Beijing moves to curb stablecoin hype even as Hong Kong advances issuer regime

Chinese financial regulators have instructed domestic brokerages and research outfits to halt promoting stablecoins, directing them to cease publishing research and cancel seminars on the asset class due to concerns over speculation and fraud. The guidance went out to several leading firms in late July and early August, Bloomberg reported Friday.

Beijing has ramped up efforts to tamp down retail hype around dollar-pegged crypto tokens, even as policymakers explore where privately issued digital dollars fit into cross-border finance. Regulators have voiced concerns that stablecoins could become a new tool for illicit fundraising on the mainland.

Stablecoins are blockchain-based tokens pegged to fiat currencies, typically the U.S. dollar, and backed by cash and short-term Treasurys. They are used for settlement in crypto markets and, increasingly, for cross-border transfers — a use case Chinese officials have publicly acknowledged even while cautious toward the sector.

The directive arrives after a month of local warnings tied to rising stablecoin chatter. In early July, Shenzhen authorities warned residents about scams masquerading as stablecoin investments, reflecting a broader, nationwide uptick in consumer alerts.

Mainland officials have also highlighted stablecoins’ growing relevance in cross-border payments as the People’s Bank of China set up an e-CNY international operations center in Shanghai to extend the digital yuan’s reach.

Different strokes

China maintains a blanket ban on most crypto activities, but the picture is not uniform. Hong Kong, a special administrative region tied to mainland China under the “One Country, Two Systems” principle, has moved ahead with its own stablecoin-issuer framework. It’s part of a push to position the city as a digital asset hub under a separate regulatory regime.

Furthermore, crypto activity remains stalwart in China despite the ban. Over-the-counter crypto trading persists onshore, with Chainalysis estimating some $75 billion in OTC flows in the first nine months of 2024.

While China is skeptical about stablecoins, the U.S. has opted for regulatory support instead. Last month, President Trump signed America’s first federal stablecoin legislation, dubbed the GENIUS Act, into law.