China's Document 42 and the narrow road offshore.

For five years the mainland position on tokens could be stated in a sentence: virtual currency business was illegal and token issuance financing was banned. On 6 February 2026 that sentence acquired a second clause. Eight departments led by the People's Bank of China issued a notice that keeps the virtual currency ban and, for the first time, defines and permits a route for tokenising onshore assets offshore. The CSRC published the rulebook for that route on the same day. The market calls the notice "Document 42". This article sets out what the two documents say, who they reach, and what they mean for a Chinese issuer weighing Dubai, Hong Kong or a BVI vehicle.

The two documents

The notice: Yinfa [2026] No. 42

The Notice on Further Preventing and Disposing of Risks Related to Virtual Currencies and Other Matters (关于进一步防范和处置虚拟货币等相关风险的通知, Yinfa [2026] No. 42) was issued jointly by the People's Bank of China, 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 National Financial Regulatory Administration, the China Securities Regulatory Commission and the State Administration of Foreign Exchange. It records the agreement of the Cyberspace Administration, the Supreme People's Court and the Supreme People's Procuratorate and the approval of the State Council. It took effect on issue and repeals the 2021 notice on virtual currency trading speculation (Yinfa [2021] No. 237).

The CSRC guidelines: Announcement [2026] No. 1

Alongside the notice the CSRC issued the Regulatory Guidelines on the Offshore Issuance of Asset-Backed Security Tokens Based on Onshore Assets (关于境内资产境外发行资产支持证券代币的监管指引, CSRC Announcement [2026] No. 1), together with a filing guide on the content and format of filing materials. The guidelines cover tokenised rights certificates issued offshore using cryptography and distributed ledger or similar technology, where repayment is supported by cash flows generated by onshore assets or rights in them.

What stays banned

Document 42 is first a prohibition instrument, and the prohibitions are wider than the 2021 notice it replaces:

• Virtual currencies have no legal tender status. Virtual currency business onshore, including exchange, trading intermediation, market making and token issuance financing, is illegal financial activity.
• Fiat-pegged stablecoins are treated as performing some of the functions of legal tender. No entity or individual, onshore or offshore, may issue a renminbi-pegged stablecoin offshore without approval.
• RWA tokenisation onshore, and intermediary and IT services for it, are prohibited unless approved by the competent authorities and carried on through designated financial infrastructure.
• Offshore entities may not provide virtual currency or RWA tokenisation services to onshore persons, and those who knowingly assist them are exposed to liability.
• Onshore entities, and the offshore entities they control, may not issue virtual currencies offshore without approval.

Financial institutions, payment institutions and internet platforms are told not to provide accounts, settlement, custody, promotion or traffic for unapproved activity, and investment contracts that offend public order and good morals are void, with losses left on the investor. For anyone hoping that "RWA" would become a label under which ordinary crypto tokens could be launched from the mainland, the notice closes that door expressly.

What is now permitted, and on what terms

The chapter on onshore entities' offshore business is the genuinely new part. Onshore entities may carry on RWA tokenisation offshore, but only through the procedure that matches the economic substance of what is issued, under the principle of "same business, same risk, same rules":

• Foreign debt form: tokens that are in substance foreign borrowing fall under the existing NDRC foreign debt framework, with SAFE governing the cross-border funds.
• Asset securitisation and equity forms based on onshore rights: supervised by the CSRC, through the filing regime in Announcement [2026] No. 1.
• Other forms: supervised by the CSRC together with the relevant departments.

Without the required approval or filing, the business may not be carried on. Offshore subsidiaries and branches of PRC financial institutions may provide tokenisation services offshore, but must have qualified staff and systems, apply customer admission, suitability and anti-money laundering controls, and bring the business within the parent group's risk management. Intermediaries and technology providers serving permitted cross-border issuances must build internal compliance and report their business to the regulators.

The CSRC filing

• Who files: the onshore entity that actually controls the underlying assets, not the offshore issuer.
• When: before the business is carried on, which in practice means before the offshore issuance.
• What is filed: a filing report covering the onshore filer, the underlying assets and the token issuance plan, a legal opinion, and the full set of offshore issuance documents, including offering, technical, transaction and disclosure documents. Materials are filed in Chinese, with Chinese translations of anything in another language.
• Outcome: complete and compliant files are recorded; incomplete files are returned for supplement; non-compliant files are refused. The CSRC may consult other State Council departments and industry regulators, and publishes completed filings on its website.
• After filing: completion of the offshore issuance, and any major risk event, must be reported to the CSRC.
• Who answers for the file: the filer, its controlling shareholders, actual controllers, directors, supervisors and senior management, and the intermediaries involved, all of whom must ensure there is no false record, misleading statement or material omission.

The guidelines also require compliance with the PRC rules on cross-border investment, foreign exchange and network and data security, including any approval, filing or security review those rules impose. The CSRC filing is the gate specific to tokenisation, not the only one.

The negative list

The business may not be carried on at all where the underlying assets or their onshore controller fall within any of six situations:

1. laws, administrative regulations or state rules expressly prohibit financing through the capital markets;
2. the competent State Council authorities determine that the offshore issuance may endanger national security;
3. the onshore entity, or its controlling shareholder or actual controller, has within the last three years committed corruption, bribery, embezzlement, misappropriation of property or crimes disrupting the socialist market economic order;
4. the onshore entity is under investigation for suspected crimes or major violations and no conclusion has been reached;
5. the underlying assets are subject to a material ownership dispute or cannot lawfully be transferred;
6. the underlying assets fall within the negative list for onshore asset securitisation.

Who it catches

The rules are drafted around the asset and its onshore controller. That has practical consequences for structures that founders often assume are outside PRC reach.

• PRC companies tokenising their own assets: the obvious case. Rental income, receivables, infrastructure revenue or equity interests in the mainland, tokenised offshore, require the matching approval or filing.
• Offshore groups holding mainland assets: a BVI or Cayman SPV issuing tokens backed by the cash flows of a mainland operating company is in scope, because the filing obligation sits with the onshore entity that controls the assets. The offshore wrapper changes who issues, not whether the rules apply.
• Chinese-controlled offshore companies issuing crypto tokens: separately from RWA, onshore entities and the offshore entities they control may not issue virtual currencies offshore without approval. A utility or governance token launched by a BVI company controlled from the mainland is a Document 42 question before it is a BVI question.
• Offshore platforms and service providers: exchanges, brokers, launchpads and technology vendors may not serve onshore persons with virtual currency or RWA services, wherever they are licensed.
• Offshore arms of PRC financial groups: permitted to act, inside the group's compliance perimeter.

The notice does not define "onshore entity" exhaustively, and commentators read its control language broadly. Where a mainland individual, rather than a mainland company, sits behind an offshore issuer, the position needs to be analysed on the facts with PRC counsel rather than assumed.

Dubai, Hong Kong or the BVI

The single most important point for structuring is that the PRC requirements and the offshore regime are cumulative. No offshore licence substitutes for the CSRC filing, and a CSRC filing authorises nothing offshore. Each venue has to be satisfied on its own terms.

Dubai and VARA

A token referencing a real-world asset issued from Dubai is, in VARA's taxonomy, generally a Category 1 Asset-Referenced Virtual Asset, issued by a VARA-licensed issuer incorporated in Dubai outside the DIFC. For a Chinese issuer with mainland assets, that means three tracks running together: the VARA issuance licence and the Category 1 architecture described in our Category 1 guide; the CSRC filing by the onshore controller; and the PRC outbound investment and foreign exchange procedures for establishing and funding the Dubai issuer, set out in our ODI guide. Expect VARA, banks and custodians to ask how the PRC side has been handled. A published CSRC filing is the clean answer; silence is not.

Hong Kong

Hong Kong was where most mainland tokenisation projects looked first, and it remains a natural venue for a mainland issuer. Its own securities and stablecoin regimes govern the offshore offering. Document 42 governs the mainland side, and proximity does not soften it: a Hong Kong issuance backed by mainland assets needs the same CSRC filing as one from Dubai. Two points deserve particular care. Mainland financial groups' Hong Kong subsidiaries may act, but inside the group's risk management. And any project built around an offshore renminbi stablecoin now needs PRC approval, whoever the issuer is.

The BVI

BVI companies are a common issuer or holding vehicle in Chinese structures, and Document 42 is indifferent to them: the filing obligation remains with the onshore controller. On the BVI side, a token that entitles holders to cash flows from underlying assets is very likely to be an investment under the Securities and Investment Business Act. The BVI's familiar advantage for utility tokens, that issuing your own token is not a registrable service under the VASP Act 2022, does not carry across to an asset-backed security token; see why tokens launch from the BVI for where that line sits. A mainland company establishing a BVI SPV also engages the outbound investment procedures.

The safe sequencing

The order matters, because each step decides what the next can say. On a mainland-asset tokenisation we work through it in this sequence, with PRC counsel on the PRC legal opinion and filing:

1. Classify the token under PRC rules. Foreign debt, asset securitisation, equity or another form decides the lead regulator and the procedure. If the design is closer to a virtual currency than to an asset-backed instrument, stop.
2. Clear the negative list. Diligence on the assets (title, transferability, encumbrances, securitisation negative list) and on the onshore controller, its controlling shareholder and actual controller.
3. Map the other PRC gates. Outbound investment for the offshore SPV, foreign exchange for cash flows leaving and returning, and data export and security review for asset data that will sit offshore.
4. Choose the offshore venue and design to it. VARA Category 1 in Dubai, Hong Kong's regime or another regulated venue, with the offshore classification (including the BVI SIBA analysis where a BVI vehicle is used) settled in writing.
5. Prepare the offshore document set in final form. The CSRC files the offshore offering, technical, transaction and disclosure documents themselves, so the filing cannot run ahead of them.
6. File with the CSRC and wait for the filing to complete. No marketing, pre-sales or token generation before then.
7. Issue offshore with distribution controls that work. Onshore persons may not be served, so exclusion of mainland investors has to be enforced through onboarding and geoblocking, not stated in a footer.
8. Report and run the post-issuance file. Completion and major risk events go to the CSRC; offshore ongoing obligations run in parallel.

What the rules leave open

The guidelines are detailed on the asset-backed security token filing and much thinner elsewhere. The notice does not give a statutory timetable for the CSRC to complete a filing. The procedure for tokenised foreign debt beyond the existing foreign debt rules, and for "other forms" of RWA, has not been spelled out. The reach of "onshore entity" to individuals is a matter of interpretation. Projects that need certainty on any of these points should expect to obtain it through pre-filing engagement rather than from the text, and should budget time accordingly.

Our position

Neo Legal advises on the offshore side of these structures: the Dubai and VARA layer, the BVI and other offshore vehicles, and the offshore document set the CSRC will read. PRC legal opinions and PRC filings are given by PRC-qualified counsel, and our China Desk works with them in Chinese throughout. We act only on structures designed to comply with PRC law, and we do not assist with arrangements intended to avoid it.

Frequently asked questions

What is China's Document 42?

It is the Notice on Further Preventing and Disposing of Risks Related to Virtual Currencies and Other Matters, Yinfa [2026] No. 42, issued on 6 February 2026 by the People's Bank of China, NDRC, MIIT, the Ministry of Public Security, SAMR, NFRA, the CSRC and SAFE. It keeps virtual currency business illegal onshore, repeals the 2021 notice (Yinfa [2021] No. 237), and sets the conditions on which onshore assets may be tokenised offshore.

Does China now allow RWA tokenisation?

Only offshore and only through the required procedure. Onshore RWA tokenisation remains prohibited unless approved and carried on through designated financial infrastructure. Offshore tokenisation of onshore assets is permitted after the matching approval or filing: the NDRC foreign debt framework for debt, the CSRC for asset securitisation and equity forms, and the CSRC with other departments for anything else.

Who has to make the CSRC filing?

The onshore entity that actually controls the underlying assets, before the business is carried on. It files a filing report, a legal opinion and the full set of offshore issuance documents in Chinese. The CSRC records, returns or refuses the filing and publishes completed filings on its website.

Can a BVI or Hong Kong company issue tokens backed by mainland assets without a CSRC filing?

No. The filing obligation attaches to the onshore entity that controls the assets, so the place of incorporation of the offshore issuer does not change the requirement. The offshore issuer must also satisfy its own regulator, for example the SFC in Hong Kong or SIBA in the BVI.

Does a VARA licence replace the CSRC filing for a Dubai RWA issuance?

No. The two are cumulative. A Dubai issuer of an asset-referenced token needs its VARA licence, and if the underlying assets are in mainland China the onshore controller still needs the CSRC filing, together with the outbound investment, foreign exchange and data procedures that apply.

Can a Chinese-controlled offshore company launch a crypto token?

Document 42 provides that onshore entities and the offshore entities they control may not issue virtual currencies offshore without approval, and no one may issue a renminbi-pegged stablecoin offshore without approval. Whether a particular founder or company is caught depends on the facts and should be analysed with PRC counsel before any launch.

This article is general information on the position at the date shown and is not legal advice. Token classification and licensing turn on the specific facts of each project; speak to us before relying on it.