China Doubles Down on Crypto Ban as PBOC Issues Warning on Stablecoins

Core Viewpoint - China's central bank, the People's Bank of China (PBOC), has reaffirmed that digital assets remain illegal in the country, emphasizing that cryptocurrencies and related business activities pose financial risks and do not comply with core requirements [1][2]. Regulatory Stance - The PBOC reiterated that digital assets do not have the same legal status as fiat currency and are not allowed as a means of payment in commercial transactions [2]. - Crypto-linked business activities are classified as illegal financial activities under Chinese law [2][3]. - The PBOC specifically highlighted stablecoins, stating they do not meet standards for customer identification and anti-money laundering controls [2][3]. Risks Identified - The PBOC indicated that the lack of compliance in stablecoins exposes them to potential misuse in money laundering, fraudulent fundraising, and illegal cross-border capital transfers [3]. - The authorities are focused on tightening risk prevention and ensuring compliance with prohibitions [4]. Comparison with Global Trends - China's strict stance on cryptocurrency contrasts with the broader trend in major economies, where governments are introducing frameworks to integrate digital assets into traditional financial markets [5]. - While other jurisdictions are accommodating the crypto industry, China has maintained its comprehensive ban since 2021 [5]. Central Bank Digital Currency Development - The Chinese authorities are prioritizing the development of its central bank digital currency, the e-CNY, and are advancing the digital yuan across pilot regions and public-sector payment systems [6]. Underground Activity - Despite the restrictions, underground crypto activity continues in China, with reports indicating ongoing usage of virtual assets [7]. - Recent estimates suggest that China accounts for 14% of the global Bitcoin mining market, indicating a resurgence of crypto mining activity despite the nationwide ban [7].