTC's one-month actual volatility rose to over 70%, with ETH exceeding 100%, reflecting the market's dramatic volatility after the tariff announcement
Macroeconomic Impact: Inflation, Stagflation Concerns, Interest Rates, and Fed Outlook1. Inflation and Stagflation Concerns
The new tariffs amount to a significant additional tax on imported goods, coming at a time when the Federal Reserve is trying to suppress price growth, adding fuel to inflationary pressures. The market has shown concerns that these measures may disrupt the process of inflation easing. Market-based indicators such as the one-year inflation swap rate have surged to over 3%, and consumer surveys have seen expectations rise to around 5%, both indicating widespread expectations of continued price increases over the next 12 months.
Meanwhile, economists warn that if the trade war escalates further and triggers a global retaliatory response, global economic output could suffer losses of up to $14 trillion. The U.S.'s real GDP per capita is expected to initially decrease by nearly 1%. Fitch Ratings has pointed out that if the comprehensive tariff system continues to exist, most economies may slide into a recession, stating that "the current high level of tariffs in the U.S. has already rendered most economic forecasting models useless."
Amidst rising inflation expectations and growth concerns, the risk of global stagflation (a combination of economic stagnation and price inflation) is becoming increasingly prominent.
2. Interest Rate Outlook and the Fed's Stance
Federal funds rate futures data from the Federal Reserve indicates a significant increase in market expectations of interest rate cuts in the coming months. This marks a clear shift in sentiment—just a few weeks ago, the Fed was still firmly committed to containing inflation, but now, due to growing concerns about economic growth prospects, the market has begun to anticipate a possible shift in monetary policy towards accommodation to support the economy.
Figure 8: Market expectations for rate cuts in 2025 continue to rise, with the current expectation of 4 25-basis-point cuts—far exceeding the previous expectation of only 1 cut
Reflecting this sentiment shift are public statements by Fed officials. They have expressed concerns, emphasizing that the new round of tariffs contradicts previous economic policy directives. Now, the Fed faces a difficult decision: whether to tolerate the additional inflation brought by tariffs or to stick to a hawkish stance, risking further growth suppression?
"The scale of tariffs announced in recent weeks exceeds expectations, and its impact on inflation and growth—especially the cumulative effect—needs to be closely monitored."
—Jerome Powell, April 4, 2025
In the short term, the Federal Reserve seems to still be committed to maintaining stable long-term inflation expectations. However, monetary policy decisions will continue to rely on data, depending on which signal, inflation or growth, appears weaker. If inflation far exceeds the target, a stagflation environment could limit the Fed's policy response capability. This uncertain policy outlook has also heightened market volatility.
Outlook1. Relevance and Diversified Allocation
The evolving relationship between crypto assets and traditional markets is becoming a focus—where Bitcoin, as the dominant asset in the market, serves as the best window to observe this change. The recent "risk-off" event triggered by the trade war has significantly affected the correlation structure between BTC and the stock market and traditional safe-haven assets.
Since the first mention of tariffs on January 23, the initial market reactions were not consistent—Bitcoin and stocks showed slightly independent trends, causing their 30-day correlation to drop to -0.32 on February 20. However, as trade war rhetoric escalated and risk aversion continued to spread, this value rose to 0.47 in March, indicating Bitcoin's increased short-term linkage with overall risk assets.
In contrast, the correlation between Bitcoin and traditional safe-haven assets like gold has significantly weakened—originally neutral to positive relationships turned into a negative correlation of -0.22 in early April.
These changes reflect macroeconomic factors, especially trade policy and rate expectations, increasingly shaping crypto market behavior, temporarily suppressing the market structure that was originally demand-driven. Observing whether this correlation structure continues will help understand Bitcoin's long-term positioning and its diversified value.
Figure 9: Initial differentiated response, with BTC strengthening correlation with the S&P 500 as the trade war escalated, while its correlation with gold continued to weaken
2. Reviving the Safe Haven Asset Narrative
Despite recent macro and liquidity shocks highlighting crypto assets' "risk attributes," the long-term trend remains unchanged: Bitcoin's correlation with traditional markets usually rises under extreme pressure but gradually declines once the market stabilizes. Since 2020, BTC has had an approximately 0.32 90-day average correlation with the stock market and only a 0.12 correlation with gold, indicating that it has consistently maintained a certain distinctiveness from traditional asset classes.
Even under the impact of recent tariff announcements, BTC has shown resilience on days when some traditional risk assets weakened. Meanwhile, the supply held by long-term holders continues to increase—indicating that core holders have not significantly reduced their holdings during recent volatility, but instead have shown strong confidence.
This behavior implies that despite intensified short-term price fluctuations, Bitcoin may still re-establish a more independent macro identity.
Figure 10: Since 2020, Bitcoin has maintained a mild long-term correlation with traditional assets: 0.32 with the S&P 500 and 0.12 with gold
The key issue is whether BTC can regain a long-term structure of low correlation with the stock market. A similar trend was reflected during the March 2023 banking crisis, when BTC successfully decoupled from the stock market downturn and strengthened.
Today, facing an escalating trade war and global markets adapting to a pattern of long-term trade fragmentation, whether Bitcoin can once again be seen as a "non-sovereign, permissionless" safe-haven asset will determine its future macro role. Market participants will closely observe whether BTC can maintain this independent value proposition.
One potential path is to regain its attractiveness during currency inflation and fiat devaluation periods, especially when the Fed turns to easing. If the Fed starts cutting rates while inflation remains high, Bitcoin may regain favor as a "hard asset" or inflation hedge asset.
Ultimately, this process will determine BTC's long-term positioning as an asset class—and its role in portfolio diversification. This also applies to other mainstream altcoins, which exhibit stronger risk attributes in the current environment and may continue to rely on BTC's market sentiment dominance.
3. Stagflation and the Crypto Market in a Protectionist World
Looking ahead, the crypto market will face a complex macro environment dominated by trade policy risks, stagflationary pressures, and global coordination fractures. If global growth continues to weaken and the crypto market fails to form a clear narrative, investor sentiment may further deteriorate.
Long-term trade wars will test the resilience of the entire industry—potentially leading to retail fund outflows drying up, institutional allocations slowing down, and venture capital funding diminishing. Key macro variables to closely monitor in the coming months include:
● Trade Dynamics: Any new tariff list, unexpected easing measures, or significant bilateral changes (such as U.S.-China negotiations or further escalation) will directly impact market sentiment and inflation expectations.
● Core Inflation Data: The upcoming CPI and PCE data are crucial. If driven higher unexpectedly by import costs, it will exacerbate stagflation concerns; if the data is soft, it may alleviate central bank pressure and increase the attractiveness of risk assets (including crypto).
● Global Growth Indicators: Declining consumer confidence, slowing business activity (PMI), weak labor markets (rising jobless claims, slowing nonfarm payrolls), corporate profit warnings, and an inverted yield curve (a common recession signal) may further trigger risk aversion in the short term. However, if macro weakness accelerates expectations of monetary easing, it may also support the crypto market.
● Central Bank Policy Path: How the Fed and other major central banks seek to balance between inflation and recession will determine various asset liquidities. If they refuse to cut rates in the context of slowing growth, risk assets will continue to be under pressure; if they shift towards accommodation, it may lead to a broad boost. If real interest rates fall (whether due to policy or sustained inflation), long-duration assets like Bitcoin may benefit. Central bank policy divergence (such as Fed turning dovish while the ECB remains hawkish) may also trigger cross-border capital flows, further intensifying crypto market volatility.
● Crypto-Specific Policy Events: Approval of ETFs, strategic BTC reserves, advancement of key legislation, etc., may serve as independent catalysts in the current macro backdrop, potentially breaking the "macro linkage" status of crypto assets and highlighting their uniqueness. However, one should also be cautious of reverse risks, such as regulatory delays or unfavorable legal developments, which may result in negative feedback.
Conclusion
The most aggressive round of tariff policies since the 1930s is having profound effects on the macroeconomy and the crypto market. In the short term, the crypto market may continue to exhibit high volatility, with investor sentiment swaying with the latest trade war news.
If inflation remains high while growth slows, the Federal Reserve's response will be a key inflection point: if it turns dovish, the crypto market may rebound due to liquidity recovery; if it remains hawkish, pressure on risk assets will persist.
If the macro environment stabilizes, a new narrative emerges, or if crypto assets regain their long-term safe haven status, the market may see a revival. Until then, the market may remain in a state of flux, highly sensitive to macroeconomic news. Investors need to closely monitor global developments, maintain asset allocation diversification, and seek opportunities in potential market dislocations brought about by trade tensions.
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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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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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