Chinese regulators have expanded their crackdown on crypto activities, imposing strict oversight on tokenization and stablecoin issuance in a Friday announcement.
“Recently, influenced by various factors, speculative activities related to virtual currencies and real-world asset tokenization have occurred frequently, which has brought new challenges and situations for risk prevention and control,” said the notice issued jointly by eight national organizations, including the People’s Bank of China (PBOC) and the China Securities Regulatory Commission (CSRC).
The announcement reiterates China’s blanket ban on crypto, saying that trading, issuing or facilitating transactions involving digital currencies such as bitcoin ether or stablecoins like Tether’s USDT is illegal.
The ban includes foreign entities and individuals offering such services in China. It also prohibits domestic entities from issuing digital currencies abroad without regulatory approval.
The announcement singles out stablecoins — cryptocurrencies pegged to fiat currencies — for special scrutiny. Authorities argue that stablecoins replicate key functions of sovereign money and therefore threaten monetary control.
The new rules make it clear that no entity, Chinese or foreign, may issue a stablecoin pegged to the renminbi abroad without government approval. It includes foreign branches of domestic companies.
The rules also tighten controls on tokenization, the fast-growing trend of turning ownership of real assets such as stocks, real estate or funds into digital tokens.
Chinese firms that want to tokenize assets overseas now must obtain approvals or file with regulators, and their financial and technical partners are required to meet heightened compliance standards, the announcement said.
China’s crackdown on cryptocurrencies and related activities has been a fixture in recent years. The new set of rules is based on Chinese authorities deeming all crypto-related business activities illegal by 2021 and banning cryptomining, often referred to as a “China ban”. In 2017, authorities banned Initial Coin Offerings (ICOs), labeling them illegal fundraising and financial fraud, and ordered domestic cryptocurrency exchanges to shut down fiat-to-crypto trading operations.
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