Wang Yongli: Why has China resolutely halted stablecoins?
TechFlow Selected TechFlow Selected
Wang Yongli: Why has China resolutely halted stablecoins?
China has clearly accelerated the development of digital RMB and firmly established its policy stance to curb virtual currencies, including stablecoins. This decision is based on a comprehensive consideration of multiple factors, such as China's leading global position in mobile payments and digital RMB, the sovereignty and security of the RMB, and the stability of its monetary and financial system.
Navigating Web3 tides with focused insightsAuthor: Wang Yongli
Since May 2025, the United States and Hong Kong have been racing to advance stablecoin legislation, triggering a global surge in legislative efforts around stablecoins and crypto assets (also referred to as "cryptocurrencies" or "virtual currencies"). A large number of institutions and capital are rushing to issue stablecoins or invest in crypto assets. This has sparked heated debate over whether China should actively promote stablecoin legislation and the development of RMB-based stablecoins (including offshore versions). Meanwhile, after U.S. legislation banned the Federal Reserve from issuing digital dollars, controversy has intensified over whether China should continue advancing its digital RMB initiative.
For China, this involves fundamental decisions on the direction and path of national currency development. With dollar-backed stablecoins spreading globally, international relations becoming increasingly tense and complex, and competition among global currencies intensifying, how the RMB innovates and develops while safeguarding national security will profoundly impact China's strategic goals of building a strong currency and a powerful financial system. Decisions must be made promptly and accurately—neither ignoring the situation nor hesitating, but also avoiding blind trends that could lead to directional and catastrophic mistakes.
Subsequently, the People's Bank of China announced that it will optimize the positioning of digital RMB within the monetary hierarchy (adjusting its previous designation as M0—a point the author has consistently advocated since the beginning; see Wang Yongli’s WeChat Official Account article dated January 6, 2021, titled “Digital RMB Should Not Be Positioned as M0”) and further refine the management system for digital RMB (establishing an International Operations Center for Digital RMB in Shanghai responsible for cross-border cooperation and usage, and a Domestic Operations Management Center in Beijing responsible for system construction, operation, and maintenance), to promote and accelerate the development of digital RMB.
On November 28, a coordination meeting on combating virtual currency trading speculation was jointly convened by the People's Bank of China and 12 other departments. It pointed out that under multiple influencing factors, speculative activities involving virtual currencies have recently resurged, with related criminal offenses occurring from time to time, posing new situations and challenges for risk prevention and control. The meeting emphasized enhanced inter-agency collaboration and reiterated adherence to the prohibition policy on virtual currencies, continuing to crack down on illegal financial activities related to virtual currencies. It explicitly stated that stablecoins are a form of virtual currency, and their issuance, trading, and other business activities fall equally within the scope of illegality and enforcement actions. This dashed the hopes of those who believed China would promote RMB stablecoin development and lift restrictions on virtual currency (crypto asset) trading.
Thus, China's policy orientation—to accelerate digital RMB development while firmly curbing virtual currencies including stablecoins—has now become fully clear. Of course, this policy stance continues to spark intense debate both domestically and internationally, and consensus remains elusive.
So, how should we understand this major policy shift in China?
Here we first address why China has decisively halted stablecoins; discussion on accelerating innovation in digital RMB will be covered separately in another article.
Limited Room and Opportunity for Non-Dollar Stablecoins
Since Tether launched the USD-pegged stablecoin USDT in 2014, dollar-backed stablecoins have operated for over ten years, forming a complete international operating system and dominating the entire crypto asset trading market, accounting for over 99% of both market capitalization and transaction volume in global fiat-backed stablecoins.
This situation arises partly because the U.S. dollar is the world’s most liquid currency with the most comprehensive supporting infrastructure, making dollar-pegged stablecoins easiest to accept globally. It also results from long-standing U.S. tolerance toward Bitcoin and other crypto assets and dollar stablecoins, rather than leading international efforts to strengthen necessary regulation in defense of humanity’s fundamental interests. Even recent U.S. moves to legislate stablecoins and crypto assets are primarily driven by the belief that dollar stablecoins will increase global demand for U.S. dollars and U.S. Treasury bonds, reduce financing costs for the U.S. government and society, reinforce the dollar’s global dominance, and allow the U.S. to support and control potential shocks from stablecoins—all aimed at maximizing national self-interest, with little consideration for mitigating international risks posed by stablecoins.
Under such aggressive U.S. promotion of dollar stablecoins, it is extremely difficult for other countries or regions to launch non-dollar fiat stablecoins that can compete internationally. Outside their own sovereign jurisdictions or specific e-commerce platforms, such stablecoins have minimal room for growth or meaningful impact. Without strong ecosystem foundations or application scenarios, lacking distinct advantages over dollar stablecoins in attracting traders and transaction volumes, the return on investment for launching non-dollar fiat stablecoins is unlikely to meet expectations. Under tightening regulatory regimes worldwide, these initiatives will struggle to survive.
U.S. Stablecoin Legislation Still Faces Major Issues and Challenges
After President Trump’s successful re-election campaign, his strong endorsement of Bitcoin and other crypto assets reignited a new wave of global speculation and trading activity, rapidly boosting transactions and expanding market capitalization in dollar stablecoins. This increased demand for U.S. dollars and U.S. Treasury bonds, reinforcing the dollar’s international standing, while also generating massive gains for Trump’s family and his cryptocurrency allies. However, it has introduced new disruptions to monitoring U.S. dollar circulation globally and threatens the stability of America’s traditional financial system. Moreover, crypto asset transactions backed by dollar stablecoins have become a novel and hard-to-defend tool for the U.S. to extract global wealth, posing serious threats to other nations’ monetary sovereignty and financial security.
Because of this, the U.S. has accelerated stablecoin legislation—but this legislation prioritizes American interests above all, aiming to maximize benefits for the U.S. and its allied groups, often at the expense of foreign and global common interests.
Once U.S. stablecoin legislation takes effect, entities not approved by U.S. regulators and lacking operating licenses cannot legally issue or operate dollar stablecoins (for this reason, Tether has announced plans to apply in the U.S. for a U.S.-targeted version of USDT). Licensed issuers must comply with customer verification (KYC), anti-money laundering (AML), and counter-terrorism financing (CTF) requirements, screen customers against government watchlists, report suspicious activities, and enable systems to freeze or intercept specific stablecoins upon law enforcement orders. Stablecoin reserves must be fully backed (at least 100%) by dollar-denominated assets recognized by regulators—including cash deposits, short-term Treasuries, and repo agreements collateralized by Treasuries—with U.S. customer funds held in U.S. banks and prohibited from being transferred overseas. Issuers may not pay interest or returns on stablecoins, must strictly prevent over-issuance and self-managed manipulation, hold reserves in custody with independent third parties approved by regulators, and undergo monthly audits by auditors whose reports must be published regularly. These measures significantly enhance value stability relative to the dollar, strengthen payment functionality and compliance, weaken investment attributes and illicit use, greatly raise regulatory costs, and correspondingly reduce the supernormal profits previously enjoyed in unregulated environments.
U.S. stablecoin legislation officially took effect on July 18, yet still faces numerous problems and challenges: Although reserve asset categories are defined (bank deposits, short-term Treasuries, Treasury-backed repos, etc.), since they include instruments like Treasuries whose prices fluctuate, even initially sufficient reserves may become inadequate if Treasury prices fall later. If different issuers hold structurally different reserve portfolios without central bank backstops, their respective dollar stablecoins will effectively differ, creating arbitrage opportunities and challenging market stability and oversight. Even if stablecoins themselves aren’t over-issued initially, allowing decentralized finance (DeFi) platforms to lend stablecoins could generate derivative issuance and over-expansion unless strictly limited to peer-to-peer matching without proprietary operations. Requiring non-financial institutions to meet stringent regulatory standards is inherently difficult, presenting significant supervisory challenges.
More importantly, the original and most basic need for stablecoins emerged from the requirement for borderless, decentralized, 7x24-hour pricing and settlement of blockchain-based crypto assets. Because Bitcoin and similar crypto assets fail to fulfill the core monetary functions—particularly serving as a stable unit of account and medium of exchange—they cannot maintain price stability as required for tracking the total value of tradable real-world wealth, resulting in extreme volatility against legal tender (thus, using Bitcoin or similar assets as collateral or strategic reserves carries substantial risk). This inherent instability gave rise to fiat-backed stablecoins pegged one-to-one with legal currencies (hence, Bitcoin and others are properly classified as crypto assets; calling them “cryptocurrencies” or “virtual currencies” is inaccurate; translating the English term “Token” as “coin” or “token” is also inappropriate—it should be transliterated as “tongzheng,” clearly indicating an asset rather than money). The emergence and development of fiat stablecoins have brought legal tender and more real-world assets (RWA) onto blockchains, strongly supporting on-chain crypto asset trading and development, acting as bridges between the on-chain digital world and off-chain reality, thereby enhancing integration and influence of the digital world over the real economy. This will dramatically expand the scope, speed, scale, and volatility of global financialization and financial transactions, accelerating the transfer and concentration of global wealth into the hands of a few nations or groups. Under these conditions, failing to strengthen global coordinated regulation over the issuance and trading of stablecoins and crypto assets poses enormous and dangerous risks. Precisely for this reason, the surge in stablecoin and crypto asset development driven by the Trump administration has already created a massive bubble and latent dangers, rendering it unsustainable—and the international community must remain highly vigilant!
Stablecoin Legislation Could Severely Backfire on Stablecoins
An outcome beyond the intended scope of stablecoin legislation is that once fiat stablecoins are brought under legal regulation, it will inevitably extend legislative oversight to crypto asset transactions priced and settled in fiat stablecoins—including blockchain-native assets like Bitcoin and tokenized real-world assets (RWA)—which will profoundly affect stablecoins themselves.
Prior to legal recognition and regulatory protection for crypto assets, licensed financial institutions such as banks were unable to directly participate in crypto-related activities like trading, clearing, and custody. As a result, these opportunities were ceded to private organizations outside the traditional financial sector. Due to lack of regulation and low compliance costs, existing stablecoin issuers and crypto trading platforms became highly profitable ventures, increasingly disrupting banks and the broader financial system, forcing governments like the U.S. to accelerate stablecoin regulation. However, once crypto assets gain legal status and regulatory safeguards, banks and other financial institutions will inevitably enter the space aggressively. In particular, payment institutions like banks can directly facilitate on-chain operation of fiat deposits (deposit tokenization or “deposit tokenization”), fully replacing stablecoins as the new conduit and hub linking the crypto world with the real economy. Similarly, established exchanges for stocks, bonds, money market funds, ETFs, and other standardized financial products can move more of these regulated instruments onto blockchains as RWAs. Having sufficiently regulated banks and financial institutions serve as the main actors connecting on-chain and off-chain worlds makes it easier to implement current stablecoin regulations and uphold the principle of “same business, same regulation” across all institutions, reducing disruption and risks to the existing monetary and financial system. This trend has already begun in the U.S. and is rapidly gaining momentum, becoming unstoppable.
Therefore, stablecoin legislation may severely backfire or even dismantle the stablecoin model itself (see Wang Yongli’s WeChat Official Account article dated September 3, 2025, titled “Stablecoin Legislation May Severely Backfire on Stablecoins”).
In this context, it is not a rational choice for other countries to emulate the U.S. approach by aggressively pushing forward stablecoin legislation and development.
China Must Not Follow the U.S. Stablecoin Path
China already holds a globally leading position in mobile payments and digital RMB. Promoting RMB stablecoins domestically offers no advantage, and internationally there is little room for expansion or influence. China should absolutely not follow the U.S. path by aggressively promoting both onshore and offshore RMB stablecoins.
More importantly, Bitcoin and other crypto assets along with stablecoins can leverage borderless blockchains and crypto trading platforms to enable continuous 7x24 global trading and settlement. While efficiency improves significantly, the high degree of anonymity and rapid, seamless global flows—lacking coordinated international supervision—make it difficult to meet KYC, AML, and CTF regulatory requirements. There are clear risks and documented cases of misuse for money laundering, fundraising fraud, and unauthorized cross-border fund transfers. Given that dollar stablecoins already dominate the crypto trading landscape and the U.S. exerts greater control or influence over key blockchain infrastructures, crypto trading platforms, and dollar-crypto exchange mechanisms (evidenced by the U.S. ability to trace, freeze, and confiscate certain individuals’ and entities’ crypto holdings, or penalize and even arrest executives of crypto platforms), following the U.S. model to develop RMB stablecoins would not only fail to challenge the dominance of dollar stablecoins but could turn RMB stablecoins into mere satellites of dollar stablecoins. This would threaten tax collection, foreign exchange controls, cross-border capital flows, and pose serious risks to RMB sovereignty and the stability of China’s monetary and financial system. Facing increasingly acute and complex international dynamics, China must place national security at the forefront, remain highly vigilant against and strictly control speculation and trading in crypto assets including stablecoins, rather than simply pursuing higher efficiency and lower costs. It is essential to accelerate improvements in regulatory policies and legal frameworks, focus on critical areas such as information and capital flows, enhance inter-departmental data sharing, improve monitoring and tracking capabilities, and severely punish illegal and criminal activities involving crypto assets.
Of course, while firmly halting stablecoins and cracking down on virtual currency speculation, China must simultaneously accelerate innovation and broad domestic and international adoption of digital RMB, establishing a globally leading edge in digital RMB, forging a unique Chinese path in digital currency development, and actively exploring the creation of a fair, sound, and secure new international monetary and financial system.
Taking all these factors into account, it becomes clear why China has chosen to firmly suppress virtual currencies—including stablecoins—while resolutely advancing and accelerating the development of digital RMB.
About the Author
Wang Yongli, Ph.D. in Economics, Co-Chairman of DHC Technology Service Group Co., Ltd.
Former Vice President and Executive Director of Bank of China, directly overseeing the bank’s response to the U.S. subprime mortgage crisis and the global financial crisis, as well as leading the unification and optimization of BOC’s core systems; inaugural mainland Chinese director at SWIFT; Senior Vice President and CEO of LeEco Financial Services; Chief Economist at Shenzhen Neway Group; General Manager of China International Futures Co., Ltd.
He has conducted in-depth research and holds unique insights into financial accounting, monetary finance, international settlements, foreign exchange reserves, RMB internationalization, futures and derivatives, internet finance, cryptocurrencies and blockchain, and digital RMB, possessing extensive practical experience and theoretical expertise.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
