TLDR
- Chinese regulators have ordered firms to halt stablecoin promotions and research due to fraud concerns.
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Beijing is concerned about speculative behavior and the risks of investors not understanding crypto.
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Stablecoin use is expanding in Hong Kong, with new frameworks for digital currency issuance.
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Yuan-pegged stablecoins are being developed for use outside China as part of a global strategy.
Chinese authorities have ordered local firms to halt stablecoin promotions, research, and seminars. The move comes amid rising concerns over potential fraud and speculation. According to reports, regulators cited fears that stablecoins could be used for fraudulent activities, leading to the decision to block any related seminars and research in the country.
This crackdown is part of China’s ongoing efforts to control the digital asset space more strictly. By preventing further discussions and research into stablecoins, authorities aim to reduce the chances of widespread speculative activity and protect investors from making ill-informed decisions.
Concerns Over Fraud and Speculation
China’s strict approach to stablecoin regulation is driven by fears of a speculative surge, particularly among retail investors. Christopher Wong, a currency strategist, pointed out that Beijing is cautious about the speculative nature of the crypto market.
“There’s still a worry that not everyone knows adequately about crypto,” Wong said. He further added that policymakers do not want to see herd mentality pushing investors to buy into assets they don’t fully understand.
The prohibition of seminars and research is seen as an attempt to curb the risk of individuals diving into crypto investments without a clear understanding of the potential hazards. With an increasing number of people exploring crypto assets, the government is taking action to prevent risky financial behavior.
Selective Use of Stablecoins Outside Mainland China
While China has restricted stablecoins within its borders, it is selectively enabling their use in regions outside of mainland China. Hong Kong, often viewed as a separate regulatory zone, has implemented new rules for stablecoin issuance. These rules include a six-month transition period, providing a framework for firms to operate within legal boundaries.
Hong Kong’s approach has led to several developments in the stablecoin space. Standard Chartered Bank has partnered with Web3 company Animoca Brands to launch a Hong Kong-dollar stablecoin.
Similarly, JD.com, the Chinese e-commerce giant, has registered entities in Hong Kong for a potential stablecoin rollout. These moves show China’s interest in fostering the use of stablecoins in global markets, while keeping control within its own borders.
Yuan-Pegged Stablecoins for Global Use
Chinese firms are also developing yuan-pegged stablecoins, but these are intended for use outside mainland China. Conflux, a Chinese blockchain, introduced a new stablecoin backed by offshore Chinese yuan. This stablecoin will not be used domestically but instead targets countries involved in China’s Belt and Road Initiative.
The aim is to expand China’s influence in global financial markets through digital currency without allowing domestic usage. Similarly, AnchorX, a company operating in Kazakhstan, has received approval to issue a yuan-pegged stablecoin, AxCNH, to serve international markets.
China’s approach to stablecoin regulation reflects its broader strategy of controlling the domestic crypto space while enabling global expansion. While stablecoin use remains restricted within mainland China, these digital currencies are finding applications beyond its borders, furthering China’s economic and financial reach.
