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Rug Pulling, Market Maker Raking, What Can Save the Much-Maligned TGE?
Original Article Title: Between Extremes: A DeFi-Native Blueprint for Sustainable TGEs
Original Article Author: DougieDeLuca, Figment Capital Member
Original Article Translation: Rhythm Xia Deep
Editor's Note: The article reviews the advantages and disadvantages of two TGE models: low circulating supply/high FDV and fair distribution. It points out that the former enables insiders to cash out quickly, while the latter struggles due to insufficient funding and liquidity. Based on market lessons, it proposes a DeFi-native TGE scheme that utilizes on-chain liquidity, staged price unlocks, and a transparent smart contract mechanism to balance the team's funding needs with public price discovery. It also incentivizes insiders to align with the project's long-term goals, thus building a more sustainable tokenomic structure.
Below is the original content (slightly reorganized for readability):
Why Rethinking TGE is Necessary
A TGE is often a defining moment in a project's lifecycle. It marks the most significant transition from the private domain to the public domain. Different stakeholders have different expectations of the TGE, making it a complex task that requires careful coordination.
Over the past 18 months, we have seen two mainstream TGE approaches: low circulating supply/high FDV issuance and fair distribution. These two approaches are at opposite ends of the spectrum, each with clear advantages and disadvantages. However, in achieving long-term sustainable outcomes, these approaches have mostly fallen short. As the crypto ecosystem continues to evolve, we believe it is time to take a step back, learn from history, and decide whether a change is needed.
This article proposes an intermediate TGE model that leverages on-chain liquidity to promote genuine public price discovery and ensure alignment of incentives between insiders—the team and investors—and long-term success. Before delving into its mechanisms, let us first examine how the two mainstream TGE approaches have faltered due to their own flaws, what the market reaction has taught us, and why an on-chain-centric approach is the logical next step for projects pursuing sustainable success.
Flaws in Recent TGE Models
Low Circulating Supply/High FDV
The low circulating supply/high FDV model typically involves multi-round pre-TGE financing, with valuation gradually increasing and an extremely low initial circulating supply on the first day. Initially, this can create a scarcity illusion that drives a sharp price surge. However, over time, issues arise:
· Private Pre-TGE Price Discovery: The team conducts multiple rounds of financing at increasingly higher valuations and negotiates to ensure listing on a mainstream centralized exchange (CEX) on the first day. By the time of the TGE, most of the price appreciation has already occurred, leaving few buyers in the public markets.
· Expensive Top-Tier Exchange Listing: Many projects need to pay up to 10% or more of the token supply as a fee to list on a top-tier exchange on the first day. This highly dilutes ownership and often harms the project's long-term prospects.
· Overreliance on Market Maker (MM) Trading: To ensure initial liquidity, projects allocate a large number of tokens to third-party market makers under loose terms. These trades lack transparency, often leading to misaligned incentives and ongoing burdens for the project.
· Investor Position Locking Hedge: Due to long-term token locking, savvy investors/funds short the asset in the external market to effectively hedge their exposure, laying the groundwork for sell pressure post-unlock.
· Discounted Over-the-Counter (OTC) Sales: Investors and teams often sell at a discount through OTC to buyers seeking lower prices, who then hedge their newly acquired discounted positions and close them out at unlock.
· Providing Liquidity Fund Kickbacks: Teams may offer "sweeteners" or private deals to liquidity funds to induce early post-TGE purchases, artificially driving up the price. This potentially illicit activity provides insiders with a brief window to exit OTC at inflated valuations.
· Investor Unlocking Triggers Unsustainable Sell Pressure: Once a large amount of tokens unlocks, retail investors must consider whether the looming supply will overwhelm the market. If there is insufficient demand for the product (or token), unlocking can lead to price stagnation or a collapse under selling pressure.
Essentially, the low circulation/high FDV model has fostered an environment where insiders can quickly cash out, often leaving retail or late buyers at a disadvantage. Projects often struggle after the first year as early profiteers lack the incentive to continue involvement.
The Shift to Fair Distribution — and Its Own Pitfalls
Disappointment with the failure of the low circulation/high FDV model has prompted the market to pivot towards supporting fair distribution. Fair distribution aims to create an open, equitable TGE structure by initially placing tokens in the hands of the public, reducing insider advantages and large-scale private allocations. Despite good intentions, this distribution strategy has gradually revealed its own flaws:
· Limited Funding: Fair distribution teams usually start the TGE with very little or no funding. As the team's token supply is usually very low, fundraising post-TGE becomes extremely challenging, hampering the project's long-term viability, especially during continuous token price declines.
· Low Liquidity and Poor Execution: The lack of market makers and initial liquidity results in fair-launched tokens having poor liquidity during launch and maturation, leading to high volatility and slippage.
· CEX Perpetual Contracts Amplifying Downside Pressure: Many fair-launched tokens—especially in the AI space—had already been listed on centralized exchanges (CEXs) with perpetual futures contracts before entering the spot market, allowing leveraged short positions to significantly impact tokens with shallow on-chain liquidity, thus driving down prices.
· Long-Term Price Ceiling: Limited on-chain liquidity combined with leveraged shorting ultimately creates an environment where demand struggles to surpass suppressive sell pressure.
Fair launch initially stood as a beacon of hope, encouraging a more "open" participation. However, it ultimately failed to establish a sustainable long-term market structure. The market is once again seeking alternative solutions.
Market Response Learnings
Both low circulating supply/high fully diluted valuation (FDV) and fair launch approaches failed in their own ways. Observing the market's response to both, we learn the following lessons:
· Public Price Discovery Is Critical: If the public buyers cannot participate effectively in price discovery, they will lose interest, especially when insiders clearly cash out well in advance.
· Depth and Liquidity Trump Short-Term Hype: Quick speculation or pump-and-dumps cannot fix a fundamentally illiquid market. Sustained on-chain liquidity depth is crucial.
· Teams Need Runway, Retail Buyers Need Upside: Teams must raise enough funds to ensure the project's long-term survival while leaving significant upside potential for public market newcomers.
· Market Demand Drives Structural Change: The evolution from low circulating supply/high FDV to fair launch indicates that if the market refuses to support flawed issuance methods, teams will adapt. However, relying solely on fair launch cannot guarantee success without liquidity building and long-term market strategy.
· Transparency Is Non-Negotiable: When insiders exploit opaque market structures to swiftly exit, trust collapses. Fair launch has spurred more on-chain openness, but true accountability and clarity remain incomplete.
Why On-Chain Liquidity Is the Next Step
Reflecting on these failures and market pushback highlights a core principle: a long-term sustainable market needs to conduct price discovery openly on-chain, where insiders cannot easily offload tokens in private. On-chain trading fosters real-time accountability, clearly showing who holds what assets and at what price they sell.
Ensuring adequate liquidity at all stages of a token's lifecycle requires a structure that integrates the following elements:
· Transparent On-Chain Market Depth
· Robust Mechanism to Restrain Sudden Sell Pressure
· Incentivize Team and Investors for Long-Term Engagement Post TGE
This directly leads to the concept of a DeFi-native TGE—an amalgamation of capital raising and public liquidity formation, aligning insiders with the project's long-term destiny.
DeFi-Native TGE
Our proposal core lies in:
· Transforming potential sell pressure into structured on-chain liquidity
· Employing price/time-based vesting instead of large cliff-vesting
· Proposing a transparent sustainable path to mainstream CEX listing
· Enabling insiders—investors and team members—to activate or even necessitate on-chain mechanisms
The specific approach is as follows:
Phased Liquidity Provision (Single-Sided and Dual-Sided)
· Single-Sided LP: Investors can deposit only the native token into a concentrated liquidity pool (e.g., Uniswap V3). By selecting a specific price range, they effectively set a conditional sell order—the token is sold only when the market reaches that range.
· Dual-Sided LP: To provide deeper liquidity and reduce slippage, participants (including the team) can pair the token with a stablecoin or other assets (e.g., ETH). This facilitates immediate market depth.
Price-Based Vesting and Locking LP Positions
· Gradual Unlocking: The project restricts the LP share each investor can have at TGE. With time or price threshold increases, more shares unlock, preventing sudden supply shocks.
· LP Locking: To restrain speculative behavior (e.g., manipulating prices to hit the LP range), liquidity providers need to lock their position for a period post-token conversion, unable to withdraw immediately and re-enter stealthily, maintaining liquidity consistency.
Incentivizing Early Investors to Exit Pre-TGE
· Lower Price Targets vs. New Investors: The team can incentivize early investors with very low-cost entry to partially exit before TGE through oversubscribed high-price rounds for new investors. This can be achieved through a transfer from existing investors to new investors, ultimately approved by the team. In this scenario, early investors can profit without selling on the public market, while new supporters—with a higher entry price—have a lower tendency to sell early post-launch. It is worth noting that historically, such transfers have often been rejected by teams.
· Healthier Post-TGE Structure: Therefore, the investor base at TGE is more likely to hold tokens for higher multiples, reducing immediate sell pressure, and evenly distributing liquidity within the price range.
Smart Contract Governance and Compliance
· Compliance Pool and Structured Withdrawals: Through enforced policy constraints (such as AML fund flow checks), locked tokens can only flow into approved on-chain markets in a publicly visible, rule-based manner.
· Gradual Access: Smart contracts govern how and when LPs adjust price ranges, collect fees, or withdraw, ensuring insider sell-offs do not crash the market.
TGE Pricing and Team Inclusion
· Attractive and Sustainable Valuation: Projects may undergo TGE at a valuation lower than the typical low float/high FDV, attracting genuine buyer interest. Over time, on-chain price and trading volume can naturally increase, eventually attracting mainstream listings.
· Team Allocation Inclusion: The team is subject to the same LP constraints on their holdings, signaling true alignment. In an environment where market demands transparency, team positions can also be publicly monitored, curbing silent OTC sales or sudden insider exits.
Gradual Move Towards CEX Listing
Delayed Early Listing: Initially reducing exposure on major exchanges helps the market discover price on-chain without immediate insider exit pathways.
Catalyst: With increasing utilization, trading volume, and community traction, mainstream CEX listings become a genuine demand-driven factor rather than a quick sell-off scenario.
Expected Benefits
This DeFi-native TGE model addresses many issues while supporting deeper public price discovery:
· Authentic On-Chain Discovery: Launching at a fair price and requiring insiders to provide liquidity promotes real-time transparent price formation.
· Healthier Unlocking Patterns: Price-based token unlocks reduce the fear of large cliff sell-offs. If buyers do not push the price to a specific range, insiders remain locked.
· Enhanced Liquidity, Reduced MM Dependency: Key stakeholders become initial liquidity providers, reducing reliance on market makers with potential conflicts of interest.
· Unity Between Teams and Investors: If core contributors also face liquidity constraints, they cannot silently abandon the project; success is shared.
· Robust Market Support: Combining gradual CEX listing, the project goes through incremental catalysts while building a stronger on-chain reputation.
· Experimentation Space: Due to this programmable approach, the team can adjust lock-up periods, price thresholds, or whitelist pools to pursue the optimum outcome.
Most importantly, it aligns founders, early investors, and new participants towards sustainable long-term growth rather than quick opportunistic exits.
Issues and Considerations
Even though this model addresses common TGE failures, it sparks further exploration:
· Liquidity Concentration: Could a large number of holders cluster in similar ranges, forming a price "wall"? If so, how can this be prevented?
· Order Book vs. AMM: Is concentrated liquidity AMM always superior, or is a hybrid approach more suitable for certain tokens?
· Execution and Regulation: Are there compliance requirements (such as KYC/AML) that investors need to meet to participate?
· Investor Education and Tools: Is there a need for a dedicated dashboard or third-party manager to help inexperienced or resource-constrained insiders handle advanced LP strategies?
· Team Transparency: While forward contracts or private sales may continue, requiring insiders to fully or nearly fully disclose will drive honesty.
Summary
From low supply/high FDV to fair distribution, the crypto world oscillates between extremes—a model that brings short-term profits for insiders versus one lacking enough funding or sustainable liquidity to succeed. Both choices lead participants to optimize short-term outcomes, feeling disillusioned by transient pumps and manipulation.
By introducing DeFi-native TGE—rooted in phased on-chain liquidity, metric-based incremental unlocks, and enforced transparency—we have paved a path:
· Projects raise sufficient capital without relying on exploitative trading.
· Genuine on-chain price discovery and liquidity development, building trust with retail and institutional investors.
· Early investors with lower price targets can safely exit pre-TGE to newcomers with higher costs and valuations, optimizing secondary market health.
· Mainstream CEX listings become a true catalyst rather than an immediate exit ramp.
· The market as the ultimate arbiter can reward or reject issuance based on alignment with these principles.
While not a one-size-fits-all TGE model for every project, it is clear that we need a blueprint to promote genuine on-chain price discovery, robust market liquidity, and deep alignment among stakeholders. The DeFi-native TGE model aims to take a meaningful step towards these goals.
The crypto ecosystem thrives on innovation and iteration. By challenging the norms of low supply/high FDV and fair distribution, we can pave the way for a healthier incentive structure — ensuring long-term value creation prevails over short-term speculation.
Ultimately, if this article can inspire a discussion on integrating the best aspects of various TGE models, encouraging rewards for real growth rather than quick exits through new solutions, then we have accomplished our mission. Let us together build a token issuance environment where everyone can benefit from sustained success, where the market fairly rewards those who strive for a brighter future in crypto — the builders, investors, and community members.
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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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