China bans most yuan stablecoins — but leaves a tiny loophole

The Chinese government’s decision to ban most yuan-pegged stablecoins and real-world assets will impact the entire world, Chinese analysts claim.

Real-world assets, or RWAs, are tokenised property rights in tangible or intangible assets — including property, bonds, commodities such as gold, and artworks — issued on blockchain networks.

Implementing China’s new, enhanced regulatory policies “will have a comprehensive impact” on all cryptocurrency-related industries, Wang Peng, an associate research fellow at the Beijing Academy of Social Sciences, told Chinese newspaper Beijing Business Today.

Wang Peng said the move will “directly cut off overseas issuance channels that have links to China.”

Beijing’s policy runs counter to those pursued in regions such as the EU, the UK, Japan, and the US, where industry leaders say stablecoins and tokenisation drives are set to hit financial systems “like a freight train.”

Strict penalties

In an official notice issued last Friday by the People’s Bank of China, the Ministry of Public Security, and several major financial regulators, Beijing essentially prohibited the domestic circulation of stablecoins and the tokenisation of real-world assets within China.

The document also mentions punishments for firms that provide overseas crypto firms with “intermediary and information technology services.”

Domestic entities and individuals who knowingly or unknowingly work with overseas entities that provide crypto and RWA tokenisation services to firms or individuals based in China will also face sanctions, the document states.

These punishments will be particularly severe if Chinese firms are found to have adversely disrupted the Chinese economy.

, on the one hand, appears to slam the door shut on crypto-related business and, on the other,

Door left ajar

Analysts in China are still unsure what to make of the document, which, on the one hand, appears to slam the door shut on crypto-related business and, on the other, contains a few caveats for possible “government-approved” RWA projects.

But all analysts appear to agree that Beijing will not permit yuan-pegged stablecoins to operate on Chinese soil.

Beijing’s strict approach to crypto regulation suggests mainland tech firms “are unlikely to pursue stablecoin licenses going forward,” Xiao Sa, a senior partner at Beijing Dacheng Law Offices, told Chinese news agency Yicai.

“This is a precise response from regulators to address new market risks. It represents a deepening and implementation of previous regulatory policies,” Wang Pengbo, a senior financial analyst at the financial services provider Broadcom Consulting, told Beijing Business Today.

Beijing’s statement, however, contains key carve-outs for possible future government-endorsed RWA-related activities.

Experts appear divided on whether this means Beijing will allow a small number of RWA firms to operate in a regulatory sandbox in Hong Kong.

“This is the first time Chinese regulators have spoken out about RWAs,” an unnamed senior figure in the blockchain space told Beijing Business Today.

“The guidelines are very detailed. They essentially provide a clear path for pilot and sandbox projects. This is definitely a positive signal.”

Wang Peng agreed that the text of the document “creates a very narrow compliance bridge for high-quality projects with genuine underlying assets, firms that work in line with approved national industrial policies.”

Tim Alper is a News Correspondent at DL News. Got a tip? Email him at tdalper@dlnews.com.