The People’s Bank of China issued a statement over the weekend regarding concerns about ongoing crypto speculation and a crackdown on stablecoins.
Mainland China has banned crypto for years, allowing Hong Kong to serve as a jurisdiction where digital asset development and experimentation can take place in a controlled environment.
Reuters, which translated the PBC statement, said a coordinating meeting indicated that regulators would seek to halt illicit crypto activities.
In general, China tightly controls capital movements, limiting citizens to $50,000 in outbound money per year. If this cap were not in place, it is hard to imagine the avalanche of money that would exit the socialist country as the population seeks to mitigate risk and diversify holdings in a country with more than its share of economic problems.
In China, Central Bank Digital Currency (CBDC) has been in the works for years now and is currently in the launch phase, but it is not yet fully available across the country. The “e-CNY” is in use in many cities, hosted in digital wallets and accepted at public transport, certain retailers, and more. But unlike regulated stablecoins, the CBDC will be used to monitor and control the Chinese population, making dollar-based stablecoins like USDC or USDT an interesting option for moving value and avoiding government intrusion. But it now appears that Chinese authorities may be aiming to do more to restrict capital flows in the form of digital money beyond a digital yuan used internally.
The objective of Chinese authorities is to restrict crypto use by targeting over-the-counter markets, offshore crypto exchanges, and other services that provide workarounds to the draconian Chinese government.
China has long sought to establish the yuan as a challenger to the US dollar, but the current Trump administration’s policy to empower private issuers of digital dollars will certainly undermine this ambition and help buttress the US dollar as the global reserve of choice.