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The new regulations reinforce China’s strict position on cryptocurrency and impose limitations on the tokenization of real-world assets as well as the offshore issuance of yuan-backed stablecoins.
China flag (Unsplash)
Key points:
- Chinese financial authorities and regulatory bodies released a statement reaffirming the 2021 prohibition on cryptocurrency trading and stablecoins, which includes cross-border transactions.
- The tokenization of real-world assets is now under stringent regulations, with few exceptions, according to the statement.
- Increased oversight is applied to overseas cryptocurrency and tokenization operations by Chinese organizations, the statement noted.
Chinese regulators have extended their enforcement against cryptocurrency activities, implementing stringent oversight on tokenization and stablecoin issuance in a notice released on Friday.
"Recently, influenced by various factors, speculative activities associated with virtual currencies and the tokenization of real-world assets have occurred frequently, presenting new challenges for risk prevention and control," stated the notice, issued collectively by eight national entities, including the People’s Bank of China (PBOC) and the China Securities Regulatory Commission (CSRC).
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The notice reiterates China’s comprehensive ban on cryptocurrency, stating that the trading, issuance, or facilitation of transactions involving digital currencies such as bitcoin , ether , or stablecoins such as Tether’s USDT is prohibited.
This ban also applies to foreign entities and individuals providing such services within China. Additionally, it prohibits domestic organizations from issuing digital currencies abroad without regulatory consent.
The notice highlights stablecoins — cryptocurrencies pegged to fiat currencies — as needing special attention. Authorities contend that stablecoins emulate crucial functions of sovereign currency, thereby jeopardizing monetary control.
The new regulations clarify that no entity, whether Chinese or foreign, can issue a stablecoin associated with the renminbi internationally without governmental approval. This includes overseas branches of domestic companies.
Furthermore, the regulations tighten control over tokenization, which involves the emerging practice of converting ownership of tangible assets like stocks, real estate, or funds into digital tokens.
Chinese companies aiming to tokenize assets abroad must now obtain approvals or notify regulators, and their financial and technological partners are required to adhere to stricter compliance standards, as stated in the notice.
China’s enforcement against cryptocurrencies and related activities has been a continuous theme in recent years. The latest regulations expand upon the earlier 2021 determination by Chinese authorities that all crypto-related business activities are illegal and the banning of crypto mining, often referred to as the “China ban.” In 2017, regulators prohibited Initial Coin Offerings (ICOs), categorizing them as illegal fundraising and financial fraud, and mandated the closure of domestic cryptocurrency exchanges engaged in fiat-to-crypto trading.
Read more: China Never Completely Banned Crypto
