Chinese financial regulators have instructed local brokerages and research bodies to halt publishing studies or hosting seminars that promote stablecoins, to limit potential risks from the fast-growing asset class.
Key Takeaways:
- China has ordered brokerages to stop promoting stablecoins over fraud and risk concerns.
- The crackdown comes despite speculation of a softer crypto stance and Hong Kong’s pro-stablecoin policies.
- OTC crypto trading remains active in China, with $75B in volumes in the first nine months of 2024.
In late July and earlier this month, some of China’s leading brokerages and think tanks received direct guidance from regulators to cancel events and stop distributing research on stablecoins.
Officials are reportedly concerned the tokens could be used as a tool for fraudulent activity on the mainland, Bloomberg reported Friday, citing people familiar with the matter.
China’s Stablecoin Crackdown Follows Speculation of Softer Crypto Stance
The move comes despite renewed speculation over China’s stance on digital assets, fueled by recent official comments and Hong Kong’s rollout of new legislation for stablecoin issuers.
While mainland China maintains a blanket ban on crypto-related transactions, authorities have backed Hong Kong’s push to become a digital asset hub, sparking interest from mainland firms.
Analysts say Beijing is treading carefully. “Policymakers don’t favor too much fanfare in some topics just to avoid a herd rush to any particular asset class,” said Christopher Wong, currency strategist at Oversea-Chinese Banking Corp.
“They don’t want investors piling into something without understanding the risks.”
Despite the ban, over-the-counter crypto trading remains active in China, with volumes reaching an estimated $75 billion in the first nine months of 2024, according to Chainalysis.
Local governments in Beijing, Suzhou, and Zhejiang have recently issued warnings about illicit fundraising linked to stablecoins and virtual currencies.
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Stablecoins are increasingly used for fast, low-cost cross-border payments. Global supply is projected to reach $3.7 trillion by 2030.
While People’s Bank of China Governor Pan Gongsheng said in June that stablecoins could reshape international finance, regulators are wary of uncontrolled growth, especially amid geopolitical tensions.
Hong Kong is moving in the opposite direction, granting licenses to 11 crypto exchanges and 44 digital asset trading firms, including Chinese state-backed entities such as CMB International Securities, Guotai Junan Securities (Hong Kong), and TFI Securities and Futures.
Stablecoin Regulation Gains Traction
Globally, stablecoin regulation is accelerating. In the US, President Donald Trump signed the first federal stablecoin bill on July 18, calling it a “giant step” toward securing American dominance in global finance and crypto technology.
As reproted, Western Union is positioning itself for a new phase of digital transformation, signaling strong interest in using stablecoins to modernize its global remittance operations.
Last month, CEO Devin McGranahan outlined how stablecoins could streamline cross-border transfers, improve currency conversion in underserved markets, and provide financial tools for populations grappling with unstable local currencies.
Meanwhile, Ripple CEO Brad Garlinghouse has said the stablecoin sector is poised for explosive growth, projecting the market could balloon from its current $250 billion capitalization to as much as $2 trillion in the near future.
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