China Intensifies Crypto Crackdown With Latest Warning Against Stablecoins

Despite facing criticism for lagging behind the United States in creating a more accommodating environment for cryptocurrency growth and adoption, China reaffirmed its stringent stance on crypto once again this week. 

Authorities issued warnings about the alleged risks posed by stablecoins, particularly amid concerns that the US may have solidified its dollar dominance through these digital assets.

US GENIUS Act Vs. China’s Crypto Caution

According to local media reports, Pan Gongsheng, governor of the People’s Bank of China, announced plans to expand the use of the country’s central bank digital currency (CBDC), known as the “e-CNY.” 

He remarked, “[Stablecoins] are still in their early stages of development,” emphasizing that financial regulators globally remain cautious about these assets, which are typically pegged to other currencies.

In the United States, however, Trump’s policies toward digital assets have resulted in the passage of the GENIUS Act, as the first crypto bill aimed at laying the framework for the adoption of these dollar-pegged cryptocurrencies. 

Yet, Pan highlighted that stablecoins currently fail to meet essential requirements such as customer identification and anti-money laundering (AML) measures, which could allegedly exacerbate gaps in global financial regulation. 

He expressed concern that these issues foster a “speculative market atmosphere,” increasing vulnerabilities in the global financial system and affecting the monetary sovereignty of less developed economies. 

The central bank plans to collaborate with law enforcement to continue cracking down on domestic operations and speculation related to crypto. “The policies and measures implemented since 2017 to address risks associated with virtual currencies remain in effect,” he stated.

Regulatory Revisions Ahead

Despite China’s continuous crypto crackdown, research on stablecoins is progressing within China. The country’s largest government-backed research fund recently opened applications for studies focused on stablecoins and their cross-border monitoring systems, offering grants ranging from 200,000 yuan (approximately $28,083) to 300,000 yuan ($42,126).

The central bank also plans to optimize the positioning of the digital yuan, allowing more commercial banks to participate in the pilot program that has been running in over two dozen cities since 2019, accumulating a transaction value exceeding 14 trillion yuan.

Zhu Hexin, director of the State Administration of Foreign Exchange, indicated that nine new policy measures would soon be introduced to promote trade innovation and development, with the potential to bring positive developments for the growth of the crypto ecosystem in the Asian country. 

Wu Qing, chairman of the China Securities Regulatory Commission, also hinted at the possibility of such measures, stating that the regulator would review listing standards on the Shenzhen Stock Exchange’s ChiNext board to better align with the characteristics of emerging fields and future industries.

Featured image from DALL-E, chart from TradingView.com