China’s central bank has identified stablecoins as a risk and vowed to renew its crackdown on crypto trading, which has been banned in the country since 2021.
Following a meeting with 12 other government agencies on Saturday, the People’s Bank of China said that “virtual currency speculation has resurfaced” due to various factors, creating new challenges for risk management.
“Virtual currencies do not have the same legal status as fiat money, lack legal tender status, and should not and cannot be used as currency in the market,” the bank said, according to a translated statement.
“Virtual currency-related business activities constitute illegal financial activities.”
China’s central bank banned crypto trading and mining in 2021, citing the need to curb criminal activity and warning that cryptocurrencies posed risks to the financial system.
Stablecoins under scrutiny
The central bank singled out stablecoins as a particular concern, saying the tokens fail to meet legal standards and have been linked to illicit activities.
“Stablecoins are a form of virtual currency and currently cannot adequately satisfy requirements for customer identification and anti-money laundering. This creates a risk that they could be used for illegal activities such as money laundering, fundraising fraud, and unauthorized cross-border fund transfers,” the bank said.
The central bank said it would “persistently crack down on illegal financial activities” involving cryptocurrencies to “maintain the stability of the economic and financial order.”
Thirteen agencies attending the meeting pledged to “deepen coordination and cooperation” in monitoring crypto users by enhancing information sharing and strengthening oversight capabilities.
Reuters reported on Wednesday that China accounts for the third-largest share of global Bitcoin mining, holding 14% of the market as of the end of October.
In August, Chinese financial regulators reportedly instructed brokers to cancel seminars and halt research promotion on stablecoins, citing concerns that the tokens could be exploited for fraudulent purposes.
Meanwhile, Hong Kong began licensing stablecoin issuers in July. However, some tech firms have suspended plans to launch stablecoins in the region after Chinese regulators reportedly intervened to pause the offerings.
