China Closes the Offshore Loophole: PBOC Bans Unauthorized RMB Stablecoins & RWAs
Regulators explicitly ban domestic firms from issuing tokens overseas and outlaw unauthorized Yuan-pegged stablecoins, sending China-linked assets tumbling.
The Receipt
The People’s Bank of China (PBOC), alongside seven other state regulators, issued a joint notice (Yinfa [2026] No. 42) Friday effectively dismantling the “offshore workaround” used by domestic crypto operators. The directive explicitly extends the 2021 ban to include offshore entities controlled by domestic firms, prohibiting them from issuing tokens or conducting crypto derivatives business without specific regulatory approval.
The market reaction was immediate and violent. Conflux (CFX), often traded as a proxy for Chinese liquidity, plummeted 18% to $0.044. NEO shed 15% to trade at $2.66, while Bitcoin (BTC) slid 3% to test support at $67,300, dragging the broader market down with it.
The Offshore Ban
Since the 2021 crackdown, many Chinese crypto initiatives migrated to Hong Kong or Singapore, operating through offshore corporate structures while maintaining mainland ties. This notice closes that gap. The text clarifies that any issuance of virtual currency overseas by a domestic entity, or an offshore entity it controls, is now classified as an “illegal financial activity” unless explicitly authorized. This puts immediate legal pressure on “gray zone” projects that have relied on the distinction between mainland operations and offshore registration.
The Stablecoin Wall
The regulators singled out currency plays. The notice strictly prohibits the issuance of Renminbi-pegged stablecoins (CNY/CNH) anywhere in the world without approval. The rationale is explicit: protecting monetary sovereignty.
“Stablecoins linked to fiat currencies perform some functions of fiat currencies… and strictly infringe on monetary sovereignty.”
This effectively kills the unauthorized CNH stablecoin market that had been quietly building in decentralized finance (DeFi) circles. If you want to tokenize the Yuan, you use the e-CNY or a state-sanctioned vehicle. There is no third option.
RWA Restrictions
Real-World Assets (RWA) were also swept into the dragnet. The notice bars domestic firms from tokenizing mainland assets for overseas issuance, whether through debt, equity, or securitization structures, without navigating strict regulatory channels. This stifles the growing trend of using DeFi protocols to secure foreign capital against Chinese real estate or credit assets.
Institutional Context
This is not a rehash of old news; it is a targeted patch for specific regulatory leaks. By involving the Ministry of Public Security and the China Securities Regulatory Commission (CSRC), Beijing is signaling that enforcement will be cross-jurisdictional. For Hong Kong, the message is stark: the city can be a crypto hub for the world, but not a backdoor for mainland capital flight.
