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ThunderChain Resumes Legal Battle as Former CEO Chen Lei Accused of Embezzlement for Cryptocurrency Speculation - What Happened Back Then?
Editor's Note: This article was first published on October 10, 2020. At that time, Xunlei was in a public dispute with its former CEO, Chen Lei, accusing him of embezzling millions of RMB from the company to speculate on cryptocurrency and fleeing overseas.
Several years have passed, and the aftermath of this internal conflict has resurfaced. Today, Xunlei announced the restart of lawsuits against Chen Lei and his core team, accusing them of harming the company's interests, with the claim amount now increased to 200 million RMB. Looking back at the melodramatic events surrounding "contract fabrication, improper benefits transfer, and elopement with a lover" in 2020, there are still many details worth revisiting. The following is the original content:
On the last day of the National Day holiday, the U.S.-listed company Xunlei released a statement accusing its former CEO, Chen Lei, of embezzling millions of RMB from the company for cryptocurrency speculation, arranging for relatives to fabricate contracts internally to embezzle company funds. The Shenzhen Public Security Bureau has launched a criminal investigation against Chen Lei and others suspected of embezzlement.
Meanwhile, Chen Lei, who claimed his innocence, had left the country with his lover when the "Xunlei power struggle" began in April this year.
The rapid development of online streaming layered over the internet has almost pushed Xunlei, a company, out of the view of internet users. Still, it cannot be denied that Xunlei is indeed a product of its time.
From a downloading software used by 100 million people daily to a CEO who was ousted to make the company soar, from a U.S.-listed company to being involved in illegal blockchain fundraising, what has Xunlei been through in these 20 years?
First in the Download Business Field
At the end of the last century, few households had computers connected to the internet. It was the era of dial-up internet, and the computer's download function was very limited. Downloads would often be interrupted by a phone call or network fluctuation, causing the downloaded files to be lost.
There was a strong need for a technology that could resume downloading files from where it was interrupted, known as a download manager with the feature of resuming broken downloads. This led to the creation of NetAnts in 1998, FlashGet in 2001, and Xunlei founded by Zou Shenglong in 2003.
Interestingly, these three download software were all developed by Chinese developers. FlashGet, based on NetAnts, added multi-threading and a Chinese interface, making it more popular among Chinese users.
However, just as FlashGet was gaining momentum in the Chinese market and Xunlei was still a small player, Blizzard's "World of Warcraft" started its public beta testing.
Speaking of "World of Warcraft," this game has truly influenced many people. Ethereum's founder, Vitalik Buterin, was inspired by "World of Warcraft" to focus on decentralization. Xunlei also benefited greatly from this game: because "World of Warcraft" was so fun, Hou Yantang, the developer of FlashGet, stopped updating the software for more than a year just to play the game.
For Thunder, founded in 2002, this was truly a heaven-sent opportunity.
Thunder brought all the functions of Internet Express, added a large number of new features, allowing even niche resources to be downloaded at high speed. In an instant, Thunder was installed on the computers of Chinese netizens. Next, Thunder further upgraded the anti-deadlink function to P2SP, incorporating all the resources on Thunder users' computers and resources not belonging to Thunder on servers into Thunder's download network, accelerating downloads through resources from multiple sources.
Although this strategy is debatable, product experience is key, and at that time, Thunder's download speed was unrivaled.
Thus, relying on the "skillful use" of Chinese users' computer resources and network bandwidth, Thunder successfully became China's top download software. In Thunder's initial public offering prospectus, Thunder had a 73% market share in 2008. Everyone knew Thunder, and no one could live without it. Thunder was also favored in the capital market, receiving support of over $30 million.
In theory, Thunder should have been able to become a company like Tencent, earning money effortlessly with traffic support. However, the fact is that this company, apart from doing well in the download business, performed miserably in all other businesses.
Disastrous Business Ventures
Starting in 2007, Thunder ventured into online video streaming with Thunder KanKan, even doing less than Youku, becoming just a section player. In 2008, it acquired Shiny Stone Magic Hand to enter photo processing, and the same year, Meitu Xiuxiu was launched. Today, the already publicly listed Meitu Xiuxiu is well known, while Shiny Stone Magic Hand was quietly closed in 2014.
According to Nan Qidao's description in "The Power Game Behind Thunder's Palace Drama," during the period when Zou Shenglong was in charge of Thunder, whatever this company did, it failed, resulting in the death of dozens of products. All functions were launched at the best time but died due to various institutional and management constraints of this company.
After raising funds for so many years, almost ready to go public, Thunder faced a "short-selling wave." At the end of 2010, capital institutions began short-selling Chinese concept stocks, and many Chinese companies with financial fraud saw their stocks become worthless, with 42 Chinese concept stocks being suspended and delisted within a year. The US capital market began to question Chinese companies listed in the US.
Against this backdrop, in June 2011, Thunder submitted its application for a US stock market listing.
Not only was the IPO timing unfavorable, but the prospectus also revealed that the company was carrying a $21.8 million copyright lawsuit. This was the fatal issue Thunder could not evade, as the Motion Picture Association previously publicly stated that Thunder was helping netizens download pirated movies, causing harm to movie copyrights.
With external challenges exacerbating internal issues, Thunder's IPO journey in 2011 failed. Despite Thunder lowering the offering price multiple times, reducing the financing scale, it still did not attract the attention of the capital markets, leading Thunder to halt its IPO.
Looking back at that time, it was also when the mobile internet began to develop, China's internet started to shift from home computers to smartphones, and Thunder, which started with PC downloads, found it increasingly difficult.
Xiaomi's Rescue
In 2014, the mobile internet rising star Lei Jun invested $310 million in Thunder (with Xiaomi contributing $200 million and Kingsoft $90 million), becoming Thunder's largest shareholder. Xiaomi held 27.95% of the shares, Kingsoft held 11.19%, Lei Jun held a total of 39% of Thunder's shares, and founder Zhou Shenglong's shares fell to only 9.5%, losing control of the company.
In Xiaomi's view, Thunder was a cloud service provider to improve Xiaomi's ecosystem's video playback, download, and other functions, perhaps to squeeze out the last bit of value from desktop computers. With Lei Jun's help, in June 2014, Thunder finally went public on the NASDAQ in the United States. Everyone thought that Thunder might have emerged from its low point and started to turn the corner, but Thunder took action that defied everyone's expectations.
During the years from 2014 to 2017, Thunder remained silent like a dead chicken. Storm Video was making VR glasses next door, LeTV was doing mobile phones, TVs, and cars, Baidu was doing artificial intelligence, Didi had already dominated the market, but Thunder did not chase any hot trends.
However, after three years of silence, in October 2017, Thunder's stock experienced an unprecedented large-scale surge, becoming a star company in the entire internet world. Did their business make a qualitative leap? Not really. The reason was simple. While Bitcoin was surging towards its all-time high, Thunder followed the trend and directly issued its own cryptocurrency.
Thunder Issues Cryptocurrency
As early as the beginning of 2014, Zhou Shenglong personally led a new business called the "Crystal Plan," which sold Thunder users' idle bandwidth and storage space to internet companies in need, such as video websites, music websites, download websites, etc., forming a CDN network with users' computers. The prices were very cheap and highly competitive. They even launched the Thunder Router product as hardware support.
However, during Zhou Shenglong's leadership at Thunder, the product experience was not ideal and was gradually shelved, to the extent that it did not even appear in Thunder's own introductions.
At the end of 2014, Tencent's cloud business leader, Chen Lei, was persuaded by Lei Jun to join Xunlei and became Xunlei's CTO, taking over the cloud service business and Xunlei's subsidiary, Xunlei Technologies, established in September 2013.
Chen Lei Image Source: Internet
From then on, Xunlei's main focus shifted to Xunlei Technologies, and Xunlei Group's download business no longer had much new content.
After taking over Xunlei Technologies, Chen Lei began to revitalize the Crystal Plan by creating the "Earning Treasure," which focused on earning money using idle bandwidth and hard drive space. Starting in April 2015, they began selling the Earning Treasure boxes and actually started selling this CDN service. A year later, they began providing cheap CDN services to live streaming websites. Many live platforms are still using it, such as Bilibili Live. By August 2016, the Earning Treasure users exceeded 4 million.
4 million may seem small today, but imagine this: 4 million households chose to connect their home network cables to the Earning Treasure, using their own hard drive and bandwidth to accelerate the national video websites. This was equivalent to adding 4 million servers nationwide, which was definitely a pioneering move at that time.
However, greatness comes with sacrifices. Initially, to encourage users to buy the Earning Treasure and participate in this network, Xunlei adopted a cash repurchase model of users' bandwidth and storage. The more Earning Treasure sold, the more Xunlei lost, which was not something a company hoped to see.
In 2017, there was a trend of hype around virtual currencies in China. The price of Bitcoin doubled crazily from $1,000, giving Chen Lei a new idea. In June of the same year, Chen Lei was appointed as the CEO of Xunlei Group. One month later, the Earning Treasure was rebranded as "Kuaike Cloud" and issued the Kuaike Coin virtual currency.
Once the coin was issued, things took a different turn.
Xunlei transformed the cash subsidy model into a model where users received virtual currency based on the amount of shared resources. Then, the 4 million Earning Treasure players became Kuaike Cloud miners, with some mining dozens to hundreds of Kuaike Coins a day, while others earned a few coins. The price of Kuaike Coin on exchanges also surged from 1 cent to over ten yuan, allowing some to break even in a day.
Driven by profit, there was a frenzy for Kuaik Cloud machines across the network. The original price of 399 yuan for Kuaik Cloud was resold for over 2,000 or 3,000 yuan on the second-hand market, turning buyers into winners. That year, Xunlei's revenue from selling Kuaik Cloud alone reached 100 million yuan a day, marking one of Xunlei's rare moments of glory.
When Chinese speculators were crazily hyping the cloud and coin of QvodPlayer, Thunder's stock also soared to an unprecedented $27, a 900% surge.
With a 9x increase, even in the current era of limitless quantitative easing, not many US stocks have seen a 9x surge from their lows. Thunder's stock became a "diamond" in the eyes of all US stock traders.
Thunder Stock Price
By November 2017, Chen Lei was probably blinded by success, starting to axe those old businesses of Thunder that were not profitable. At the end of November 2017, Thunder announced the revocation of brands and trademark authorizations such as Thunder Big Data, Thunder Financial, and Thunder Mini Games.
However, this move disrupted the interests of Thunder's old guards, triggering internal strife within Thunder's management. The biggest chaos was with Thunder Big Data, whose actual controller, Yu Fei, was the former senior vice president of Thunder. She came out to accuse QvodPlayer of being a scam, illegal fundraising, and even started reporting Netease Technology.
It's the same company reporting on itself.
The good times ended in a few days. In January 2018, the virtual currency market experienced a major crash, national regulators continued to intervene, QvodPlayer collapsed, and Thunder's stock also collapsed; in 2019, Thunder Group's losses continued to widen, and Thunder's proud CDN business began to face challenges from companies like Alibaba Cloud, Tencent Cloud, and Wangsu Technology. The once-vaunted blockchain business did not show much promise.
All of this was a prelude to this "palace struggle."
Clearing the Gates
In January 2014, Thunder's CTO Li Jinbo resigned and in July of the same year founded the ZuiRight APP, which has been doing very well. In April 2019, Xiaomi invested $80 million in ZuiRight. ZuiRight and several investors reached an agreement to exchange their shares in Thunder for shares in ZuiRight. Through this process, ZuiRight transformed into Thunder's largest shareholder, holding a 39.8% stake. The old guard of Thunder, represented by Li Jinbo, is about to come back to take over Thunder.
The first thing upon return is: clearing the gates.
In early April 2020, Thunder announced a personnel adjustment, with Chen Lei no longer serving as CEO of Thunder and its affiliates. Li Jinbo took over, followed by the occupation of Netease Technology by security guards, physically taking over the company.
Faced with the sudden fall from grace, Chen Lei said he regretted joining Xunlei in 2014 at the invitation of Lei Jun. I made many big mistakes as a professional manager: first, I offended some people, and second, I was too naive.
But the Xunlei elders don't see it that way.
In the investigation details released by Xunlei, a Xunlei broadband supplier named Xingronghe was found. This was a company personally controlled by Chen Lei, and he illicitly transferred a huge amount of funds to this company.
During Chen Lei's tenure, there had been constant external questioning about his relationship with Xunlei's Senior Vice President and Vice President of Netac Technology, Dong Xue. There were rumors that the two were in a romantic relationship. During a board meeting, the Xunlei board directly questioned Chen Lei, who, based on his Christian reputation, assured them that the two had no relationship beyond being colleagues.
However, after his resignation, Xunlei discovered that the two had a child during their tenure. Chen Lei also used Dong Xue to place a group of fellow natives and close friends from Hegang, Heilongjiang, in key positions within the company. He misappropriated company funds through fictitious trade links, devalued fake contracts, and was even found to have embezzled tens of millions of dollars for cryptocurrency speculation.
Xunlei had had enough. On October 8, Xunlei announced that former CEO Chen Lei and others were suspected of embezzlement. The Shenzhen Public Security Bureau has initiated an investigation into Chen Lei's alleged embezzlement and called on him to return to China to cooperate with the investigation as soon as possible.
Although Chen Lei expressed a different opinion in an interview with the "National Business Daily," since a case has been filed, everything will be determined by the public security judgment. This "Xunlei Court Battle," which began in April this year, has also come to an end. Regardless of whether Chen Lei truly regrets coming to Xunlei, the six years of relationship have also ended in this power struggle.
Compared to the power struggle, Xunlei's core business itself is more worthy of our attention. When the core download function is no longer a high-frequency application for people, how will Xunlei, whose stock price has dropped nearly 90% from its peak, regain its past glory?
Original Article Link
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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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