China’s New Crypto Ban Explained: Stablecoins, RWA, and the Digital Yuan

China is tightening the screws on crypto again.

The People’s Bank of China and seven other government agencies released a revised joint notice on Friday, banning unauthorized offshore issuance of yuan-pegged stablecoins. The notice also brings RWA tokenization under regulatory control for the first time.

The agencies stated that stablecoins pegged to fiat currencies “perform some of the functions of fiat currencies,” and warned that their unregulated circulation could threaten the yuan’s stability.

The rules apply to both domestic and foreign entities, including overseas branches of Chinese firms.

What Do the New Rules Cover?

The notice reaffirms that crypto has no legal tender status in China. All crypto-related business activities remain classified as “illegal financial activities.”

Financial institutions are warned against offering banking or clearing services to crypto businesses. Mining operations continue to face enforcement. And businesses can no longer include words like “stablecoin,” “RWA,” or “cryptocurrency” in their registered names or business scope.

A Hidden Opening for RWA?

Here is where it gets interesting. Despite the ban language, the notice does seem to create a regulated path for RWA tokenization, something that previously sat in a grey area.

Louis Wan, CEO of Unified Labs, said, “The biggest breakthrough is a clear separation between virtual currencies and RWA. Virtual currencies will still be outlawed, but RWA is being included in the regulatory system. For China’s RWA business, this is a milestone.”

Alex Zuo, senior vice president at Cobo, added, “To some extent, this means China is allowing the issuance of offshore tokens based on onshore assets.”

Digital Yuan Dominance

Winston Ma, adjunct professor at NYU School of Law, said China’s central bank is essentially highlighting that only its own digital yuan is legitimate.

China recently allowed commercial banks to pay interest on digital yuan wallets starting January 1, 2026, a clear push to drive e-CNY adoption while shutting out private alternatives.

Crypto Twitter has been exploding with reactions. Benjamin Cowen, CEO of Into The Cryptoverse, summed it up on X: “It wouldn’t be a bear market if China wasn’t banning crypto.”

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