At a time when stablecoins are under the spotlight internationally, China is making moves to dampen the hype within its jurisdiction. The authorities there, have been instructing local brokers and study groups to stop research work and seminars advocating stablecoins, Bloomberg reported on Friday, August 8.
Stablecoins are digital assets that derive their value from underlaying reserved assets like fiat currencies. This helps them navigate choppy markets while maintaining a more stable value compared to cryptocurrencies like Bitcoin and Ether. Two of the biggest stablecoins, by market cap, are Tether (USDT) and Circle (USDC) — both of which are pegged to the US dollar.
The Chinese regulators are concerned that stablecoins could be misused to facilitate illegal activities in mainland China, the Bloomberg report said citing anonymous sources familiar with the matter.
In July, a bunch of China-based brokerages and think tanks were conveyed instructions, discouraging them from conducting studies and awareness initiatives around stablecoins.
All crypto-related activities have remained ban in China since September 2021. In June this year, however, reports of China planning to reassess its crypto stance started making it to the headlines.
The speculations arose after Pan Gongsheng, the Governor of the People’s Bank of China (PBOC) said “stablecoins are thriving” and new technologies like blockchain and CBDC are fundamentally reshaping the traditional payment and settlement systems.
“Technologies, such as smart contracts and decentralized finance, will further promote the evolution and development of cross-border payment systems,” Gongsheng had said, highlighting that these advanced fintech tools have significantly shortened the cross-border payment chain.
On August 1, Hong Kong’s stablecoin bill also took effect that lays out clear licensing requirements, risk controls, and reserve necessities for stablecoin players looking to expand business there.
Amid these developments, discussions on how a potential yuan-backed stablecoin could help China elevate its currency on a world level, have reportedly grown louder. In 2018, Tether had attempted to launch the CNHT, a Chinese yuan stablecoin, but the project never gained traction.
For now, however, China does not seem to be taking a supportive approach towards stablecoins. Media reports have, however, claimed that the country is secretly testing out stablecoins to prevent capital outflows.
U.S. President Donald Trump, meanwhile, recently signed the stablecoin-focussed GENIUS Act into a law — positioning the U.S. at the forefront of leading the sector.