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Mainland China widens its crypto ban to cover RMB-pegged stablecoins and tokenized real-world assets, even as Hong Kong pushes ahead with a licensed stablecoin regime.
Summary
- A new joint notice from the PBoC, CSRC and other agencies extends China’s virtual currency ban to tokenized real-world assets, treating many RWA platforms as illegal finance if unlicensed.
- The rules bar any domestic or controlled entity from issuing RMB-pegged stablecoins abroad without approval, tighten mining enforcement, and target “shadow” data centers that secretly run rigs.
- Hong Kong moves in the opposite direction, with the HKMA preparing its first stablecoin licenses as firms like Ant Group and JD.com apply, even as Beijing flags crime and dollar-stablecoin risks.
China’s central bank and top regulatory authorities have extended the country’s cryptocurrency ban to include tokenization of real-world assets and stablecoins, according to a new regulatory notice.
China issues new stablecoin guidance
The People’s Bank of China and the China Securities Regulatory Commission, along with other agencies, released the notice to prevent and resolve risks associated with virtual currencies. Virtual currencies and mining remain completely prohibited in China under the expanded framework.
The notice requires prior authorization for the issuance of stablecoins tied to the renminbi outside the country. Domestic businesses and foreign entities under their control cannot issue virtual currencies worldwide unless they have obtained necessary permits from relevant authorities in accordance with applicable laws and regulations, the notice stated.
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The regulatory framework emphasizes that monetary sovereignty is affected by stablecoins related to legal tender since they perform certain functions in circulation and usage. No entity or individual, domestic or foreign, can issue any RMB-pegged stablecoin outside the country without appropriate authorizations, according to the notice.
The notice reiterates the prohibition of virtual currency-related companies and the need to continue regulating virtual currency mining. The National Development and Reform Commission and relevant agencies will continue implementing stringent regulations on mining operations, the document stated.
Regulatory concerns include organizations appearing to be data centers but actually engaged in mining, managers moving equipment between areas to avoid local oversight, and correlation between some mining operations and speculation and trading in virtual currencies, according to the notice.
The notice establishes ground rules for tokenization of real-world assets, including compliance criteria. Regulators defined tokenization as using encryption and distributed ledger technology for the issuance and trading of rights to ownership, income, and other interests in assets.
Providing intermediary or technology services for RWA tokenization activities in China, as well as engaging in such activities, may be considered unlawful financial operations, the notice stated. The framework forbids the illegal sale of tokenized securities, the sale of securities to the public without proper authority, the trading of criminal securities or futures, and the solicitation of funds without a proper license.
The notice indicates possible exclusions for commercial operations carried out using specified financial infrastructure and with approval of relevant authorities under current laws and regulations. The entity with actual control over underlying assets is required to file a report with the CSRC before participating in related operations, according to regulatory guidelines.
Overseas issuance paperwork must describe the domestic filing company, underlying assets, token issuance strategy, and related details in depth, along with other relevant documentation, the notice stated.
Despite mainland opposition to cryptocurrency activity, the Hong Kong Monetary Authority is planning to grant an initial set of stablecoin licenses in March. Eddie Yue, chief executive of the HKMA, said in a Legislative Council meeting that a decision was hoped for by March.
The government is evaluating dozens of applications submitted by stablecoin issuers. The HKMA began accepting applications after Hong Kong passed a Stablecoins Ordinance requiring permits for entities that issue stablecoins in the territory or link them to the Hong Kong dollar.
Stablecoins are digital currencies designed to maintain steady values by being linked to assets such as traditional currencies or gold. The HKMA has discussed regional uses including tokenized deposit systems for foreign banks and cross-border payments, according to reports.
Ant Group and JD.com have expressed interest in Hong Kong’s licensing framework, according to the Financial Times. Preparations in Hong Kong were halted after Chinese authorities, notably the People’s Bank of China, raised reservations, the Financial Times reported.
China’s regulatory framework on cryptocurrency tightened from 2013 onward, and concerns about volatility and illegal activity led to a total ban on cryptocurrency transactions in 2021.
Recent research indicates that stablecoins were used by organized crime to move illicit funds, with daily transfers facilitated by complex networks, according to reports. Beijing’s concerns include the growing role of the US dollar in the digital asset market, especially dollar-tied stablecoins.
At a recent Senate Banking Committee hearing, the US Treasury Secretary said he “would not be surprised” if Hong Kong’s digital asset program were seen as an attempt to establish an alternative to American financial leadership.
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