China Widens Crypto Ban to Choke Off Stablecoins and Asset Tokenization

China’s top financial regulators have significantly extended the existing crypto ban. This expansion specifically targets stablecoin issuances and the tokenization of real-world assets.

The joint notice was released Feb. 6 by eight agencies, including the People’s Bank of China and the China Securities Regulatory Commission. It represents the most aggressive tightening of capital controls since the landmark 2021 prohibition on Bitcoin mining and trading.

Beijing Shuts Offshore Loopholes in New Stablecoin Rules

The regulatory agencies cited a recent surge in virtual asset activities as a direct threat to the country’s financial stability and monetary sovereignty.

Under the new rules, foreign entities are strictly prohibited from offering stablecoin or tokenization services to Chinese residents.

Perhaps more significantly, the crackdown targets the “offshore loophole” by banning domestic firms and their overseas branches from issuing digital currencies without explicit government approval.

The PBOC emphasized that stablecoins, particularly those pegged to fiat currencies, carry attributes of sovereign money.

In light of this, the authorities argued that these private digital assets undermine the state’s ability to control the money supply. They further claimed these assets circumvent strict anti-money-laundering and customer-identification protocols.

Specifically, the notice prohibits any entity from issuing Renminbi-pegged stablecoins abroad, a move analysts see as a defense of the e-CNY, China’s official central bank digital currency.

RWA Tokenization Targeted

The directive also targets the burgeoning $24 billion Real-World Asset (RWA) tokenization sector.

The regulators reclassified unauthorized tokenization—such as fractionalized ownership of real estate or securities—as “illegal public security offerings” and “unauthorized futures business.”

“Real-world asset tokenization activities within China, as well as providing related intermediary and information technology services, which are suspected of involving illegal token issuance, unauthorized public offerings of securities, illegal operation of securities and futures businesses, illegal fundraising, and other illegal financial activities, should be prohibited,” the notice stated.

The notice leaves a narrow path for activities conducted on government-approved financial infrastructure.

However, it requires any firm pursuing tokenization abroad to meet heightened compliance standards and obtain domestic clearance.

To enforce these measures, the central government plans to launch a collaborative framework that integrates local and national oversight.

The coordinated approach aims to eliminate the regulatory arbitrage previously used by Chinese tech and finance firms. These companies often utilized neighboring jurisdictions to experiment with blockchain-based assets outside of Beijing’s direct oversight.

By tightening the tether on both stablecoins and RWAs, Beijing has signaled that the next generation of digital finance must remain entirely within state-sanctioned, permissioned systems.