Project financing funds enter a digital RMB wallet, and a smart contract restricts them to the purchase of raw materials only, while the platform also marks the funds on its page as "earmarked for a specific purpose." If the platform is suddenly subject to enforcement, will these funds be frozen? If the platform becomes insolvent, can suppliers recover the outstanding balance that has not yet been paid?

Many project descriptions link "targeted," "controlled" and "traceable" with "fund safety." The first few terms describe system capabilities, but the last term may encompass entirely different legal issues: preventing misappropriation by handling personnel, restricting the use of funds, identifying the ownership of funds, withstanding ordinary creditors, excluding compulsory enforcement, and achieving bankruptcy remoteness.

They cannot be equated.

The judgment of this article is: smart contracts can write the use of funds into a program, but code alone cannot convert contractual rights into property rights with effect against the world. Whether a technical "earmarking for a specific purpose" can be transformed into legal risk isolation depends on whose name the money is registered under, who can control it, whether commingling occurs, and whether the law recognizes a corresponding independent property arrangement.

I. "Earmarking for a specific purpose" has at least four different meanings

An enterprise must first confirm which layer the "specific purpose" referred to in the project actually falls under.

Feishu spreadsheet (original table retained)
Feishu spreadsheet: view the full spreadsheet in Feishu

A project may simultaneously possess the first three items but not necessarily the fourth.

For example, after funds enter a wallet under the platform's name, the system permits payment only to designated suppliers. This arrangement does indeed reduce the possibility of platform employees transferring the money to purchase other goods, but if the platform can still change the whitelist, suspend payments, replace payees, or if the funds are uniformly recorded in the back office together with other projects, then the strength of the so-called "earmarking" needs to be reassessed.

Even if technical permissions are very strictly limited, one must continue to ask: before payment, to whom does this balance legally belong? Does the fund provider enjoy a right to restitution, a contractual right to payment, or a right sufficient to withstand third parties? Code will not automatically answer these questions.

II. Determining the ownership of funds cannot rely solely on the labels on the wallet page

Digital RMB projects commonly involve multiple entities: the contributing enterprise, the financing enterprise, the platform, the operating institution, technical service providers, and suppliers. The "project balance" displayed on the page may correspond to a real wallet opened by the operating institution, or it may merely be internal bookkeeping in the platform's database.

At a minimum, the review must reconstruct four things:

  1. which entity opened the wallet under its real name, and how the operating institution agreement records this;
  2. from whose account or wallet the funds entered, and whether the transfer of rights was completed before payment;
  3. who holds the authority to modify rules, add payees, suspend and re-initiate instructions;
  4. whether the wallet balance is commingled with the platform's own funds, other customers, or other projects.

These four items of information are more important than product names such as "supervisory wallet," "dedicated wallet," or "sub-wallet." Different operating institutions and projects may define these terms differently. A sub-wallet used for categorized display is not necessarily an independent legal account; nor does a contract stipulating "earmarked funds for designated use" necessarily give the payee ownership of the funds before payment.

The relevant entities' control over wallets and payment instructions may also affect whether they have crossed the boundary of technical services; see"Technical Services or Payment Business? The Compliance Boundary of Digital RMB Projects"However, the determination of payment licensing and the determination of fund ownership remain two separate issues: the fact that an entity does not operate a payment business does not mean that a particular balance is necessarily insulated from its debt risk.

III. When Enforcement Occurs, Technical Restrictions Are Only One Piece of Evidence

The provisions of the Supreme People's Court on cases concerning enforcement objections and reconsideration, with respect to property such as bank deposits, emphasize that a preliminary determination may be made based on the account name registered with the financial institution; for other property and rights, where registration exists, registration is relied upon, and where no registration exists, a determination is made in light of evidence such as contracts proving ownership or the rights holder.Provisions on Several Issues Concerning the Handling of Execution Objection and Reconsideration Cases

The 2025 judicial interpretation on actions against enforcement rulings further provides that, to exclude enforcement, an outsider must prove that it enjoys civil rights and interests in the subject matter of enforcement sufficient to exclude compulsory enforcement.Fa Shi [2025] No. 10

This means that project participants cannot merely show the court the four words "earmarked for designated use" on a product page. They must also explain wallet registration, the source of funds, the purpose of the contract, actual receipts and expenditures, control authority, and whether the funds are commingled.

A 2026 Supreme People's Court report on the attribution of funds in new business forms is instructive: after a technology company's account was frozen, an outside company claimed that the parking fee revenue in the account belonged to it and submitted settlement agreements, service agreements and numerous transfer records, asserting that the account was earmarked for designated use. During the hearing, the collegial panel continued to verify the actual transfers and found that the account had also made payments to unrelated companies; it therefore examined the payment process, the nature of the account and the rights-and-responsibilities relationship, rather than stopping at the names of the agreements.Relevant Supreme People's Court report

This is not a digital renminbi case, nor can it directly predict the outcome of any particular digital renminbi wallet. But it illustrates a simple principle: if independence of funds is asserted, actual operations should be consistent with that assertion. If the contract is drafted cleanly but funds flow in all directions, the probative value of a technical label will decline rapidly.

Another misunderstanding should also be avoided: the existence of a freezing risk does not mean that an operating institution or technology company may on its own refuse a legally effective request for assistance in enforcement; conversely, the fact that a system can freeze or restrict payments does not mean that it has the authority to decide the ultimate attribution of funds in any dispute. Technical enforcement capability and legal decision-making authority must be kept separate.

IV. After entering bankruptcy proceedings, the key question is "whose property"

Article 30 of the Enterprise Bankruptcy Law provides that all property belonging to the debtor at the time the bankruptcy application is accepted, as well as property acquired by the debtor thereafter and before the conclusion of the proceedings, constitutes the debtor's property; Article 38 at the same time preserves a path for the rights holder to recover property in the debtor's possession that does not belong to the debtor.Enterprise Bankruptcy Law of the People's Republic of China

Therefore, when a platform becomes bankrupt, the dispute is not whether the wallet uses smart contracts, but whether the unpaid balance belongs to the platform, the funder, the financing enterprise, or another rights holder. A return provision in a project agreement may create only an ordinary claim against the platform; to assert recovery of specific property, it is usually also necessary to prove that the property indeed belongs to another person or that another rights basis sufficient to support recovery exists, and to be able to identify the corresponding property.

Commingling of funds makes the problem more difficult. If funds of different clients enter the same wallet, the platform records balances through an internal ledger, and at the same time its own funds are transferred in and out, then even if the books can calculate how much each person "should have," it may not be easy to answer clearly who holds rights to specific balances and the scope of recovery.

Institutional arrangements that genuinely provide asset independence usually have a clear legal basis. For example, Articles 15 and 16 of the Trust Law provide that trust property is distinguished from other property of the settlor that is not subject to the trust and from the trustee's own property, and set rules for compulsory enforcement under specified circumstances.Trust Law of the People's Republic of China

However, this does not mean that inserting the words "trust," "custody" or "segregation" into a contract can achieve the same effect. Whether a trust or other independent property arrangement is established must satisfy the corresponding legal requirements item by item and comply with business regulatory rules. An ordinary technology company also cannot engage in financial or payment business requiring a license under the name of "fund custody."

V. Smart contracts may also create a new illusion of segregation

Programmable payments embed control conditions into the system; the advantage is stable execution, and the risk lies precisely here as well.

First, the rules may be modified unilaterally. A project advertises that "funds can only be paid to suppliers," yet backend administrators can add payees at any time. In this case, the real control lies not in the code but in the person who modifies the code or parameters.

Second, trigger data may be distorted. Loan funds are restricted to procurement, but the platform disburses funds solely on the basis of order numbers uploaded by suppliers without verifying actual delivery; the technical restriction does not prevent fictitious trade.

Third, the fund path and the rights structure are disconnected. The contract provides that funds belong to the financing enterprise, yet the wallet is opened in the platform's name; or the page displays a separate balance for each supplier while there is only one master wallet at the underlying level. Ledger splitting at the display layer cannot replace genuine wallet and rights arrangements.

Fourth, handling of exceptions is not clearly specified. If the platform is seized, the operating institution interrupts services, a smart contract is erroneously triggered, or the project is terminated early, who can suspend instructions not yet executed, to whom are balances returned, and how are historical records exported? If these questions have no answers, "automatic execution" merely appears smooth under normal conditions.

VI. How to transform technical control into more credible legal arrangements

There is no one-size-fits-all structure applicable to all projects, but enterprises can reduce the disconnect between technology and law in the following respects. These are review directions, not commitments as to the outcome of bankruptcy remoteness or exclusion from enforcement.

  • Align wallet registration with the assertion of rights. Where a wallet can be opened and controlled by the actual rights holder, it should not unnecessarily be placed under a master wallet in the platform's name.
  • Keep the flow of funds as direct as possible. Funds paid directly from the investor's or financier's wallet to the supplier as agreed are generally easier to explain than funds first pooled by the platform and then recorded through internal bookkeeping.
  • Limit and record administrative authority. Adding payees, modifying conditions, manual release and refunds should be subject to tiered approval, dual review and complete logs.
  • Avoid commingling across projects. Separate wallets, separate ledgers and independent reconciliation should corroborate one another; isolation at the database-field level alone still requires an explanation of the underlying fund structure.
  • Set out clearly the handling of anomalies and exit arrangements. For freezes, disputes, insolvency, replacement of the operating entity and system decommissioning, design separately the paths for suspension, verification, return of funds and data migration.
  • Verify the legal structure. If a project genuinely seeks to be effective against third parties or to achieve insolvency remoteness, professionals should assess security, trust, legally established regulatory or other structures, rather than allowing the technical team to substitute product names for legal analysis.

Digital RMB can ensure that funds operate strictly according to rules, but the rules themselves must answer a more difficult question: to whom does this money belong before and after payment, and can the relevant rights be asserted against third parties outside the contract?

VII. A 'reverse stress test' should be conducted before launch

Do not merely demonstrate that payment succeeds. During project review, you may assume that the worst-case scenario has already occurred, and then answer item by item:

  1. When the platform is frozen by a court, who raises the objection, and on what materials?
  2. When the platform or scenario party becomes insolvent, who asserts the balance claim against the administrator, and is the claim for recovery of the property or an ordinary claim?
  3. When a smart contract makes an erroneous payment, who can suspend unexecuted instructions, and on what basis are payments already made returned?
  4. When an operating institution terminates cooperation, how are wallet balances, transactions in transit and logs migrated?
  5. When an administrator modifies the whitelist without authorization, can the system trace it, and who bears liability?

If the answer is still 'the system will handle it automatically,' that shows the legal structure has not yet been truly designed.

FAQ

If a digital RMB wallet is labeled 'earmarked for a specific purpose,' can it not be frozen by a court?

No direct conclusion can be drawn on that basis. Whether it can be enforced must be determined in light of the registration of the wallet or relevant rights, the ownership of the funds, actual control, the legal basis, and whether an outsider to the case enjoys civil rights and interests sufficient to exclude enforcement. A technical label is only one piece of evidence.

If funds can be paid only to a designated supplier, does that mean the funds already belong to the supplier?

Not necessarily. Purpose restrictions and the transfer of rights are distinct issues. When a supplier acquires a right to claim payment or corresponding rights to funds should be determined in light of the contract, performance conditions, wallet structure and the actual payment status.

Can the use of a separate sub-wallet achieve bankruptcy remoteness?

The label "sub-wallet" alone is not sufficient. It should be verified whether it was genuinely opened by the operating institution, in whose name it is registered, whether the underlying funds are independent, who can direct them, and whether there is a legally recognized arrangement for separate property.

If the contract provides that the platform merely collects and pays on behalf of others, do customer funds not belong to the platform?

Contractual provisions are important, but they must also be corroborated against the account-opening name, the flow of funds, internal ledgers and actual control. In enforcement or bankruptcy disputes, contractual wording alone may not be sufficient to exclude review of registration and actual operating circumstances.

Sources and Scope of Application

The sources in this article were verified as of September 26, 2026 (Beijing time). The specific rights structure of digital renminbi wallets should still be governed by the rules in effect at that time, agreements with operating institutions, project contracts and actual system permissions; this article does not make any determination of illegality or attribution of funds with respect to any disclosed project.

This article is a general professional analysis and does not constitute legal advice that any particular fund arrangement has bankruptcy-remote effect, security effect, or the effect of excluding enforcement. Where large project funds, financing, or platform collection and payment are involved, a specialized opinion should be obtained before launch based on the full set of agreements and system permissions.