Nationality, residence and actual control are not the same thing
A founder with Chinese nationality may reside outside China for a long period, or may actually manage the business in mainland China; a foreign-national shareholder may also be controlled by a domestic entity. Regulatory applications must disclose the true structure, and a passport cannot substitute for an analysis of actual control. In making the assessment, one should separately list who contributes capital, who enjoys the economic benefits, who holds appointment and veto rights, and who is responsible for operations, and then examine the different conditions that the target market imposes on shareholders, directors and management personnel. Do not mistake director residency requirements for shareholder nationality requirements.
Taking the EU as an example, the key points include reputation and suitability
Article 68 of MiCA sets out requirements concerning the reputation, knowledge, experience and time commitment of management, as well as the reputation of qualifying shareholders; these are not a rule that "Chinese shareholders are of course prohibited from applying." It cannot, however, be relied on to promise that all applications with a Chinese background will be approved; sanctions, funds, complex shareholding structures and other applicable reviews must also be examined. Canada's FINTRAC registration materials also require disclosure of the control structure and the submission of background documents for specified persons, which shows that substantive transparency matters more than a superficial packaging of identity.
Domestic connections require a separate analysis
In addition to prohibiting the relevant domestic business, the 2026 mainland notice imposes restrictions on domestic entities and the overseas entities they control issuing virtual currency overseas without consent, and also sets out provisions on the overseas issuance of RMB-pegged stablecoins. Particular attention should be paid to the fact that issuing virtual currency and providing payment or exchange services to clients are not the same activity, and the provisions must not be expanded or narrowed at will. Projects involving mainland capital contributions, control and teams should be reviewed separately according to their actual business; it should not be assumed that obtaining an overseas licence will resolve mainland issues as well.
Suppose the founder considers asking a friend to hold shares on his behalf
If the nominal shareholder is replaced by an overseas friend, but the founder still contributes capital and controls the company, the true control relationship does not thereby disappear. Such an arrangement may also cause the application, bank materials and internal agreements to contradict one another. A more prudent approach is to prepare in advance a complete equity chart, the formation of funds and the capital contribution chain, past regulatory or criminal matters, and the division of management responsibilities; where conditions present obstacles, the actual operating structure should be adjusted in accordance with law, rather than circumventing review through inaccurate application materials. Inconsistencies in the spelling of names, historical addresses and dates of equity changes across different documents should also be explained consistently. Differences that can be explained by original documents should be clarified proactively; true facts should not be altered for the sake of superficial consistency.
Recommended actions
- Look through to the ultimate natural persons and set out the equity, voting, profit and actual control relationships.
- Prepare verifiable materials on source of funds, background records and management experience, and ensure that the regulatory and bank versions are consistent.
- Conduct separate reviews of the applicable rules for mainland capital contributions, the actual team and any possible token issuance, rather than using one overseas licence opinion to cover all issues.
Information note: This article provides general information only and does not replace legal advice based on specific facts.
References
- MiCA Article 68 — Governance arrangements — ESMA
- Register your MSB or FMSB — FINTRAC
- Notice on Further Preventing and Addressing Risks Associated with Virtual Currency and Related Matters — People's Bank of China and seven other departments
