Nasdaq's New Listing Rules for Chinese Companies and the Trend of Global Asset Digitalization

Abstract

On May 14, 2026, the U.S. Securities and Exchange Commission (SEC) issued an Accelerated Approval Order (Release No. 34-105494), officially approving the rule change proposal (SR-NASDAQ-2025-069) by the Nasdaq Stock Market targeting companies primarily operating in China (including Hong Kong and Macau Special Administrative Regions). By setting rigid fundraising thresholds, tightening specific listing pathways, and expanding the scope of look-through corporate entity identification, the new rules signify a comprehensive increase in the compliance and capital costs for small and medium-sized Chinese companies seeking to list in the U.S. From an industry evolution perspective, the official implementation of this policy not only reshapes the traditional cross-border Initial Public Offering (IPO) market landscape but may also prompt certain small and medium-sized assets to explore alternative financing and liquidity channels, including emerging liquidity infrastructures such as digital securities and Real-World Assets (RWAs).

I. Core Content and Implementation of the New Nasdaq Rules for Chinese Companies

The approved rule changes represent a substantive structural adjustment by Nasdaq, based on the pain points of cross-border regulatory enforcement and market liquidity volatility characteristics in recent years. Its core restrictive provisions have been officially approved and entered the implementation phase, mainly reflected in the following four dimensions:

Establishing Rigid Underwriting and Fundraising Baselines for IPOs

The new rules establish more stringent quantitative thresholds for the traditional IPO pathway of companies primarily operating in China:

• Mandatory Firm Commitment Underwriting: Issuers must utilize a "Firm Commitment Offering" method, where underwriters assume the financial risk of a failed offering, aiming to enhance offering quality and underwriter discipline.
• Minimum Fundraising Limit: The gross proceeds from public investors in each IPO must not be less than \$25 million. This standard is significantly higher than the \$15 million threshold set for typical companies on the Nasdaq Capital Market (NCM).

Tightening the "Direct Listing" Pathway

To prevent small-cap companies from using direct listings to circumvent the public investor scrutiny and initial liquidity building process of a traditional IPO, the new rules significantly tighten the pathway for Chinese operating companies to list on lower-tier markets via direct listing. If companies continue to pursue this route, they will generally face the standards of higher-tier markets or more complex regulatory requirements.

Tightening Standards for Business Combinations and Uplisting

• Reverse Mergers and de-SPACs: Entities seeking listing through a merger with a Special Purpose Acquisition Company (SPAC) or a major asset restructuring must achieve a market value of unrestricted publicly held shares of at least \$25 million upon completion of the merger transaction. This significantly raises the barrier for achieving a listing through SPACs or reverse mergers.
• OTC to Nasdaq Uplisting: Entities applying to uplist from the Over-the-Counter (OTC) market or other exchanges to Nasdaq must, in addition to meeting the \$25 million unrestricted publicly held shares requirement, have maintained a stable trading history in their original market for a full 1 year. This is designed to eliminate the speculative practice of short-term listings followed by rapid uplistings.

"Substance Over Form" Identification Mechanism for Chinese Operating Entities (Rule 5210(l))

Following the implementation of the new rules, applicability will no longer rely solely on the company's place of incorporation (e.g., Cayman, BVI). Instead, a comprehensive look-through assessment will be employed. A company will be deemed a "company primarily operating in China" if it triggers a majority of the following 7 quantitative assessment factors:

1. Location of the company’s books and principal records;
2. 50% or more of assets are located in mainland China, Hong Kong, or Macau;
3. 50% or more of revenues are derived from the aforementioned regions;
4. 50% or more of board members are Chinese citizens or residents;
5. 50% or more of executive officers are Chinese citizens or residents;
6. 50% or more of employees are based or have office locations in the aforementioned regions;
7. Actual control of the company (including joint control) belongs to Chinese citizens, residents, or legal entities.

II. Background of the Policy Implementation and Liquidity Bifurcation in Traditional Capital Markets

According to the risk data submitted by Nasdaq to the SEC and adopted during the hearings, the core logic behind the implementation of these rules lies in investor protection and the practical considerations of cross-border regulation.

• Microcap Market Risks: Official data indicates that between 2022 and 2025, a disproportionately high percentage of suspicious manipulation reports referred by Nasdaq involved Chinese companies. Numerous small-cap companies with IPO proceeds under \$25 million faced rapid liquidity depletion and market capitalization collapse post-listing, frequently violating continued listing rules.
• Liquidity Concentration in Top-Tier Firms: Liquidity in the traditional U.S. stock market is increasingly skewing towards large-cap, high-float, top-tier technology companies. Small and medium enterprises (SMEs) not only face mounting legal, audit, and underwriting costs but often lose the refinancing function of the capital markets post-listing due to wide bid-ask spreads and low turnover rates.

This trend has led a large number of growing, moderately-sized traditional assets (including high-quality equity, SME stocks, and various industry investment funds) to face the dilemma of being "difficult to fundraise, difficult to maintain" within the traditional exchange system, creating an urgent need to find more efficient, low-friction liquidity solutions.

III. Potential Opportunities for Digital Asset Infrastructure to Accommodate Traditional Financial Assets

As the compliance boundaries of traditional offshore trading venues, represented by Nasdaq, tighten, the potential of digital asset exchanges and on-chain clearing and settlement networks as a complementary infrastructure is becoming increasingly prominent. This process represents the digital evolution of Real-World Assets (RWAs).

Technological and Efficiency Advantages of Digital Asset Listing

Compared to the cumbersome cross-border clearing and settlement processes and high intermediary costs of the traditional financial system, digital asset networks utilize smart contracts to achieve Atomic Settlement. This mechanism requires that trading and settlement either complete simultaneously or fail entirely, drastically reducing the time costs and settlement risks associated with cross-border funds.

Furthermore, the digital fragmentation of asset ownership allows for traditional assets that previously had extremely high entry barriers (such as specific overseas equity funds, foreign exchange derivatives, etc.) to be fractionalized. This enables assets to reach a broader base of compliant investors globally, thereby building deeper liquidity pools in the secondary market.

Primary Pathways and Commercial Logic Exploration for Traditional Asset Tokenization

Currently, forward-looking digital asset exchanges and research institutions are focusing their RWA core business on exploring the following three areas:

• Fixed Income and Short-Term Paper: Highly liquid, low-risk assets (such as short-term US Treasuries) mapped in digital form, providing stable underlying yield instruments for native on-chain capital.
• Diversified Funds and Private Equity: Exploring the conversion of special assets with traditionally long liquidity lock-up periods and extremely high subscription thresholds (e.g., Pre-IPO fund quotas anchored to top-tier unicorn companies in frontier technology sectors) into flexibly tradable digital vouchers.
• On-Chain Mapping of Stocks and Forex Assets: Under the premise of full compliance and trust custody, offering global investors 24/7, cross-border diversified asset allocation options, attempting to accommodate investment demand spilling over from traditional markets.

Business Closed-Loop and Risk Boundaries of On-Chain Financing

In a mature RWA commercial architecture, the core of digital asset issuance lies in "empowering the real economy." After project sponsors raise funds through compliant on-chain channels, the actual use of funds is directly invested into the operation of the underlying assets.

Within this ecosystem, the boundaries regarding technology, listing, and supervision for trading platforms and research institutions are distinct:

• The core function of an exchange is to provide robust technical support, a compliant matching platform, and a sound secondary market circulation environment.
• In most platform-type architectures, exchanges typically do not directly bear the operational risk of the underlying assets. The focus of risk management lies in establishing strict asset admission standards, continuous information disclosure review mechanisms, and transparent emergency response plans to safeguard traders' right to know and market order at the infrastructure level.

IV. Conclusion and Industry Projection

The official approval and implementation of the new Nasdaq listing rules for Chinese companies (SR-NASDAQ-2025-069) marks the entry into a period of substantive contraction regarding the tolerance of traditional offshore capital markets for small and mid-cap assets. From an industry evolution perspective, this shift in the macroeconomic regulatory environment may provide new asset integration opportunities for compliant digital asset infrastructures.

In the future, the positioning of digital asset exchanges will likely not be limited to trading platforms for crypto-native assets, but may explore evolving into digital clearing and settlement hubs for globally diversified assets. By continuously refining their compliance audit frameworks and risk control systems, the digital securities market is expected to gradually accommodate high-quality SMEs and innovative assets spilling over from traditional markets, promoting the deep integration of the TradFi and Crypto ecosystems on a compliant track.

References

• U.S. Securities and Exchange Commission (SEC). Release No. 34-105494; File No. SR-NASDAQ-2025-069. (Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 3), May 14, 2026.