China Reaffirms Crackdown on Virtual Currency Trading and Stablecoins

TLDR:

• China’s PBOC declares all virtual currency-related activities illegal under national law.
• Stablecoins currently fail KYC/AML standards, posing money laundering and fraud risks.
• Inter-agency coordination aims to monitor information flow and capital movement closely.
• Authorities emphasize strict enforcement to maintain financial and economic stability.

China’s central bank has reinforced its position on virtual currencies, emphasizing they lack legal tender status. 

The People’s Bank of China (PBOC) convened a major coordination meeting with multiple government agencies to review crypto risks. Officials stressed that all virtual currency-related business activities are illegal under Chinese law. Stablecoins, in particular, were highlighted as high-risk instruments unable to meet anti-money laundering standards.

PBOC Meeting Details and Attendees

The coordination mechanism meeting included representatives from the Ministry of Public Security, Cyberspace Administration, and the Supreme People’s Court. Financial regulators, including the China Securities Regulatory Commission and State Financial Regulatory Commission, were also present. 

Officials discussed recent trends in virtual currency speculation and associated illegal activities. The meeting reviewed past enforcement efforts following the 2021 “Notice on Further Preventing and Handling Risks of Virtual Currency Trading and Speculation.”

Participants noted that previous crackdowns had curtailed market chaos but warned speculation has recently resurged. Illegal fundraising, fraud, and cross-border capital transfer risks were identified as growing threats. 

The PBOC emphasized continuous enforcement and inter-agency coordination to maintain financial stability. Data from Wu Blockchain confirmed the renewed commitment to monitoring virtual currency markets and related business activities.

The meeting reaffirmed that stablecoins remain a form of virtual currency and currently cannot effectively meet KYC/AML requirements. 

Authorities warned that their misuse could facilitate money laundering and illegal cross-border transactions. The PBOC stressed adherence to China’s regulatory framework and national financial policies. 

All units were instructed to focus on key information and capital flows to prevent and penalize illegal activity.

Regulatory Enforcement and Policy Guidance

Officials reiterated that virtual currencies cannot be used as market currency and that all related business is illegal. Coordination among government agencies is expected to enhance monitoring and enforcement. 

Legal and regulatory frameworks will continue to be refined to cover emerging risks in crypto trading. The PBOC also instructed authorities to protect public property and uphold financial stability.

The meeting further emphasized guidance from Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. Policy directives from the 20th CPC National Congress remain central to financial risk management. 

Agencies were reminded to maintain prohibitive policies on crypto, particularly stablecoins. The focus is on proactive prevention, inter-agency cooperation, and rigorous supervision of virtual asset activities.

Authorities concluded that strengthening information sharing and enforcement is critical for reducing illicit financial activity. Monitoring capabilities will be expanded to identify emerging risks. The PBOC’s stance reinforces that China maintains a zero-tolerance approach to unauthorized virtual currencies. 

Stablecoins and other digital assets remain under strict scrutiny, with potential legal consequences for misuse.

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