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Trump Takes Over the Fed, Impact on Bitcoin in the Coming Months
Tonight will see the most anticipated interest rate cut decision by the Federal Reserve this year.
The market is widely betting on a rate cut almost being a done deal. However, what will truly determine the future trend of risk assets in the coming months is not just another 25-basis-point cut, but a more critical variable: whether the Fed will inject liquidity back into the market.
Therefore, this time, Wall Street is not focused on the interest rate but on the balance sheet.
According to expectations from institutions such as Bank of America, Vanguard, PineBridge, and others, the Fed may announce this week that it will start a $45 billion per month short-term debt purchase program from January next year as part of a new round of "reserve management operations." In other words, this means that the Fed may be quietly restarting an era of "tacit balance sheet expansion," allowing the market to enter into liquidity easing ahead of the rate cut.
But what truly has the market on edge is the backdrop against which this is playing out—the U.S. is entering an unprecedented period of monetary power reshuffling.
Trump is taking over the Fed in a way far faster, deeper, and more thorough than anyone had anticipated. It's not just about replacing the chairman but redefining the power boundaries of the monetary system, reclaiming control of long-term rates, liquidity, and the balance sheet from the Fed to the Treasury. The central bank independence, which has been considered a "sacred rule" for decades, is quietly being eroded.
This is also why from the Fed's rate cut expectations to ETF fund flows, from MicroStrategy to Tom Lee's contrarian position increase, all seemingly disparate events are actually converging on the same underlying logic: the U.S. is entering a "fiscally-led currency era."
And what impacts will this have on the crypto market?
MicroStrategies Power Up
Over the past two weeks, the entire market has been discussing one question: Will MicroStrategy be able to withstand this downturn? Bears have simulated various scenarios of this company "collapse."
But Saylor clearly doesn't think so.
Last week, MicroStrategy increased its Bitcoin holdings by approximately $963 million, specifically 10,624 BTC. This was their largest purchase in the past few months, exceeding even the total accumulation of the last three months.
It's worth noting that the market had been speculating whether, as MicroStrategy's market NAV approached 1, the company would be forced to sell Bitcoin to avoid systemic risk. When the market NAV almost hit 1, instead of selling, they not only held but also doubled down on their position, and to such a large extent.
Meanwhile, on the ETH side, an equally exciting contrarian move unfolded. BitMine, under Tom Lee's leadership, managed to continue hitting the ATM even as the ETH price plummeted and the company's market value retraced by 60%. In a surprising turn of events, BitMine raised a large amount of cash and bought $4.29 billion worth of ETH in one go last week, increasing its holdings to a $12 billion scale.
Despite BMNR's stock price plummeting by over 60% from its peak, the team was still able to keep hitting the ATM (issuance mechanism) to raise money and continue buying more.
CoinDesk analyst James Van Straten was more direct in his assessment on X: "MSTR can raise $1 billion in a week, while back in 2020, it would take them four months to achieve the same scale. The exponential trend is still ongoing."
In terms of market capitalization impact, Tom Lee's actions are even "heavier" than Saylor's. Since BTC's market cap is five times that of ETH, Tom Lee's $4.29 billion buy order is equivalent to a "double impact" on Saylor's $1 billion BTC purchase in terms of weight.
No wonder the ETH/BTC ratio has started to rebound, breaking free from a three-month downtrend. History has repeated itself countless times: whenever ETH takes the lead in warming up, the market enters a brief but intense "altcoin rebound window."
With $1 billion in cash on hand, BitMine is strategically positioned in the optimal cost averaging range where ETH has significantly dipped. In a market where funding is generally tight, having an institution that can continue to aggressively buy is inherently part of the price structure.
ETFs Are Not Fleeing, but Arbitrage Players Are Temporarily Withdrawing
At first glance, over the past two months, Bitcoin ETFs have seen outflows of nearly $4 billion, causing the price to drop from $125,000 to $80,000, leading the market to quickly draw a rough conclusion: institutions are pulling out, ETF investors are panicking, and the bull market structure is crumbling.
However, insights from Amberdata provide a completely different explanation.
These outflows are not due to "value investors fleeing," but rather to "leveraged arbitrage funds being forced to liquidate." The main source of this liquidation is a structured arbitrage strategy called "basis trade" falling apart. Funds originally earned a stable spread by "buying spot/shorting futures," but starting from October, the annualized basis dropped from 6.6% to 4.4%, spending 93% of the time below the breakeven point, turning the arbitrage into losses and forcing the strategy to unwind.
This triggered a "two-way action" of ETF outflows + futures unwinding.
In the traditional sense, a capitulation sell-off often occurs in an extreme emotional environment after a continuous downturn, where market panic reaches its peak, investors no longer attempt to set stop-loss orders, but instead completely abandon all positions. Its typical characteristics include: almost all issuers experiencing large-scale redemptions, a surge in trading volume, relentless sell-offs regardless of cost, and accompanying extreme sentiment indicators. However, this ETF outflow clearly does not fit this pattern. Despite an overall net outflow, the direction of funds is not consistent: for example, Fidelity's FBTC continued to experience continuous inflows throughout the period, while BlackRock's IBIT even absorbed some incremental funds during the most severe net outflow phase. This indicates that only a few issuers are truly withdrawing, rather than the entire institutional group.
More critical evidence comes from the distribution of outflows. From October 1 to November 26, over a 53-day period, Grayscale's funds contributed to over $9 billion in redemptions, accounting for 53% of the total outflows; 21Shares and Grayscale Mini followed closely, together representing nearly ninety percent of the redemption volume. In contrast, BlackRock and Fidelity—the most typical institutional allocation channels in the market—saw a net inflow overall. This is completely inconsistent with a true "panic institutional retreat" and instead appears more like some kind of "localized event."
So, which type of institutions are selling? The answer is: large funds engaging in basis arbitrage.
The so-called basis trade is essentially a direction-neutral arbitrage structure: funds buy spot Bitcoin (or ETF shares) while shorting futures to earn the contango yield. This is a low-risk, low-volatility strategy that attracts a large amount of institutional funds when the futures premium is reasonable and funding costs are manageable. However, this model relies on one premise: the futures price must consistently remain above the spot price, and the spread must be stable. Starting from October, this premise suddenly disappeared.
According to Amberdata, the 30-day annualized basis compressed from 6.63% to 4.46, with 93% of trading days below the 5% breakeven point required for arbitrage. This means these trades are no longer profitable, and may even start to incur losses, forcing funds to exit. The rapid collapse of the basis led to a "systemic unwinding" of these arbitrageurs: they had to sell off ETF holdings while buying back the futures they were previously short, to close this arbitrage trade.
This process is clearly visible from the market data. The open interest of Bitcoin perpetual contracts decreased by 37.7% during the same period, with a cumulative reduction of over $4.2 billion, and a correlation coefficient of 0.878 with the basis change, showing an almost synchronous movement. This "ETF sell-off + short cover" combination is the typical path for basis trade exit; the sudden amplification of ETF outflows is not price panic-driven but rather the inevitable result of the arbitrage mechanism's collapse.
In other words, the ETF outflows of the past two months look more like a "leverage unwinding event" rather than a "long-term institutional retreat." This was a highly professional, structured trading dismantling, rather than a panic sell-off driven by market sentiment.
More importantly, when these arbitrage positions were cleared, the remaining fund structure actually became healthier. Currently, ETF holdings remain at around a high of about 1.43 million bitcoins, with the majority of shares coming from allocation-focused institutions rather than short-term funds chasing spreads. As leveraged hedge positions were removed, the overall market leverage ratio decreased, reducing volatility sources. Price action will be more driven by "genuine buying and selling pressure" rather than being hijacked by forced technical maneuvers.
Amberdata's Head of Research, Marshall, describes this as a "market reset": after the retreat of arbitrage positions, the additional funds in ETFs are more directional and long-term in nature, reducing structural market noise. Subsequent trends will more reflect real demand. This means that although it may seem like a $4 billion outflow on the surface, it may not necessarily be a bad thing for the market itself. On the contrary, it could also lay the foundation for the next wave of healthier growth.
If Saylor, Tom Lee, and the ETF funds represent a micro perspective, the macro-level changes are deeper and more drastic. Will the Christmas market rally come? To find the answer, we may need to look at the macro level again.
Trump's "Takeover" of the Currency System
For decades, the independence of the Federal Reserve has been seen as a "sacred rule." Monetary power belongs to the central bank, not the White House.
However, Trump clearly disagrees with this.
Increasing signs indicate that the Trump team is taking over the Federal Reserve in a way that is far faster and more thorough than the market expected. It's not just symbolically "changing to a more hawkish chairman," but rather a comprehensive rewriting of the power distribution between the Federal Reserve and the Treasury Department, changing the balance sheet mechanism, and redefining the pricing of the interest rate curve.
Trump is attempting to reconstruct the entire currency system.
Former New York Fed trading desk head Joseph Wang (a long-time researcher of the Fed's operational system) has also made it clear that "the market significantly underestimates Trump's determination to control the Fed, and such changes could push the market into a higher-risk, higher-volatility phase."
From personnel arrangements, policy direction to technical details, we can see very clear traces.
The most tangible evidence comes from personnel arrangements. The Trump camp has already put several key figures in core positions, including Kevin Hassett (former White House economic advisor), James Bessent (key decision-maker at the Treasury Department), Dino Miran (financial policy advisor), and Kevin Warsh (former Federal Reserve governor). These people have a common trait: they are not traditional "central bank proponents" and do not advocate central bank independence. Their goal is very clear: to weaken the Fed's monopoly on interest rates, long-term funding costs, and systemic liquidity, and to return more currency power to the Treasury Department.
The most symbolic point is: It was widely believed that Bessent, who was considered the most suitable candidate to take over as Federal Reserve Chair, ultimately chose to stay at the Treasury Department. The reason is simple: in the new power structure, the Treasury Department's position is more influential in shaping the rules of the game than the Federal Reserve Chair.
Another important clue comes from the changing term premium.
For the average investor, this indicator may be somewhat unfamiliar, but it is actually the most direct signal of the market's judgment on "who is controlling long-term interest rates." Recently, the spread between 12-month U.S. Treasuries and 10-year Treasuries once again approached a multi-month high. This upward trend is not due to a strengthening economy or rising inflation but rather the market reassessing: in the future, it may not be the Federal Reserve but the Treasury Department that determines long-term interest rates.
The yields on 10-year and 12-month Treasury bonds are continuing to decline, indicating a strong market bet that the Federal Reserve will cut interest rates, and the pace will be faster and more aggressive than previously expected.
The SOFR (Secured Overnight Financing Rate) experienced a cliff-like drop in September, indicating a sudden collapse in the U.S. money market interest rates and signaling a significant loosening of the Federal Reserve's policy rate system.
The initial increase in the spread was because the market believed that Trump would cause the economy to "overheat" after taking office; later, when tariffs and large-scale fiscal stimulus were absorbed by the market, the spread quickly fell back. Now, as the spread rises again, it no longer reflects growth expectations but rather uncertainty about the Hassett-Bessent system: if in the future the Treasury Department controls the yield curve through adjustments in debt duration, increased short-term debt issuance, and reducing long-term debt, then traditional methods of assessing long-term rates will become completely ineffective.
A more subtle but critical piece of evidence lies in the balance sheet system. The Trump team has frequently criticized the current "ample reserve regime" (where the Federal Reserve expands its balance sheet and provides reserves to the banking system, making the financial system heavily reliant on the central bank). However, at the same time, they are keenly aware that the current reserves are already tight, and the system actually needs a balance sheet expansion to maintain stability.
This contradiction of "opposing balance sheet expansion but being forced to expand" is actually a strategy. They use this as a reason to question the Federal Reserve's institutional framework, advocating for more monetary power to be transferred back to the Treasury Department. In other words, they are not seeking an immediate balance sheet reduction but are using the "balance sheet dispute" as a breakthrough to weaken the Federal Reserve's institutional position.
If we string these actions together, we see a very clear direction: term premium compression, U.S. Treasury duration shortening, the gradual loss of independence of long-term rates; banks may be required to hold more U.S. Treasuries; government-sponsored entities may be encouraged to leverage up to buy mortgage-backed securities; the Treasury Department may influence the entire yield structure by increasing short-term debt issuance. Prices previously determined by the Fed will gradually be replaced by fiscal tools.
The resulting outcome may be: gold entering a long-term uptrend, stocks maintaining a slow melt-up structure after volatility, and liquidity gradually improving due to fiscal expansion and repurchase mechanisms. The market may appear chaotic in the short term, but this is only because the boundaries of the monetary system's power are being redrawn.
As for Bitcoin, the most concerning asset in the crypto market, it finds itself on the edge of this structural shift, not the most direct beneficiary, nor the main battleground. On the positive side, improved liquidity will provide a floor for Bitcoin prices; however, looking at the longer-term trend in the next 1-2 years, it still needs to go through a period of further accumulation, waiting for the new monetary system framework to truly clarify.
The U.S. is transitioning from the "Central Bank Dominated Era" to the "Fiscal Dominated Era."
In this new framework, long-term rates may no longer be determined by the Fed, liquidity will come more from the Treasury, the Fed's independence will be weakened, market volatility will be greater, and risk assets will also face a completely different pricing system.
As the underlying system is being rewritten, all prices will behave more 'illogically' than usual. But this is a necessary stage of the old order loosening and the new order arriving.
The market trends in the coming months are likely to emerge in this chaos.
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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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