The Chinese government has ordered local brokers and research groups to stop studying and promoting stablecoins. This decision aims to reduce financial risks. Officials worry that stablecoins may lead to fraud, even though there is a ban on cryptocurrency transactions in the country.
Stablecoin Faces Reduced Hype
The China Securities Regulatory Commission and the People’s Bank of China (PBOC) are leading this crackdown on stablecoin to reduce its traction. They are concerned that investors might rush into stablecoins without fully understanding them, which could cause market chaos.
Stablecoins, usually linked to the US dollar, enable quick and low-cost cross-border payments. However, illegal trading with stablecoins reportedly reached $75 billion in the first nine months of 2024. Local governments in Beijing, Suzhou, and Zhejiang have warned about crypto fraud.
Recently, the country’s Shenzhen Municipal Task Force for Preventing and Combating Illegal Financial Activities warned about scams related to stablecoins, reporting that some dishonest groups are taking advantage of people’s lack of knowledge about stablecoins.
Will the Chinese Government Welcome Crypto?
Recent reports, however, suggest that the Chinese government may ease its strict rules on digital assets. At the same time, new stablecoin laws in Hong Kong have caught the attention of companies in mainland China. Hong Kong is testing new rules for stablecoins.
The city has passed laws for stablecoin issuers and has licensed 11 crypto exchanges and 44 firms to trade digital assets, including companies backed by the government. Pan Gongsheng, the Governor of the People’s Bank of China, maintains that stablecoins could change global finance, especially for yuan transactions.
At the same time, the U.S. has introduced its first federal law on stablecoins to promote crypto innovation. It is estimated that the global market for stablecoins could reach $3.7 trillion by 2030, mainly driven by dollar-pegged coins. The Chinese government is looking to regulate stablecoins while eyeing digital assets backed by the yuan. New rules in Hong Kong also show that China is interested in advancing digital finance.
Regulators want to support growth but are careful to maintain stability. They are wary of investors who might act too quickly. A yuan-backed stablecoin could potentially challenge the dollar’s dominance in global markets.
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