The Central Bank Takes Decisive Action: China's Virtual Currency Regulations Are Further Upgraded, Stablecoins Become the Focus of Control and Prevention

China’s virtual currency regulation is reaching new heights. After the People’s Bank of China held a multi-department coordination meeting at the end of November, it decisively emphasized that it will “adhere to a prohibitive policy on virtual currencies” and decided to continue cracking down on illegal financial activities related to virtual currencies. This stance is seen by the industry as the most aggressive public statement from the central bank since the comprehensive ban on cryptocurrency trading and mining in 2021.

Multi-department coordination, virtual currency trading speculation faces a new round of crackdown

On November 28, the People’s Bank of China convened the “Coordination Mechanism Meeting on Combating Virtual Currency Trading and Speculation,” which brought together representatives from 13 government departments, including the Ministry of Public Security, the Central Cyberspace Administration, the Central Financial Work Office, and the Supreme People’s Court. Such a large-scale interdepartmental coordination demonstrates the central bank’s determination to address the chaos of virtual currencies in China.

In fact, Chinese regulators have maintained a firm stance on virtual currencies. As early as 2017, China issued a comprehensive ban on cryptocurrency trading; by 2021, regulators had fully prohibited cryptocurrency mining. Under continuous crackdowns over the past few years, virtual currency speculation was significantly curbed. However, recently, influenced by various market factors, speculation in virtual currencies has resurged, and related illegal activities have frequently appeared, posing new challenges to risk prevention and control.

Stablecoin risks highlighted, central bank explicitly points out money laundering and scam hazards

Among the key focuses of this meeting, stablecoins became a clear target of the central bank. The central bank believes that stablecoins have serious deficiencies in customer identification and anti-money laundering compliance, making them easy to misuse, especially for money laundering, fundraising scams, or illegal cross-border fund transfers, posing obvious financial risks.

The meeting statement emphasized that all regulatory agencies will continue to uphold China’s prohibitive policy on virtual currencies, persist in cracking down on related illegal financial activities, strengthen inter-departmental information sharing, further enhance monitoring capabilities, severely crack down on all illegal crimes, fully protect people’s property safety, and maintain the stability of the economic and financial order.

Hong Kong takes a different path, contrasting sharply with mainland policies on crypto industry

Unlike mainland China’s firm stance on maintaining a ban on virtual currencies, Hong Kong has taken a different route in recent years. Hong Kong has actively promoted the development of the cryptocurrency industry, establishing licensing systems for exchanges and stablecoin issuers, and successfully attracting many international crypto companies to set up operations. Notably, domestic giants like Ant Group and JD.com have also expressed interest in issuing “offshore RMB” stablecoins in Hong Kong.

However, these plans later encountered policy obstacles. After the People’s Bank of China and the Cyberspace Administration explicitly demanded “not to continue advancing” these initiatives, Ant Group and JD.com temporarily suspended their respective stablecoin projects, including related RWA asset tokenization businesses, which were forced to pause. This change reflects that even in Hong Kong, where policies are relatively more open, support is insufficient to counter the clear guidance from the central government.

The path of China’s virtual currency regulation has become clear: prohibition and prevention are the long-term themes. Whether it is trading speculation, mining activities, or emerging stablecoin forms, all will be subject to strict regulation. How effective this policy combination will be remains to be seen.