China's Renewed Assault on Cryptocurrency: The Focus is Now on Stablecoins

In a recent development, China's central bank has escalated its crackdown on cryptocurrency, particularly targeting stablecoins. This move is part of a wider governmental initiative aimed at curbing fresh speculation within the market.

Key Takeaways

The People’s Bank of China is directing its focus on stablecoins in a renewed effort to enforce cryptocurrency bans.
Stablecoins pose a unique challenge due to their ability to facilitate capital movement beyond China's strict controls.
Regulatory actions have intensified amidst rising interest in cryptocurrencies following Hong Kong's stablecoin legislation.
The crackdown has resulted in significant stock market impacts, particularly for companies involved in cryptocurrency-related activities.
China's efforts coincide with its plans to explore a yuan-backed stablecoin, impacting global digital finance dynamics.

China declares a new war on crypto - This time, stablecoins are the target

The People’s Bank of China (PBoC) has intensified its efforts to eliminate cryptocurrency activity, focusing specifically on stablecoins, which are pegged to traditional currencies. This article explores the implications of this renewed crackdown, the reasons behind these aggressive measures, the market's response, and the broader context of China's relationship with stablecoins and digital finance.

A Closer Look at China's Crypto Crackdown

The renewed focus on stablecoins marks a significant shift for the People’s Bank of China (PBoC). Following broad bans initiated in 2021, on November 28, 2025, the PBoC convened a crucial meeting involving 13 government bodies. This focus indicates that the battle has evolved from attacking volatile cryptocurrencies like Bitcoin [BTC] to targeting any decentralized cryptocurrency that could threaten the dominance of the yuan or the nation’s strict capital controls.

The primary concern for the PBoC is that virtual currencies do not hold legal tender status in China and cannot be used for payments in China’s markets.

Reasons Behind Officials' Alarm

The PBoC has reiterated that activities related to cryptocurrencies are illegal and pose risks to China's financial stability. Still, the challenge posed by stablecoins, which are tethered to fiat currencies, remains significant. These assets provide a covert means to transfer funds and circumvent China's rigorous capital controls.

During the aforementioned meeting, the PBoC cautioned that stablecoins are inadequate in customer identification and lack proper Anti-Money Laundering (AML) regulations, making them susceptible to illicit financial activities, including cross-border transfers and shadow banking. As Liu Honglin, founder of Man Kun Law Firm, stated, the official communication clarifies China's stablecoin policies, drawing a definitive line regarding previously ambiguous regulations.

Consequences on the Ground

China's intensified crackdown coincides with rising interest in digital assets in Hong Kong, especially after the passage of its stablecoin bill in May. This newfound enthusiasm has sparked interest in mainland China, despite the 2021 ban. However, Beijing's recent actions indicate a desire to quash this momentum.

The PBoC's latest measures underscore that even stablecoins regulated by Hong Kong could threaten the yuan and the development of the e-CNY. Major tech companies like Ant Group and JD.com have already paused their plans for stablecoins amid PBoC pressures. Additionally, China's securities regulator has urged local brokerages to halt efforts in Real World Asset (RWA) tokenization, marking a comprehensive effort to limit cryptocurrency activities across the region.

Market Response

The immediate financial repercussions of this synchronized crackdown were steep. On December 1st, Hong Kong-listed stocks connected to cryptocurrency experienced a significant drop. For instance, shares of Yunfeng Financial Group (038.HK), which has been venturing into cryptocurrency and tokenization, fell over 10% in initial trading, setting the stage for its worst day in two months. Bright Smart Securities and Commodities Group (1428.HK) saw a decline of approximately 7%, and the digital-asset platform OSL Group (0863.HK) lost more than 5%.

The Bigger Picture

This current crackdown signals that China's strategy is not merely revisiting its 2021 ban; it is a targeted operation aimed at addressing the specific threats stemming from stablecoins concerning national capital controls and economic stability. Concurrently, China is pondering the launch of its own yuan-backed stablecoins to enhance the global influence of the yuan and mitigate U.S. dominance in the realm of digital finance.

As both Hong Kong's markets and mainland traders anticipate immediate impacts from these regulatory actions, the broader ramifications include a widening digital currency rift between the world's two largest economies.

Concluding Remarks

As China continues to assert its control over digital finance, the implications for the global cryptocurrency landscape remain significant. Stakeholders in the industry will need to navigate the evolving regulatory environment and reconsider their strategies in light of these stringent measures.