China Strengthens Crackdown on Crypto Payments and Stablecoins

China is intensifying its crackdown on crypto payments, as regulators express concern over digital assets posing risks to the financial system. Despite a 2021 ban, crypto trading has resurfaced, leading to an increase in scams and illegal transactions.

Regulatory Actions

The People’s Bank of China held discussions with government agencies, including the Ministry of Public Security, addressing the rise in virtual currency activity.
Officials reiterated that digital assets are not legal tender within China and using them for payments or investments is illegal.
Concerns were raised about stablecoins, particularly due to their anonymity, which complicates user identification and fund tracing.
Agencies are pushing for better coordination to monitor money flows and prevent bypassing of restrictions via digital assets.

Focus on Stablecoins

State-linked companies such as PetroChina are exploring stablecoins for cross-border deals, adding to regulatory concerns over control of money flows.
Earlier, China's securities regulator advised major brokerages in Hong Kong to pause tokenization plans, reflecting Beijing's cautious stance.
Despite this, there’s interest in yuan-backed stablecoins, potentially offering a regulated alternative that aligns with Chinese rules.