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Known as Solana's most significant economic adjustment, SIMD-0228 will have the following impacts: - **Increase in Transaction Fees**: The upgrade will lead to a significant increase in transaction fees on the Solana network. - **Reduction in Token Emiss
Original Title: "What Impact Will the Self-Proclaimed Most Significant Economic Adjustment of Solana, SIMD-0228, Bring?"
Original Source: SolEasy Labs
Recently, a governance proposal within the Solana community, SIMD-0228, has become a focal point of attention. This proposal, once introduced, sparked numerous discussions within the community, with some applauding it and others expressing concerns. So what is it exactly? Put simply, SIMD-0228 aims to transform Solana's SOL issuance mechanism from its original fixed inflation to a flexible dynamic adjustment based on staking participation rate, reshaping the network's economic model. This not only concerns the value of SOL but may also press an important key for the future development of the Solana ecosystem.
Why Has SIMD-0228 Drawn Attention?
SIMD-0228 was jointly proposed in January this year by three heavyweights in the Solana ecosystem, including Tushar Jain and Vishal Kankani, co-founders of Multicoin Capital—a firm that is one of Solana's earliest and most significant supporters. Furthermore, Max Resnick, Chief Economist at Anza, the Solana core development team, has also shown strong support.
Currently, Solana's inflation mechanism follows a fixed schedule, with the annual inflation rate decreasing from the initial 8% to the current inflation rate of around 4.669%, aiming to stabilize in the long run at 1.5%. However, this fixed model lacks flexibility and cannot be dynamically adjusted based on the network's actual needs or staking participation rate.
Over the past six months, Solana's on-chain activity has been booming, creating over $1.5 billion in REV (Network Revenue = Fees + Tips), demonstrating its strong network usage demand. At the same time, Solana's staking rate has also reached a historical high of 65.7%, creating favorable conditions for reducing inflation. Therefore, the proposers believe that the inflation strategy should be optimized to no longer blindly issue excess SOL, allowing the network to develop more healthily.
The core of SIMD-0228 lies in introducing an "intelligent inflation" mechanism, which dynamically adjusts the issuance of SOL based on the staking rate, with specific goals including:
· Dynamic Staking Incentives: When the staking rate decreases, the system will automatically increase the issuance of SOL to incentivize more users to participate in staking, ensuring the network's security.
· Minimum Necessary Attestation (MNA): The system will minimize unnecessary SOL issuance, only issuing the minimum amount of tokens required to maintain network security, to avoid market sell pressure.
· Network Security: Ensure the security of the network while allowing more capital to flow into the DeFi ecosystem, driving the healthy development of the ecosystem.
The proposers believe that this adjustment will allow Solana to break free from the old path of "inflation" and move towards a more sustainable development trajectory. It sounds perfect, but what will happen after implementation? What kind of impact will it bring?
What Impact Might SIMD-0228 Have?
If SIMD-0228 is successfully approved, Solana's economic model will undergo a significant transformation, with the impact spreading throughout the entire ecosystem.
1. Impact on the Solana Network
After the proposal is passed, based on the current staking rate of 65%, the inflation rate may plummet from the current 4.5% to 0.87%, and staking rewards will see a significant reduction. This means that validator income will rely more on MEV (Miner Extractable Value) rather than inflation rewards. For regular holders, SOL dilution will decrease, sell pressure will ease, and there will be more room for price appreciation.
However, for validators, especially small validators, the low returns may make it difficult for them to maintain operations. Former Grayscale research director David Grider has created a model predicting that Solana may lose between 50 and 250 validators as a result, increasing the risk of network centralization. Therefore, this is actually a game of "security and efficiency."
2. Impact on Ecosystem Builders
A decrease in staking rewards will leave more SOL without a destination, ultimately flowing into the DeFi ecosystem, increasing liquidity. Ian Unsworth stated that this will drive up the adoption rate of liquid staking tokens (LST), creating a positive trend for DeFi protocols that currently have liquidity (such as JitoSOL), while also benefiting VRTs (like Renzo, Fragmetric, and Kairos) built on their staking platforms.
Furthermore, this will also result in rewards being directly tied to network usage, with most rewards coming from priority fees and Jito fees. Validator tips may generate a potential flywheel effect, as wealth injection drives higher chain utilization = higher returns = even higher chain utilization. At the same time, low base returns will pressure developers to create "yield-enhancing" products, ultimately triggering an explosion of staking derivative products.
Editor's Note: Jito Validator Tips, or Jito Validator Tips, is a feature introduced by Solana ecosystem MEV infrastructure protocol Jito Labs, aimed at optimizing the Validator's revenue distribution mechanism, to directly distribute a portion of MEV revenue (such as arbitrage, liquidation-generated profits) to Validators in the form of "Tips".
But everything has two sides. Reducing the issuance of new tokens may limit the funding and liquidity of ecosystem projects and developers, potentially slowing down innovation and growth, which could affect the overall vitality of the ecosystem. Furthermore, due to the reduction in network validators, if network security is compromised, it may directly impact the development of ecosystem projects, reducing user confidence.
3. Impact on Holders
For SOL holders, "smart inflation" greatly enhances Solana's inflation controllability, which is particularly attractive to institutional capital. More funds may flow into DeFi protocols in pursuit of high returns, and the long-term price performance of SOL is promising. The model can also maintain a competitive return rate based on the staking participation rate, enhancing asset value. However, for large holders, the reduction in staking rewards may prompt them to reassess: should they continue to stake or switch to other revenue channels? This is not just a technical adjustment, but also a reconstruction of investment logic.
SIMD-0228 Game of All Parties
The lively discussion of the SIMD-0228 proposal reflects the complexity of the ecosystem, with major investment institutions mainly in support, a divided Validator group, and a complex stance of developers and ecosystem builders.
· The two proposers of the SIMD-0228 proposal, Tushar Jain and Vishal Kankani, both believe that SMID-0228 will release more SOL into the DeFi ecosystem, providing more opportunities to develop and promote new DeFi products and services, increase liquidity, and user engagement.
· Solana's co-founder Anatoly Yakovenko also expressed support for this proposal, believing that a practical release gives Solana the "opportunity to correct our youthful mistakes".
· Ben Hawkins, Staking Lead at the Solana Foundation, supports the dynamic $SOL issuance to reduce inflation.
· Max Kaplan from Sol Strategies proposed the concept of "preferring to be roughly right rather than precisely wrong," emphasizing the flexibility of market-driven mechanisms.
· Kamino Co-founder Marius pointed out that "Staking encourages hoarding and reduces financial activity," supporting reducing inflation to enhance liquidity.
Therefore, for large investment institutions, the SIMD-0228 proposal can shape the narrative of a "market-driven efficient network," attracting more institutional investment. At the same time, the reduction in inflation rate helps reduce token dilution and maintain the value of their holdings.
While experts are optimistic, Solana community members have expressed their concerns. For example, validator Xen mentioned that if rewards eventually favor those who hold more SOL, smaller validators may struggle to earn rewards, leading to an "inflation spiral."
Xen's concerns are valid, as Solana's MEV revenue in Q4 2024 reached a staggering $430 million, more than 10 times that of Q1. Therefore, even with a significant reduction in the inflation rate, large professional validators can offset the reduced rewards through MEV and transaction fees, maintaining profitability.
For small and medium validators, there are currently still 250 small validators operating at a loss, relying only on the Solana Foundation's delegation program to stay online. A model created by former Grayscale researcher David Grider suggests that after the SMID-0228 proposal passes, Solana may lose an additional 50 to 250 validators in various revision scenarios.
Community member Leapfrog candidly stated on the Solana developer forum that this proposal "will have a disastrous impact on Solana." He believes that if inflation rises during a period of low investor confidence, leading to disinvestment and selling pressure, it will exacerbate panic. Regardless of the potential returns from staking, volatile assets are not suitable for long-term large investors.
The Managing Partner of Multicoin Capital stated that the current high inflation rate is a consensus and action should be taken promptly. He is not concerned about consensus security but acknowledges that validator profitability may be affected. He expects that some validators may exit the network, potentially triggering a "zero-commission race" and further worsening their economic situation.
He emphasized that excessive caution could lead to "analysis paralysis," hindering Solana's development. Therefore, rapid progress should be maintained to avoid a situation similar to Ethereum's. This proposal fundamentally represents a rebalancing of power among large token holders, validators, and ecosystem builders. As such, this vote is also considered one of Solana's most crucial decisions.
Can SIMD-0228 Be Further Optimized?
SIMD-0228 has undoubtedly sparked discussions across the entire Solana ecosystem. If it is successfully implemented, it would be a long-awaited development, achieving short-term consensus. However, after running for a period of time, new issues are likely to arise, leading to the proposal of new adjustments.
If the vote on SIMD-0228 does not pass, given the current popularity of the proposal, it is likely that new proposals will be put forward to modify Solana's economic model. The main conflict currently lies in the mismatch between Solana's development needs and its economic model. As long as this conflict exists, there will be sufficient motivation within the ecosystem to drive the proposal of new adjustments.
Through the various perspectives on SIMD-0228, we can also perceive that most people have not discussed whether this conflict itself exists; rather, the discussions have revolved around the specific adjustment methods in the SIMD-0228 proposal. Therefore, new proposals are likely to emerge endlessly.
So, if a new proposal to address the current conflict is to be put forward, where can we start?
Firstly, make some modifications to the parameters mentioned in SIMD-0228. Some of the opposition to SIMD-0228 stems from its perception as too drastic, with its significant impact on the ecosystem. By adjusting some of its parameters to slow down the overall changes, such as raising the lowest inflation rate in SIMD-0228 from 0% to around 2%, the reduction in validator income would be less severe, ensuring their sustainability. This milder version of SIMD-0228 may lead to a new proposal.
Secondly, redesign the dynamic inflation adjustment scheme. For example, Polkadot also has a mechanism for dynamically adjusting Staking rewards. It has designed an optimal Staking ratio; when the actual Staking ratio deviates from this optimal ratio, Stakers are unable to receive the full inflation rewards, as a portion is directed to the treasury. Through this mechanism, it encourages participants to align the Staking ratio closer to the optimal ratio, making it the most cost-effective for Stakers, thereby regulating the network's overall Staking ratio.
However, Polkadot's mechanism will involve routing a portion of the inflation funds to the treasury, which will add additional complexity to governance. Nevertheless, it is undeniable that there are mechanisms that can dynamically adjust Staking rewards, thus impacting the overall ecosystem development, a point that Solana can draw inspiration from.
Regarding the portion of inflation funds routed to the treasury in Polkadot, combined with Solana's treasury-less design, it can be considered to burn those funds, thereby achieving a target Solana staking ratio (e.g., 33%). At the same time, during suboptimal Staking ratios, Solana's total inflation rate will decrease due to additional burning, and Staking rewards will also decrease.
The approach mentioned above still involves dynamically adjusting the inflation rate itself, but it can also be achieved by dynamically adjusting other parameters, similarly achieving a similar effect.
For example, consider directly setting the initial inflation rate to a fixed value of 3%, but dynamically adjusting the current fee burn ratio. Currently, 50% of fees are burned, and 50% are given to validators. We can dynamically adjust this 50% ratio to increase burning when necessary or reduce burning when needed, ensuring that Staking rewards do not become too high to affect ecosystem development, while harnessing the ecosystem's power to reduce inflation.
Of course, if the transition from the current inflation rate of around 4.5% to 3% is deemed to be too rapid, it is also possible to consider reducing by 0.5% every six months, reaching the endpoint of 3% in one and a half years, thus mitigating the impact of this adjustment on the ecosystem.
The above suggestions are just some divergent thoughts on SIMD-0228, but they are sufficient to demonstrate that there are many ways to adjust the Solana economic model. As one of the most successful public chains at present, Solana's economic model adjustment is a significant experiment in the blockchain industry.
Currently, SIMD-0228 is under a vote, and the vote count has exceeded 33%, reaching the required quorum. The current approval rate has exceeded 70%, and the vote will continue until Epoch 755. If successfully passed, it will provide a "dynamic inflation" reference paradigm for other public chains. Even if it does not succeed, this governance dispute has profoundly altered the narrative of Web3: The future of blockchain economics lies in the delicate balance between code rules and human incentives, and Solana is undoubtedly leading the industry's development.
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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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