What to Know
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China has instructed brokerages and think tanks to halt stablecoin endorsements and promotions.
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The move aims to curb speculative hype, fraud risk and protect financial stability.
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Officials are exploring yuan-backed stablecoins.
China’s financial regulators have ordered local brokerage firms and research institutions to stop promoting stablecoins, in a fresh sign of Beijing’s cautious approach to the fast-growing digital asset class. According to a Bloomberg report, the guidance issued in late July and early August requires canceling public seminars, halting research publication, and avoiding any activities that could be seen as endorsing stablecoins.
The China Securities Regulatory Commission (CSRC) and the People’s Bank of China (PBoC) have not issued public statements, but people familiar with the matter say the move is aimed at preventing market instability and avoiding the kind of speculative mania that has fueled past crypto bubbles.
Why China Is Acting Now
Stablecoins generally maintain their value over time, typically by being pegged to fiat currencies like the US dollar. Chinese regulators, however, are concerned that they might be exploited as new avenues for illicit money raising, cross-border money transfers, and scams. In the past few weeks, local governments in Beijing, Suzhou, and Zhejiang province have sent out risk alerts to warn people about scams involving virtual currencies and stablecoins.
Christopher Wong, a Singapore-based currency strategist at Oversea-Chinese Banking Corp., noted that Chinese policymakers tend to avoid hype in financial markets: “There’s still a worry that not everyone understands the risks of crypto. Policymakers don’t want herd mentality driving investments into assets people don’t fully understand.”
OTC trade is still going strong even after China outlawed Bitcoin trading completely in 2021. China’s over-the-counter transactions reached $75 billion in the first nine months of 2024, according to Chainalysis, demonstrating high demand for crypto in spite of restrictions.
The Hong Kong Factor
This crackdown’s timing aligns with Hong Kong’s efforts to establish itself as a global center for digital assets. Earlier this month, the city implemented a licensing regime for stablecoin issuers and approved operations for 11 crypto exchanges and 44 licensed digital asset trading firms, including Chinese state-backed players like CMB International Securities and Guotai Junan Securities.
This difference in policy has led to rumors that China is secretly looking into yuan-pegged stablecoins and using Hong Kong as a testbed. In June, Pan Gongsheng, the governor of the People’s Bank of China (PBoC), said that stablecoins could “revolutionize international finance,” especially as tensions between countries show limitations in traditional payment systems.
Stablecoins in Global Context
Stablecoins are usually backed by cash or short-term U.S. Treasuries and are becoming more and more important in global finance. By 2030, the total supply is expected to reach $3.7 trillion. They make cross-border transactions faster and cheaper, and they are a key way for crypto traders to get cash.
USD powers most stablecoins; a shift toward yuan-backed stablecoins may help Beijing increase the renminbi’s value in international payments and reduce the dollar’s predominance. In the meantime, the U.S. has taken steps to strengthen its position in this area. President Donald Trump signed the first federal stablecoin law into effect on July 18. He called it “a giant step to cement American dominance in global finance and crypto technology.”
What’s Next for China’s Stablecoin Policy
The most recent suggestions don’t say that stablecoins should be completely rejected; instead, they show a desire to control the story and speed of adoption. Experts believe that:
- China will make it more difficult to advertise stablecoins and related schemes without authorization.
- China may test yuan-linked stablecoins in Hong Kong under close supervision.
- China will investigate cross-border payment methods that maintain capital restrictions while utilizing digital yuan technology.
Final Thoughts
China’s order to stop promoting stablecoins is part of a plan to find a balance between new ideas and safety. Beijing wants to enter the global stablecoin market on its own terms. To do this, China wants to quiet the rumors of speculation and quietly look into its own choices.
Also Read: India Cracks Down on Crypto Traders for Tax Evasion
