- Buy Crypto
- Markets
Futures- Spot
- Copy Trade
Earn- More
Why Is the Cryptographic Smart Card Doomed to Extinction?
Original Title: Crypto cards don't have any future
Original Author: @paramonoww
Translation: Peggy, BlockBeats
Editor's Note: Crypto cards were once seen as a bridge between the traditional payment system and the crypto world. However, as the industry has developed, the limitations of this model have become increasingly apparent: centralization, reliance on compliance, lack of privacy, overlay fees, and even a betrayal of the core spirit of cryptocurrency.
This article delves into the essence of crypto cards, pointing out that they are merely a transitional solution, not a true decentralized payment innovation. At the same time, the article proposes EtherFi as one of the few models that align with crypto values, demonstrating the possibility of DeFi and TradFi integration.
The following is the original text:
My overall view is that cryptocurrency cards are just a temporary solution to address two well-known issues: first, to bring cryptocurrency to the masses; second, to ensure that cryptocurrency is accepted globally as a form of payment.
Crypto cards are ultimately still cards. If someone truly embraces the core value of cryptocurrency but believes that the future will be dominated by cards, then you may need to rethink your vision.
All crypto card companies will eventually disappear
In the long run, crypto cards are likely to disappear, but traditional cards will not. Crypto cards only add an additional layer of abstraction and are not a purely cryptocurrency use case. The card issuers are still banks. Yes, they may have different logos, designs, and user experiences, but as I mentioned earlier, this is only abstraction. Abstraction makes things more convenient for users, but the underlying processes remain unchanged.
Various public chains and Rollups have been obsessed with comparing their TPS and infrastructure to Visa, Mastercard. This goal has been around for years: either to "replace" or more aggressively "disrupt" Visa, Mastercard, AmEx, and other payment processors.
However, this goal cannot be achieved through crypto cards—they are not substitutes but instead bring more value to Visa and Mastercard.
These institutions are still key "gatekeepers" with the authority to set rules, define compliance standards, and even, if necessary, block your card, company, or even bank.
In an industry that has always pursued "permissionless" and "decentralization," why hand everything over to payment processors now?
Your card is Visa, not Ethereum. Your card is with a traditional bank, not MetaMask. You are spending fiat currency, not cryptocurrency.
Those crypto card companies you love so much have done almost nothing besides slapping their own logo on the card. They merely rely on a narrative, which will fade away in a few years, and those digital cards issued until 2030 won't even be operational by then.
I will explain later how easy it is to create a crypto card now — in the future, you might even make one yourself!
Same Issues + More Fees
The best analogy I can think of is "Application-Specific Sidechains." Yes, applications can process transactions independently and profit from them, which is a cool idea, but it's only temporary: infrastructure costs are decreasing, communication is maturing, and economic issues exist at a higher level rather than a lower one. (If you're interested, you can check out @mvyletel_jr's amazing talk about ASS.)
Crypto cards are the same way: yes, you can top up with cryptocurrency, and the card will convert it to fiat for spending, but the issues of centralization and permissioned access still exist.
It does help in the short term: merchants don't need to adopt new payment methods, and crypto consumption is almost "invisible."
But this is just a transitional step towards what most crypto believers truly desire:
Demand: Pay directly with stablecoins, Solana, Ethereum, Zcash
Not needed: USDT → Crypto Card → Bank → Fiat's indirect path
Adding a layer of abstraction adds a layer of fees: spread fees, withdrawal fees, transfer fees, and sometimes even custody fees. These fees may seem negligible, but they compound: saving a penny is earning a penny.
Using a Crypto Card Doesn't Mean You Are "Unbanked" or Achieving "Banklessness"
Another misconception I've noticed is that people think using a crypto card means they don't have a bank account or have achieved banklessness. Of course, that's not true. Under the guise of a crypto card, there is still a bank, and the bank must report some of your information to the local government. Not all data, but at least some critical data.
If you are a citizen or resident of the European Union, the government will know about your bank account interest, significant suspicious transactions, certain investment income, account balance, etc. If the underlying bank is in the U.S., they know even more.
From a cryptographic standpoint, this has both pros and cons. The benefit is transparency and verifiability, but the same rules also apply to using a standard debit or credit card issued by your local bank. The downside is that it is not anonymous or pseudonymous: the bank still sees your name, not an EVM or SVM address, and you still need to go through KYC.
Limitations Still Exist
You might say, crypto cards are great because they are really easy to set up: download the app, complete KYC, wait for 1–2 minutes for verification, top up with cryptocurrency, and then you can start using it. Yes, this is indeed a killer feature, extremely convenient, but not everyone can use it.
Russia, Ukraine, Syria, Iraq, Iran, Myanmar, Lebanon, Afghanistan, and half of Africa—citizens of these countries cannot use cryptocurrency for day-to-day transactions if they do not have residency rights in another country.
But hey, that's only 10–20 countries that are excluded, what about the other 150+ countries? The issue is not whether the majority can use it, but the core value of crypto: a decentralized network, equal nodes, financial inclusivity, everyone having equal rights. This does not exist in crypto cards because they are not "crypto" at all.
Max Karpis perfectly explains here why the "new banks" were doomed to fail from the start.
Max Karpis believes that "new banks" were doomed to fail from the start because they face multiple structural obstacles: high regulatory and compliance costs, lack of scale and user trust, a business model dependent on third parties and fragile, financial pressures, and profitability challenges. In contrast, giants like Revolut have a huge user base, data advantage, and regulatory moat, allowing them to rapidly replicate innovation and succeed through scale, making it difficult for startups in the new banking sector to survive or disrupt in competition.
The only scenario where I actually used cryptocurrency for payment was when booking a flight on Trip.com. They recently added an option to pay with a stablecoin, allowing you to pay directly from your wallet, and of course, anyone in the world can use it.
Don't use Booking, use Trip for true crypto payments. This is my sincere recommendation.
This is the true application scenario of cryptocurrency and a real cryptographic payment. I believe the ultimate form will look like this: wallets will be specially optimized for the user experience of payments and spending, or (less likely) wallets will evolve into crypto cards if crypto payments are widely adopted in some way.
The Functionality of a Crypto Card is Similar to a Liquidity Bridge (Rain)
I have an interesting observation: the operation of a self-custodial crypto card is very similar to a cross-chain bridge.
This only applies to self-custodial cards: cards issued by centralized exchanges (CEX) are not self-custodial, so exchanges like Coinbase are not obligated to let users think that the funds are under their control.
A reasonable use case for CEX cards is that they can serve as proof of funds, for government purposes, visa applications, or similar scenarios. When you use a crypto card tied to a CEX balance, you are still essentially within the same ecosystem.
Self-custodial crypto cards, on the other hand, are different: their operation is similar to a liquidity bridge, where you lock funds (cryptocurrency) on Chain A (crypto balance) and then unlock funds (fiat) on Chain B (real world).
This "bridge" in the crypto card field acts like a pickaxe during the California Gold Rush: it is a crucial secure channel that connects crypto-native users and enterprises looking to issue their own cards.
@stablewatchHQ has a very accurate analysis of this bridge, seeing it fundamentally as a Card-as-a-Service (CaaS) model. This is the most easily overlooked aspect by everyone discussing crypto cards. These CaaS platforms provide infrastructure for companies to launch their own branded cards.
Related Reading: "The Crypto Payment Card Market: Bridging Digital Assets and Global Commerce"
Rain: How the Crypto Card was Born
In your favorite crypto card, half of it may be supported by @raincards, and you may have never heard of it. Rain is one of the most foundational protocols in the new banking system because it essentially underpins all the core components behind the crypto card. All the remaining companies have to do is slap their logo on it (sounds harsh, but it's close to the truth).
I have created a diagram to help you understand how Rain works and how easy it is to set up a crypto card. Tip: Better quality when zoomed in.
Rain enables companies to quickly launch their own crypto card. In all honesty, Rain's execution ability can even thrive beyond the crypto space. So, no more dreaming that a team needs to raise tens of millions of dollars to issue a crypto card; they don't need that funding — they just need Rain.
The reason I emphasize Rain so much is because people generally overestimate the effort required to issue a crypto card. Perhaps I will write a separate article about Rain in the future because it is truly a highly underestimated technology.
Crypto Cards Lack Privacy and Anonymity
The lack of privacy or anonymity in crypto cards is not an issue with the cards themselves, but rather the issues deliberately ignored by those driving crypto cards, hiding behind the so-called "crypto value."
Privacy is not a widely used feature in the crypto space, and pseudo-privacy (pseudo-anonymity) does exist because what we see are addresses, not names. However, if you are ZachXBT, Wintermute's Igor Igamberdiev, Storm from Paradigm, or others with strong on-chain analysis capabilities, you can significantly narrow down the real-world identity associated with an address.
Of course, the situation with crypto cards doesn't even have the pseudo-privacy of traditional cryptocurrencies because when you activate a crypto card, you must complete KYC (in reality, you are not activating a crypto card, but a bank account).
If you are in the EU, the companies providing crypto cards will still send some of your data to the government for tax or other purposes the government needs to know. Now, you have given regulators a new opportunity to track you: linking your crypto address to your real identity.
Personal Data: The Currency of the Future
Cash still exists (the only anonymous form, except the seller can see you), and it will exist for a long time. But ultimately, everything will be digitized. The current digital systems have not provided consumers with any privacy benefits: the more you spend, the higher the cost you pay, and in exchange, the more they know about you. What a "good deal"!
Privacy is a luxury, and in the crypto card space, it will continue to be so. An interesting idea is that if we achieve truly good privacy, making companies and institutions willing to pay for it (not like Facebook, but with our consent), it may become the currency of the future, even the only currency in a jobless, AI-driven world.
If Everything Is Doomed to Fail, Why Build Tempo, Arc Plasma, Stable?
The answer is simple—locking users into the ecosystem.
Most non-custodial card choices L2 (such as MetaMask using @LineaBuild) or standalone L1 (such as Plasma Card using @Plasma). Due to high costs and finality issues, Ethereum or Bitcoin is usually not suitable for such operations. Some cards use Solana, but this is still a minority.
Of course, companies choose different blockchains not only because of the infrastructure but also because of economic interests.
MetaMask using Linea is not because Linea is the fastest or the most secure, but because Linea and MetaMask both belong to the ConsenSys ecosystem.
I intentionally used MetaMask as an example because it uses Linea. As everyone knows, almost no one uses Linea, and it is far behind Base or Arbitrum in the L2 competition.
But ConsenSys made a clever decision by placing Linea at the core of their card because it can lock users into the ecosystem this way. Users are accustomed to a good user experience rather than what they use every day. Linea naturally attracts liquidity, trading volume, and other metrics, rather than relying on liquidity mining activities or begging users to cross chains.
This strategy is similar to Apple's approach when launching the iPhone in 2007, keeping users on iOS, making it difficult for them to switch to other ecosystems. Never underestimate the power of habit.
EtherFi is the Only Viable Crypto Card
After all this consideration, my conclusion is that @ether_fi might be the only crypto card that truly embodies the crypto spirit (this research is not sponsored by EtherFi, and even if it were, I would not mind).
In most crypto cards, the cryptocurrency you deposit is sold off, and your balance is then replenished with cash (similar to the liquidity bridge I described earlier).
Most Common Crypto Cards
But EtherFi is different: the system never sells off your cryptocurrency but gives you a cash loan and uses your crypto assets to earn a return.
The EtherFi model is similar to Aave. Most DeFi users dream of being able to seamlessly collateralize their crypto assets for cash loans, and this capability has already emerged. You may ask, "Isn't this the same? I can top up my crypto and spend with a crypto card like a regular debit card, so why this extra step?"
EtherFi's Mechanism (Simplified)
The problem is that selling your crypto is a taxable event, sometimes even more easily taxed than everyday spending. In most cards, each of your transactions can be a taxable event, leading you to pay more taxes (again, emphasizing that using a crypto card does not mean going bankless).
EtherFi somewhat addresses this issue because you are not actually selling the crypto; you are just using it as collateral for a loan.
On this basis alone (along with USD with no foreign exchange fees, cashback, and other benefits), EtherFi becomes the prime example of DeFi meeting TradFi.
Most cards try to pretend to be crypto products, but in reality, they are just liquidity bridges, while EtherFi truly caters to crypto users, not merely to mainstream crypto: it enables crypto users to spend locally until mainstream users realize how cool this model is. Among all crypto cards, EtherFi could be the only project that survives in the long run.
I see the crypto card as an experimental ground, but unfortunately, most teams you see are merely using the narrative without giving due credit to the underlying systems and developers.
Let's see where progress and innovation will take us. Currently, what we see is the globalization of crypto cards (horizontal growth) but a lack of vertical growth, which is precisely what this payment technology needed in its early days.
You may also like
From 0 to $1 Million: Five Steps to Outperform the Market Through Wallet Tracking
Token Cannot Compound, Where Is the Real Investment Opportunity?
February 6th Market Key Intelligence, How Much Did You Miss?
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.
Former Partner's Perspective on Multicoin: Kyle's Exit, But the Game He Left Behind Just Getting Started
Why Bitcoin Is Falling Now: The Real Reasons Behind BTC's Crash & WEEX's Smart Profit Playbook
Bitcoin's ongoing crash explained: Discover the 5 hidden triggers behind BTC's plunge & how WEEX's Auto Earn and Trade to Earn strategies help traders profit from crypto market volatility.
Wall Street's Hottest Trades See Exodus
Vitalik Discusses Ethereum Scaling Path, Circle Announces Partnership with Polymarket, What's the Overseas Crypto Community Talking About Today?
Believing in the Capital Markets - The Essence and Core Value of Cryptocurrency
Polymarket's 'Weatherman': Predict Temperature, Win Million-Dollar Payout
$15K+ Profits: The 4 AI Trading Secrets WEEX Hackathon Prelim Winners Used to Dominate Volatile Crypto Markets
How WEEX Hackathon's top AI trading strategies made $15K+ in crypto markets: 4 proven rules for ETH/BTC trading, market structure analysis, and risk management in volatile conditions.
A nearly 20% one-day plunge, how long has it been since you last saw a $60,000 Bitcoin?
Raoul Pal: I've seen every single panic, and they are never the end.
Key Market Information Discrepancy on February 6th - A Must-Read! | Alpha Morning Report
2026 Crypto Industry's First Snowfall
The Harsh Reality Behind the $26 Billion Crypto Liquidation: Liquidity Is Killing the Market
Why Is Gold, US Stocks, Bitcoin All Falling?
Key Market Intelligence for February 5th, how much did you miss out on?
From 0 to $1 Million: Five Steps to Outperform the Market Through Wallet Tracking
Token Cannot Compound, Where Is the Real Investment Opportunity?
February 6th Market Key Intelligence, How Much Did You Miss?
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.
Former Partner's Perspective on Multicoin: Kyle's Exit, But the Game He Left Behind Just Getting Started
Why Bitcoin Is Falling Now: The Real Reasons Behind BTC's Crash & WEEX's Smart Profit Playbook
Bitcoin's ongoing crash explained: Discover the 5 hidden triggers behind BTC's plunge & how WEEX's Auto Earn and Trade to Earn strategies help traders profit from crypto market volatility.
App