Detailed Explanation of the "Notice on Further Preventing and Handling Risks Related to Virtual Currencies"

On February 6, 2026, what was initially thought to be an ordinary day before the Lunar New Year saw Bitcoin plummet in the morning, reaching a low near the $60,000 mark. That evening, eight departments, including 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 State Financial Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange, jointly issued the "Notice on Further Preventing and Handling Risks Related to Virtual Currencies" (Yinfa [2026] No. 42, hereinafter referred to as the "2.6 Notice"). "2.6" is destined to be recorded in the history of virtual currencies, and it seems to have provided the reason for this sharp drop. 1. Unlike previous regulatory documents such as the 94 Announcement and the 924 Notice, the 2.6 Notice added a clause at the end: This notice shall take effect from the date of its issuance. The "Notice on Further Preventing and Handling Risks of Virtual Currency Trading and Speculation" (Yinfa [2021] No. 237) issued by the People's Bank of China and ten other departments is hereby repealed. This is the first time in the history of virtual currency regulation that a previous regulatory document has been repealed. At the Financial Street Forum at the end of last year, Pan Gongsheng, Governor of the People's Bank of China, specifically mentioned stablecoins and RWA, and emphasized that the regulatory policies since 2017 remain effective. Now, with eight departments jointly issuing a document repealing the "924 Notice," the earlier regulatory document, the "94 Announcement," should naturally also be repealed. Judging from the titles, the 924 Notice is titled "Notice on Further Preventing and Handling Risks of Virtual Currency Trading and Speculation," emphasizing the risks of trading and speculation. The 2.6 Notice, on the other hand, is simply summarized as "Risks Related to Virtual Currencies," with a significantly broader scope. Furthermore, regarding the issuing authorities, compared to the 924 Notice involving ten departments, the 2.6 Notice lacks the Supreme People's Procuratorate and the Supreme People's Court, which was quite unexpected. Since 2024, the Supreme People's Procuratorate and the Supreme People's Court have successively intervened, using the investigation of the handling of virtual currency cases as a starting point, and have carried out a great deal of work. In my view, the legal policies regarding the handling of virtual currency cases are likely to be among the earliest to be promulgated. The Central Political and Legal Affairs Commission's working conference explicitly stated the need for forward-looking research and legislation on virtual currencies, making the absence of the Supreme People's Court and the Supreme People's Procuratorate from this meeting all the more surprising. However, the February 6th notice also explicitly states, "After reaching an agreement 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," a statement not seen in previous virtual currency regulatory documents. The specific reasons and intentions are currently difficult to interpret and analyze. My understanding is that while the relevant content is agreed upon in principle, the specific wording may not have been finalized yet. 3. Compared to previous statements, the biggest breakthrough in Notice 2.6 is that it explicitly states for the first time that "stablecoins pegged to legal tender effectively fulfill some of the functions of legal tender in circulation. Without the consent of relevant departments in accordance with laws and regulations, no domestic or foreign entity or individual may issue stablecoins pegged to RMB overseas." The second half of this sentence is not difficult to understand; the literal meaning is clear. The most crucial part is the first half, "effectively fulfilling some of the functions of legal tender." As a criminal defense lawyer, my biggest concern is whether, in judicial practice, this will be used as a basis to consider the exchange between legal tender and stablecoins as "disguised foreign exchange trading." It's important to understand that disguised foreign exchange trading constitutes the crime of illegal business operations, which can be punished with a fine of one to five times the illegal gains, and the illegal gains must be turned over to the national treasury. This provision targets OTC (over-the-counter) trading. The key is whether the implementation will be distorted, deviate from, or overstretched. If the measures are too forceful, the risks to the entire OTC industry will surge. As we all know, OTC is an indispensable industry in the virtual currency field. Regarding RWA (Real-Time Exchange), in short, it is strictly prohibited within China, and domestic entities are strictly prohibited from engaging in it. Foreign companies and individuals are also prohibited from engaging in or providing services to domestic entities. However, a loophole has been left for engaging in it overseas. The China Securities Regulatory Commission (CSRC) has issued the "Regulatory Guidelines on the Issuance of Asset-Backed Securities Tokens Overseas by Domestic Assets," which will be interpreted later. 5. Compared to previous regulatory documents, Notice 2.6 devotes more space to standardizing and improving working mechanisms, strengthening risk monitoring, prevention, and handling. Firstly, it follows the "8+3" principle, with the central government overseeing local authorities. Eight departments, together with the Cyberspace Administration of China, the Supreme People's Procuratorate, and the Supreme People's Court, are providing overall guidance to various regions in carrying out risk prevention and handling work related to illegal financial activities involving virtual currencies. Second, strengthen local implementation, forming a working pattern of central-local coordination and combined vertical and horizontal approaches to actively prevent and properly handle issues, and maintain economic and financial order and social stability. Third, strengthen risk monitoring, continuously improve monitoring technologies and system support, enhance cross-departmental data analysis and sharing, establish and improve information sharing and cross-verification mechanisms, and ensure that provincial governments fully utilize local monitoring and early warning mechanisms. Local financial management departments, together with branches and agencies of the State Council's financial management departments, as well as departments such as cyberspace administration and public security, should effectively coordinate online monitoring, offline investigation, and fund monitoring to establish a rapid response mechanism for efficient and accurate identification, investigation, and handling. Technology companies may be poised for a boom in business. Fourthly, strengthen the management of financial, intermediary, and technology service institutions, and prohibit the inclusion of virtual currencies and related financial products in the scope of collateral. Strengthen the management of internet information content and access, and provide technical support and assistance for related investigations and investigative work. Strengthen the registration and advertising management of business entities. Continue to rectify virtual currency "mining" activities. Close existing ones and strictly prohibit new ones. Severely crack down on related illegal financial activities, and transfer those suspected of crimes to judicial organs for handling according to law. Severely crack down on illegal and criminal activities related to virtual currencies and the tokenization of real-world assets, such as fraud, money laundering, illegal business operations, pyramid schemes, and illegal fundraising, as well as related illegal and criminal activities carried out under the guise of virtual currencies and the tokenization of real-world assets. 6. Domestic entities conducting related business overseas are inherently subject to certain restrictions. First, they cannot issue virtual currencies, even overseas. Second, domestic entities engaging in RWA (Real-Time Warranty) should be subject to regulation according to the principle of "same business, same risk, same rules." Third, overseas subsidiaries and branches of domestic financial institutions providing RWA services overseas must comply with certain requirements; this is a loophole, but it must be clear that this loophole is reserved for financial institutions. 7. Compared to previous regulatory policies, the format of Notice 2.6 adds "legal liability," the literal meaning of which is not complicated and will not be interpreted in detail.