China's Cryptocurrency Regulation Upgrades: Central Bank Reiterates Ban and Focuses on Stablecoin Risks

The People’s Bank of China recently held a cross-departmental coordination meeting, once again emphasizing the prohibition policy on virtual currencies and reaffirming the continued crackdown on related illegal financial activities. This is the most significant public stance from regulatory authorities since the comprehensive ban on cryptocurrency trading and mining in 2021, reflecting the ongoing strengthening of cryptocurrency regulation in China.

Official Attitude Shift: From Ban to Proactive Prevention

China’s regulation of cryptocurrencies has spanned over a decade. As early as 2017, the central bank issued a comprehensive ban on virtual currency transactions. Starting in 2021, the scope of regulation was further expanded to include cryptocurrency mining. Since then, various ministries have resolutely cracked down on virtual currency trading and speculation, achieving notable results.

However, recently, influenced by multiple market factors, phenomena of virtual currency speculation have begun to resurface, and related illegal criminal activities have increased. The convening of this meeting is an important measure in the new situation, where regulatory authorities are taking proactive steps to prevent problems before they arise. Participating departments include the Ministry of Public Security, the Central Cyberspace Affairs Office, the Central Financial Office, the Supreme People’s Court, and 13 other government agencies, demonstrating the high level of China’s attention to this issue.

Stablecoins as a New Focus: Risks of Money Laundering and Fraud

In this official statement, stablecoins are singled out as a key concern. The People’s Bank of China pointed out that stablecoins pose multiple risks. Firstly, from a compliance perspective, stablecoins “cannot effectively meet requirements for customer identification, anti-money laundering, and other aspects.” Secondly, the anonymity features of stablecoins provide a breeding ground for illegal actors, making them susceptible to use in money laundering, fundraising scams, illegal cross-border fund transfers, and other unlawful activities.

These risks are not unfounded. In recent years, there have been numerous cases of illegal fund transfers utilizing stablecoins, which explains why the central bank issued specific warnings about stablecoins. The regulatory authorities stated that all units will strengthen information sharing, further enhance monitoring capabilities, and severely crack down on illegal activities, while also protecting people’s property safety and maintaining financial order stability.

Hong Kong’s Different Path: Balancing Openness and Regulation

It is worth noting that, as a Chinese society, Hong Kong has taken a completely different approach in the past two years. Hong Kong actively promotes the development of the cryptocurrency industry, establishing a comprehensive licensing system for exchanges and stablecoin issuers, and successfully attracting many international companies.

This policy difference has even caught the attention of major mainland enterprises. Ant Group and JD.com have expressed interest in issuing RMB-pegged stablecoins in Hong Kong. However, after the People’s Bank of China and the Cyberspace Administration of China explicitly stated that “further promotion is not allowed,” both companies have currently put their related plans on hold. This move reflects the priority of mainland regulatory policies and reveals that China’s cryptocurrency regulatory red line is not to be crossed.

Future Direction of China’s Cryptocurrency Industry

Overall, China’s regulatory stance remains firm: the virtual currency ban will not be relaxed, and the crackdown on illegal financial activities will not weaken. At the same time, regulatory authorities are exploring other paths through technological innovation. For example, the exploration of asset-backed (RWA) tokenization is underway, which may become a compliant development direction for China’s future cryptocurrency-related fields.

For practitioners and investors in China’s cryptocurrency market, the core message of this official stance is clear: within the existing policy framework, any attempts to bypass regulation or engage in illegal activities will face severe sanctions. Instead of hoping for policy relaxation, it is better to actively adapt to the regulatory environment and seek compliant business development opportunities.