The People's Bank of China, along with the China Securities Regulatory Commission and other agencies, has issued a joint notice that extends the country's cryptocurrency ban to cover renminbi-pegged stablecoins and tokenized real-world assets. The notice explicitly bans any domestic entity or foreign entity under its control from issuing virtual currencies globally without prior authorization from relevant authorities.
Stablecoin Issuance Abroad Requires Approval
According to the notice, stablecoins affect monetary sovereignty because they perform certain functions in circulation and usage similar to legal tender. No entity or individual, domestic or foreign, can issue any RMB-pegged stablecoin outside the country without proper authorizations. This closes a regulatory loophole that previously left overseas issuance unaddressed.
On mining, the notice reiterates strict enforcement by the National Development and Reform Commission, targeting organizations disguised as data centers that actually run mining rigs, and managers who move equipment between regions to evade local oversight. Regulators see correlations between mining activities and speculation in virtual currencies.
Tokenized Real-World Assets Deemed Illegal Finance
The notice defines tokenization as using encryption and distributed ledger technology to issue and trade rights to ownership, income and other interests in assets. Providing intermediary or technology services for RWA tokenization in China, or engaging in such activities, may be considered unlawful financial operations. The framework forbids illegal sale of tokenized securities, public sale of securities without authority, trading of criminal securities or futures, and unlicensed fundraising.
Exceptions exist for commercial operations using specified financial infrastructure with approval from relevant authorities under current laws. Entities with actual control over underlying assets must file a report with the CSRC before participating in related operations. Overseas issuance paperwork must detail the domestic filing company, underlying assets, token issuance strategy and related information.
Hong Kong Diverges with License Plans
In contrast to mainland China's tightening, the Hong Kong Monetary Authority is planning to grant an initial set of stablecoin licenses in March. CEO Eddie Yue told a Legislative Council meeting that a decision was hoped for by March. The HKMA is evaluating dozens of applications submitted by stablecoin issuers following the passage of Hong Kong's Stablecoins Ordinance.
Ant Group and JD.com have expressed interest in Hong Kong's licensing framework, according to the Financial Times. However, the report noted that preparations were paused after Chinese authorities, notably the PBoC, raised reservations. China's crypto regulatory framework has tightened since 2013, leading to a total ban on cryptocurrency transactions in 2021. Recent research indicates stablecoins were used by organized crime to move illicit funds. Beijing also worries about the growing role of the US dollar in digital assets, especially dollar-linked 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.