Mainland China has expanded its crypto moratorium to encompass tokenised real-world assets and RMB-pegged stablecoins, while Hong Kong is making progress with a licensed stablecoin regime.
A recent regulatory notice says that China’s central bank and top regulatory officials have expanded the country’s ban on cryptocurrencies to encompass the tokenisation of real-world assets and stablecoins.
China issues new stablecoin and tokenisation guidance
The notice was sent out by the People’s Bank of China, the China Securities Regulatory Commission, and other groups to stop and fix problems with virtual currency. Under the expanded framework, China still bans all virtual currency and mining.
The notice says that stablecoins linked to the renminbi cannot be issued outside of China without permission first. According to the notification, corporations in the US and their controlled international companies cannot issue virtual currencies globally without the proper authorisation from the appropriate authorities.
The rules say that stablecoins that are tied to legal currency have an effect on monetary sovereignty since they serve particular purposes when they are used and circulated. The warning says that no person or business, whether in China or not, can issue any RMB-pegged stablecoin outside of China without the right permissions.
The notification repeats that organisations that deal with virtual currency are not allowed to do business and that virtual currency mining has to be regulated. The paper said that the National Development and Reform Commission and other relevant organisations would keep enforcing strict rules on mining operations.
Restrictions on tokenised real-world assets (RWAs)
The notice spells out the regulations for tokenising real-world assets, including what needs to be done to follow the rules. Regulators said that tokenisation is the use of encryption and distributed ledger technology to give out and trade rights to own, earn money from, and have other interests in assets.
The notification said that providing intermediary or technological services for RWA tokenisation activities in China, as well as taking part in such activities, could be seen as illegal financial operations. The framework says that you can’t sell tokenised securities illegally, sell securities to the public without the right permission, trade illicit securities or futures, or ask for money without a legitimate licence.
The warning says that certain business activities may not be allowed if they use certain financial infrastructure and get permission from the right authorities, as required by present laws and regulations. According to regulatory rules, the entity that really controls the underlying assets must file a report with the CSRC before taking part in operations that are related to them.
Hong Kong moves ahead with licensed stablecoin framework
Even if people in mainland China are against cryptocurrency activities, the Hong Kong Monetary Authority plans to give out the first set of stablecoin licenses in March. Eddie Yue, the HKMA’s chief executive, indicated during a meeting of the Legislative Council that they planned to make a decision by March.
The government is looking over dozens of applications from people who want to create stablecoins. After Hong Kong approved the Stablecoins Ordinance, which says that anyone who issues stablecoins in the territory or links them to the Hong Kong dollar needs a permit, the HKMA started taking applications.
Stablecoins are digital currencies that are tied to assets like gold or traditional currencies to keep their values stable. Reports say that the HKMA has talked about regional uses including tokenised deposit systems for foreign banks and payments across borders.
The Financial Times says that Ant Group and JD.com are interested in Hong Kong’s licensing system. The Financial Times said that preparations in Hong Kong stopped when Chinese officials, especially the People’s Bank of China, raised concerns.
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.