China Bans Unapproved Yuan-Pegged Stablecoins Abroad to Protect Currency Stability

Core Viewpoint - Chinese regulators are tightening control over digital assets, specifically banning unauthorized issuance of yuan-pegged stablecoins and extending restrictions to tokenized real-world assets linked to the yuan [1][3][4]. Regulatory Actions - The People's Bank of China (PBOC) and seven government agencies have stated that individuals and companies cannot issue renminbi-linked stablecoins without official approval, as these tokens could threaten monetary sovereignty [3][4]. - The new rules also target services related to tokenized financial assets, including blockchain representations of bonds or equities, and prohibit overseas entities from offering such products to users in China without regulatory permission [4][6]. Stance on Cryptocurrency - China has reaffirmed its position that cryptocurrencies like Bitcoin and Ether do not have legal tender status, and facilitating transactions involving these assets is considered illegal [5][9]. - The restrictions apply to both onshore and offshore versions of the renminbi, with the offshore yuan (CNH) designed for foreign exchange flexibility while maintaining capital controls [6]. Promotion of Digital Yuan - The measures align with a broader strategy to limit privately issued digital currencies while promoting the state-backed digital yuan, known as e-CNY [6][7]. - China has been developing the e-CNY and has recently allowed commercial banks to share interest with users holding digital yuan wallets to encourage adoption [7]. Regional Policy Context - In contrast to China's tightening regulations, Japan and Hong Kong are moving towards regulated stablecoin markets, indicating a policy divide in the region [8][9].