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If you are long on oil, Maduro's arrest is not good news
Original Title: Maduro is Gone. Is that Good News? Not if you are long oil
Original Author: Alexander Stahel
Original Translation: Deep Tide TechFlow
Let me quickly break down the significant events currently unfolding in Venezuela. As oil is one of my areas of expertise, I will try to succinctly explain the situation and make this analysis freely available. If you enjoy my insights, please help by sharing.
The dictator Nicolás Maduro, the leader who transitioned from a bus driver to a dictator, has caused tens of thousands of deaths, 8 million people in exile, and oppression of 34 million people. And all of this stems mainly from the curse of oil wealth, corruption, and the "breeding ground of collectivism." Yes, the resource curse is indeed real.
Today, the U.S. government announced the successful arrest of Maduro in a special military operation. Reportedly, Maduro and his wife have been extradited from Caracas to the United States, are currently held in an undisclosed location, and are planned to be charged in New York with "drug terrorism" and "drug trafficking."
So, what happens next? We do not yet know. But if Trump decides to reclaim U.S. oil assets expropriated by the Venezuelan government or even temporarily take over the country to rebuild its institutions, I am fully supportive. If you are willing to think deeply, you should support it too.
Why say that? Because for decades, Venezuela's elite has proven unable to escape the dilemma of the "resource curse." Such a policy would not only benefit humanity and freedom but also be a blessing for peace. Why think so?
The reason is that Venezuela is not just an ordinary OPEC (Organization of the Petroleum Exporting Countries) member, as can be seen from the OPEC production table below. (Note: The mention of Trump and U.S. government actions here is a hypothetical discussion, not a fact; please be aware of the distinction.)
Chart: OPEC Oil Production (Excluding Natural Gas Liquids) Source: Burggraben Analysis; Multi-source Data
In fact, Venezuela holds the world's largest oil reserves, with the quality of its conventional oil rivaling that of Saudi Arabia. In other words, it has the potential to have a significant impact on global oil prices similar to Saudi Arabia. Generally, lower oil prices (which is what Trump desires) are often seen as good news for peace and prosperity.
Before delving into geological conditions and oil production, let's first revisit basic principles. In my personal view (as a Swiss, not a US voter), Trump's stance on "American oil assets should be returned to rightful American owners" is correct. This is evidently his position. Therefore, yes, this intervention is not only about the drug issue but also closely related to oil, and I fully support this stance.
As a resource investor, I am truly tired of seeing dictators and regimes around the world plundering Western assets without providing fair compensation, while Western leaders either turn a blind eye or hide behind procedures and polite statements.
We should not reward corrupt leaders, neither now nor in the future. When Western companies' interests are harmed, we should firmly uphold the rule of law. Even if you do not agree with my perspective (which is totally fine), as a resource investor, you should also be relieved because Trump may have somewhat reduced the above-ground risk for all commodities in emerging markets, at least in the short term.
Anyway, Venezuela holds the world's largest oil reserves, a significant portion of which originally belonged to Western companies that discovered and developed these reserves. These companies not only developed some resources but also paid the host country its due taxes.
The Orinoco Belt alone represents the largest oil accumulation on Earth, with a technically recoverable heavy oil estimated average of about 513 billion barrels. In terms of reserves, the economically demonstrable portion, Venezuela holds about 20% of the world's known reserves.
However, in a market with a daily total oil demand of about 85 million barrels (note that this excludes a daily liquid fuel total production of about 103 million barrels), Venezuela's oil production accounts for only 1%.
Ladies and gentlemen, this is the consequence of socialism and corruption.
Under Maduro's rule, people have died of starvation on the streets for years. The next time someone tries to sell us the "warmth of collectivism," please remember this.
It is worth noting that OPEC's oil reserve data are motivated to be exaggerated because these data determine their production quotas. This is also why every seasoned geologist will tell you, for example, Kuwait's heavy oil reserve data have been overestimated.
However, if one carefully studies the reports from the United States Geological Survey (USGS), it will be found that the overestimation of Venezuela's heavy oil resources is unlikely.
Even if the medium viscosity of the Orinoco Belt may halve the ultimate recoverable amount, other resources are highly likely to be found elsewhere, including Venezuela's offshore areas (such as neighboring Guyana).
Therefore, from any perspective, this is a huge "cake," and in the long term, there is a possibility of achieving significant yield growth.
Figure: Global Oil Reserves
If the U.S. oil industry and the global oilfield services sector are allowed to develop this "treasure trove," Venezuela will surpass Saudi Arabia's production within the next decade.
Mark my words, I'm telling you this now.
The conventional nature and richness of these oil fields are so high that once today's advanced oil industry technology is fully applied to these reserves, their potential will be immeasurable.
America's entrepreneurial spirit has already squeezed 9.8 million barrels of oil per day from hard shale.
And Venezuela's oil resources are like a Texas-sized swimming pool full of oil, just waiting to be extracted, piped, and utilized. This is the last virgin territory of oil wealth.
Figure: Venezuela Petroleum Resource Geological Map
The growth in oil production will bring good news to all aspects of Venezuela: enormous tax revenues, high-paying jobs, and explosive growth in related service industries—from oilfield services to construction, from leisure and entertainment to hospitality, a complete ecosystem will take shape.
Imagine the prosperity of Texas, but on a larger scale.
Left-wing activists may describe it as "colonialism." But as demonstrated by Texas and Norway, this is called capitalism.
Capitalism thrives in environments with sound institutions but struggles in emerging markets lacking effective institutions.
This is a fact that can be quoted anywhere, anytime.
Figure: Venezuela's Oil Production Changes Since 1965 (unit: thousand barrels/day) Source: Bloomberg
Under the right conditions, Venezuela's oil production can increase rapidly, and even a "modest" increase will have a significant impact in a commodity market determined by marginal prices.
Currently, Venezuela's oil production is around 900,000 barrels per day. If property rights and rules of the game can be restored, increasing production to 1.5 million barrels per day within 18 months is a realistic initial target. This growth will be led by international oil giants with the most experience, strongest financial capabilities, and largest outstanding claims, including Chevron, ConocoPhillips, Exxon, and potentially Shell and Italy's ENI.
These companies have suffered losses in the past and still have significant unpaid debts to recover. Reportedly, ConocoPhillips alone has over $10 billion in unrecovered amounts. However, it should be noted that, except for Chevron, these oil giants are unlikely to actively participate until political stability is achieved, a clear national custodian is identified, and a solid and unchangeable legal framework is established.
If infrastructure bottlenecks such as pipelines, power supply, upgrades, and ports can be addressed, restoring production to 3.5 million barrels per day is achievable. However, it is important to note that large numbers can sometimes be misleading. Assuming $60 billion is needed to restore pipeline, power, and export infrastructure to normal levels, while this may sound like a huge sum, it's worth noting that in just 2010, the total drilling investment in the U.S. shale oil industry exceeded this figure.
The capital exists, the capability exists, and the key to determining the speed lies in the legal framework.
Without a stable legal environment, there will hardly be significant changes.
If the rules post-Trump are revised again, or if Venezuela merely transitions from one corrupt chaos to another, then production will likely be maintained at a maximum of between 1.5 to 3 million barrels per day. This is the worst-case scenario. However, if the rule of law can truly be enforced, reaching a production level of 10 million barrels per day within the next decade is not a pipe dream. This is simply the natural outcome of a world-class resource being developed by a world-class industry.
The key point is: even if the best expectations are not met, just making Venezuela a stable 5 million barrels per day producer (similar to today's Canada) and maintaining this level for decades can at least offset the production loss from the future maturity decline of U.S. shale fields. In a market where marginal barrels determine the price, this would have a huge impact.
In fact, you don't even need to wait for Venezuela's oil production to reach 5 million barrels per day. Just increasing from the current 900,000 barrels per day to 1.5 million barrels per day next year would be enough to impact the Brent crude oil price, as the market is already in an "oversupply mode" for 2026 and 2027.
Yes, the pricing of physical goods is based on current demand, not future expectations. However, in the oil market, the quantity of paper trading "virtual barrels" far exceeds the physical amount in the actual market, and market expectations often drive price fluctuations even before physical oil arrives.
Recall the fourth quarter of 2018, when Trump, solely based on waivers for Iran sanctions and changes in tone, managed to drive Brent oil prices down from $90 per barrel to $55 per barrel, with almost no substantive supply changes.
Nevertheless, long-term low oil prices are a boon for all of humanity.
I would like to further explain my viewpoint and preemptively address any critics who may question my forecasts. After all, consulting firms like Energy Aspects always try to make things sound more complex.
Firstly, no longer humbly speaking, I have directly or indirectly invested in the oil industry for twenty years. I have been to more remote oil fields than many industry "keyboard experts." I have firsthand experienced success and failure with my own funds, not someone else's money.
I have spent hundreds of hours analyzing this market from scratch, from individual wells to nations, all the way to every barrel of oil globally. I have used nearly every serious data tool, from Kpler to OilX, Kayrros, JODI, and services from major institutions. At one point, I really felt like I could almost track the flow of every barrel of oil in real-time. So please believe me, when I simplify the analysis process here, I have a basis for it.
Secondly, of course, I cannot predict future production accurately, as this is not a physics problem. It is path-dependent, meaning it entirely depends on what happens next. If Trump does not follow through with his plans, if property rights are not resolved, if Venezuela remains in a corrupt mess post-Maduro, then nothing will change, or only marginally so.
But if Trump can get half of it right, trust me, Venezuela's prospects will exceed expectations. These oil wells will become "monsters," and the industry will be able to develop these resources at a record pace, provided political interference is excluded.
However, these key conditions must be established first. The starting point for driving oil production growth lies in property rights protection, rule of law, and a free-market economy. Without these foundations, significant growth is hard to achieve, even with abundant oil reserves. Perhaps by the end of 2027, production could reach 1.5 million barrels per day? Who knows?
Thirdly, and a point most people overlook is that Venezuela is not starting from scratch. It is referred to in the industry as a "brownfield," meaning its oil fields already have some development groundwork. Currently, Chevron produces around 300,000 barrels of oil per day in Venezuela. They were granted permission during the Biden administration, and Chevron's history in Venezuela dates back almost 100 years.
This means that Chevron holds decades of geological data, production history, and operational experience. ConocoPhillips and Exxon, on the other hand, exited in 2007 when then-President Hugo Chávez forcibly renegotiated contracts with all oil majors, including European companies.
As a result, these oil giants already knew the field's location, what techniques work, which equipment is prone to damage, and how to scale up production. The data they possess may be more detailed than that of the Venezuelan national oil company (PDVSA). This provides a significant first-mover advantage for any revival plan.
Therefore, Venezuela's situation will not resemble the aftermath of the Soviet Union's collapse. Back then, Western companies were blocked due to political reasons and had to start learning everything from scratch. The oil industry is not just pipes and pumps; it involves logistics, engineering, process management, and massive data. Once this knowledge is acquired, and the rules of the game are clear, capital and capability will naturally follow.
Of course, many uncertainties still exist. But even a moderate outcome, such as a daily production of 4 to 5 million barrels, would structurally alter the global balance of liquid energy supply and demand. Believe me, this will be a harsh shock as Venezuela will produce some of the world's cheapest oil. This change will have far-reaching implications. We can only hope that all of this comes to fruition.
For those skeptical of a significant increase in Venezuelan oil production, I would like to offer another perspective. The United States once accomplished what seemed like a similarly absurd feat. U.S. shale oil production increased from 1.8 million barrels per day in 2010 to 9.8 million barrels by the end of 2025. In other words, the American entrepreneurial spirit literally extracted an "Saudi Arabia"-scale oil production from rocks. If we add the production from Alaska and the Gulf of Mexico, the current U.S. oil output is around 13.8 million barrels per day, reaching a level that most people thought unlikely fifteen years ago.
Figure: U.S. Shale Oil Production (million barrels per day) Source: Bloomberg
So, the question is: Why is shale oil extraction so complex? Shale oil extraction is exceptionally challenging compared to traditional onshore oil fields. Oil in conventional fields is usually stored in a "natural oil tank" formed by limestone or sandstone, and oil and gas flow naturally. Shale oil, on the other hand, is trapped in tight source rocks with very low porosity and permeability, meaning the oil is almost unable to flow on its own.
In a shale oil field, you can't simply "drill a well" and let it naturally produce oil. Instead, you need to aggressively target the rock through horizontal drilling, hydraulic fracturing, and a massive input of equipment, personnel, water, sand, steel, and capital just to unlock a small amount of oil.
Furthermore, each shale oil well can only yield in the hundreds of thousands of barrels, unlike conventional oil fields that can provide millions or even billions of barrels over many years. In contrast, shale oil well production typically only lasts a few months before needing to drill another well.
This phenomenon is known in the industry as a "Drilling Frenzy."
Figure: Key Factors in Oil Recovery and the Potential of the Venezuelan Orinoco Belt Data Source: Burggraben Analysis
The Shale Revolution is one of the greatest industrial achievements of our time. It's not just a geological story; it's a result of incentives, property rights, technology, logistics, and capital markets working together.
Now, compare this achievement to Venezuela, especially the Orinoco Belt. Whatever your view on heavy oil, yes, it does face upgrading and processing challenges, but from a simple "can we extract the oil molecules from underground" perspective, Orinoco's heavy oil extraction is much easier compared to shale.
A quick glance at the above chart gives you an intuitive numerical comparison. The permeability of shale formations typically ranges from 0.001 to 0.1 millidarcies, while the heavy oil reservoir permeability in the Venezuelan Orinoco Belt typically ranges from 1,000 to over 13,000 millidarcies. This is not a simple rounding error but an order of magnitude difference.
The same applies to porosity. The highest-quality Permian shale globally usually has a porosity of 4% to 8%, while the porosity of Orinoco heavy oil sands ranges from 20% to 38%. So, ask yourself a simple question: if political factors were excluded, which resource would you prefer to drill and produce? Which resource do you think has a lower full-cycle breakeven cost?
Figure: Resource Potential of the Orinoco Belt's Heavy Oil Data Source: U.S. Geological Survey, 2009
Yes, the rapid development of U.S. shale oil has benefited from three powerful tailwinds.
The first is property rights protection. In places like Texas, landowners typically own the mineral rights beneath their land, directly incentivizing them to develop those resources.
The second is the oilfield services ecosystem. Texas has a large and diverse oilfield services industry that can quickly mobilize and gain a competitive edge.
The third is financial capacity. The U.S. has the world's deepest debt and equity markets, allowing even seemingly impractical shale oil to receive massive financial support. Combining these factors has propelled the rapid rise of the shale oil industry.
But the key is this: even with these tailwinds, shale oil remains a technological nightmare compared to conventional onshore resources in the Orinoco Belt. If U.S. capitalism can create a "Saudi Arabia" from tight rock in 15 years, once Venezuela establishes effective property rights and basic rule of law, the global oil and gas industry will flock to the Orinoco Belt, seeing it for what it should be—the world's last vast oil frontier. Because that is exactly what it is.
Will Trump Accept the Political Risk of Nation-Building in This Scenario?
The answer is yes. This is actually his explicitly stated goal, expressed in the most blunt terms a president can. You can hear him say it for yourself.
The Trump administration will not leave easily. They want to reclaim oil assets, rebuild the oil industry, and seek to redress past expropriations and losses. That's their strategy, crystal clear.
My take? Very bearish on oil prices. Trump's stance matters greatly. From where I sit in the oil industry, this is a game-changer. Of course, it won't happen overnight, but it is changing incrementally, every day. You have been warned.
Moreover, I do not think this administration faces the risks typically described by critics. This is not fighting hostile insurgents in Afghanistan or trying to transplant Western institutions into Islamic political orders like Iran or Afghanistan, places where there is inherent hostility to Western values themselves.
But this is Venezuela. It culturally belongs to the West, with the vast majority being Christian, and before the socialists under Hugo Chávez and Nicolás Maduro systematically destroyed it, it was a shining success story. This country is fixable.
Now let's zoom out. This is not just a story about Venezuela; it is a story about global oil prices, hence a geopolitical story. Venezuela has the potential to structurally bring about long-term low oil prices, or at least maintain the current low oil prices (assuming other conditions remain the same). If this becomes a reality, it will cut off the "financial oxygen" funding the war in Ukraine, weaken the Kremlin's grip, and significantly diminish the geopolitical influence of certain major powers.
And before all this happens, another chain reaction may have already begun, such as certain countries with hardline regimes possibly crumbling as they too hold significant untapped oil reserves, waiting for the rule of law's "invisible hand" to unleash these resources.
All of this will break the funding chain of terrorism supporters, whether in Qatar or elsewhere. And all of this, ladies and gentlemen, is a gospel to peace and humanity.
In the coming weeks, you won't hear these views from the so-called progressive left "do-gooder" Marxist worshipers. But the fact is that low oil prices are one of the greatest drivers of creating peace and prosperity. However, few truly realize this.
Instead, the left will put forward various opposing views, no matter how absurd, until they inevitably end up standing on the side of murderers and dictators. Unfortunately, these are the rules of today's mainstream media game, which are entirely partisan.
Image: Trump's press conference on Venezuela, January 3, 2026
On January 3, 2026, President Trump held a press conference on the issue of Venezuela. Of course, the situation in Venezuela is far from over, and the final outcome is still uncertain. But if good fortune, sustained courage, and the right decisions continue to accompany Trump, he might truly deserve the Nobel Prize. From my perspective, he is currently moving in the right direction.
Therefore, credit is due where credit is due. We should commend or criticize based on the actual performance of each action, not based on partisan positions. President Trump and his team, well done.
Please do not attempt to criticize even for a second this precise and highly successful military operation. Salute it, I have.
Warm regards,
Alexander
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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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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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