China has instructed local brokers, research centers, and think tanks to stop selling stablecoins.
According to a Bloomberg report earlier today, this is yet another step in its efforts to maintain a firm grip on digital asset activities.
Late July and early August, the regulators directed these institutions to cancel seminars and stop publishing reports on stablecoins, the sources with knowledge of the matter said.
The directive is in line with Beijing’s concern that stablecoins can be used for malicious means, including fraud, in mainland China.
While the country has an across-the-board ban on cryptocurrency activity, the move follows growing speculation that China is selectively becoming more welcoming to certain aspects of the digital asset class.
Regulatory Moves Follow Broader Crackdown on Crypto-Related Risks
This recent warning on stablecoins follows recent moves by Chinese regulators to keep in check perceived risks in the crypto space.
On August 6, China’s Ministry of State Security (MSS) made a follow-up alert to foreign crypto projects that use iris-scan biometrics in exchange for tokens, apparently referring to Worldcoin.
Such information gathering risks being a major source of national security and privacy issues, officials warned, noting that sensitive biometric data can be shipped overseas.
The China Securities Regulatory Commission and the People’s Bank of China (PBOC) have not yet said anything on this, but analysts note that Chinese policymakers are worried about developing “herd mentality” investment fads in asset classes that individuals do not always enjoy.
Also Read: China to Greenlight First RMB-Backed Stablecoin To Boost Yuan’s Global Role
Stablecoins Gain Global Momentum Despite China’s Restrictions
Around the globe, stablecoins, the privately issued digital tokens that are tied to stable assets like the US dollar, are gaining traction as fast, low-cost tools for cross-border payments.
Their supply has been estimated at $3.7 trillion by 2030, according to industry estimates revealed in a Bloomberg report.
All of the major stablecoins are backed by US assets such as short-term Treasuries, but China has increasingly shown interest in yuan-based stablecoins as a central pillar of a broader strategy to weaken the dollar’s dominance of world finance.
PBOC governor Pan Gongsheng stated in June that stablecoins could “revolutionise international finance” through reduced reliance on traditional payment systems, particularly at moments of geopolitical tension.
Hong Kong Transforms into Test Bed for Regulation of Digital Assets
While mainland China maintains crypto firmly under wraps, Hong Kong is a regulated haven for digital assets and has emerged as a draw for domestic and international players alike.
The city recently legislated over stablecoin issuers and has approved 11 cryptocurrency exchanges, in addition to 44 companies licensed to trade digital assets on behalf of customers.
These include Chinese state-backed firms such as CMB International Securities and Guotai Junan Securities.
Developments in Hong Kong have generated a surge of interest from mainland firms seeking to operate under the more permissive environment, suggesting that Beijing may pursue the city as an experimental ground for its evolving digital finance policies.
Corporate Actions Signal China’s Strategic Interest in Stablecoins
Despite the regulatory crackdowns, Chinese companies are slowly venturing into the stablecoin space.
On July 10, China’s largest fintech firm Ant Group entered into a partnership with Circle to onboard USDC onto its global network, with a view to accelerating cross-border transactions.
Later on July 30th, JD.com, the retail giant, registered two stablecoin companies, Jcoin and Joycoin, under its fintech arm JD Coinlink.
JD will debut a Hong Kong dollar-denominated stablecoin in Hong Kong Monetary Authority’s sandbox program for commercial and consumer use.
These steps are in accordance with China’s general strategy to internationalize the yuan and reorganize global digital settlement arrangements, as regulators seek to stem domestic speculation and risk.