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China has told brokers, think tanks, and financial institutions to stop promoting stablecoins – no research reports, no seminars, no hype.
The orders, issued in late July and early August, are aimed at cooling the growing interest in the sector. Regulators are worried that stablecoins could be used for fraud in mainland China, and that too much excitement could trigger a “herd rush” into risky investments.
Here are the details.
Demand is Booming Despite the Ban
Even with China’s blanket ban on crypto transactions, over-the-counter (OTC) trading is alive and well. Chainalysis estimates that $75 billion worth of digital assets changed hands through OTC channels in the first nine months of 2024.
“Chinese policymakers don’t favor too much fanfare in some topics just to avoid a herd rush to any particular asset class,” said Christopher Wong, currency strategist at Oversea-Chinese Banking Corp.
Crypto demand might be strong, but Beijing wants it contained.
Hong Kong’s Different Playbook
While mainland regulators clamp down, Hong Kong is moving in the opposite direction.
On August 1, the city’s new stablecoin law came into effect, making it one of the first places in the world to regulate fiat-backed stablecoin issuers.
It’s a big step in Hong Kong’s plan to become a global hub for digital assets. But the law comes with strict conditions. Issuers must verify the identity of every stablecoin holder – a KYC requirement that many in the industry say will hurt adoption and strip stablecoins of their privacy benefits.
“This is a bit too strict and not good for acquiring users,” said Bo Tang from the HKUST Institute for Financial Research, noting that cross-border businesses could be hit hardest.
A Bigger Global Fight
The debate over stablecoins is not just a China-Hong Kong story. Around the world, regulators are weighing how these dollar-pegged assets could affect monetary policy, inflation, and the banking system.
Supporters say stablecoins are fast, cheap, transparent, and – unlike cash – easy to trace. In 2024, illicit crypto activity made up just 0.14% of blockchain volume. In places like the US and EU, new rules such as the Genius Act and MiCA aim to make them safer while supporting innovation.
China Holds the Line
China’s latest orders show it’s not ready to open the stablecoin door just yet. Hong Kong may be running ahead, but Beijing is keeping its grip tight. Are they falling behind? This choice will be closely watched.