China’s central bank, the Peoples Bank of China (PBOC), has escalated its defense against sketchy cryptocurrency vehicles to now target stablecoins. Only two weeks ago, the PBOC convened a multi-agency meeting on the problem of the rise in virtual currency activity. As reported by MSN, Bitcoin, for example, was a core concern as a “deep threat to monetary sovereignty and financial order.” Now Chinese officials have singled out stablecoins, specifically naming Tether (USDT) and Circle’s USDC.
On Dec. 5, seven of China’s major financial industry associations issued a public warning, which began:
“Recently, the concept of virtual currency has heated up rapidly, and some criminals have taken the opportunity to advocate related transaction speculation activities, and carry out illegal activities such as illegal fundraising and pyramid scheme fraud under the guise of stablecoins, air coins (π coins, etc.), real-world asset (RWA) tokens, and ‘mining.’ The use of virtual currency to transfer illegal and criminal proceeds seriously infringes on the property security of the public and disrupts the normal economic and financial order.”
And the first listed item explained:
“Virtual currency is not issued by the monetary authority, is not national legal tender, does not have the same legal status as legal tender, and cannot be circulated and used as currency in our country.” Beyond the more severe problems with “π coins and other air coins ... [s]tablecoins currently cannot effectively meet customer identification, anti-money laundering and other requirements, and there is a risk of being used for illegal activities such as money laundering, fundraising fraud, and illegal cross-border transfer of funds.”
TheStreet reported: “The last time this coalition mobilized was Sep. 24, 2021, when ten government departments jointly forced exchanges and mining farms to exit the country—an action that drove China’s share of global Bitcoin hashrate from roughly 75% to nearly zero…. China’s explicit ban on RWA tokenization arrives just as the global sector surpasses $30 billion in tokenized assets led by funds such as BlackRock’s $2 billion BUIDL. While other jurisdictions race to integrate blockchain-based capital markets, China is choosing the opposite approach: sealing off emerging rails to maintain capital controls and reduce systemic risk.”
According to MSN, “Professor Eric Lim from UNSW Sydney Business School told Cryptopolitan that in China digital assets pose a threat in the way it could enable capital flows to evade monitoring and oversight.
“'For a government that wants full authority over monetary policy, stablecoins are a structural problem because they give away that control,’ he said. ‘Privately issued stablecoins or crypto currencies operate on decentralized blockchain that can’t be policed in the same way as traditional finance.’
“Lim said the warning leaves no room for people to feign ignorance.
“'These comments serve as a warning for anyone harboring thoughts of experimenting with digital assets,’ he said.”