China tightens crackdown on virtual currency speculation

China has vowed to intensify its crackdown on virtual currency speculation, with the central bank making its clearest statement to date that stablecoins fall within the scope of illegal financial activities, bringing them further under the onshore monitoring and enforcement framework.

At Friday's meeting of the interagency mechanism for combating virtual currency trading and speculation, attended by representatives from the People's Bank of China (PBOC), the Ministry of Public Security, the Office of the Central Cyberspace Affairs Commission and other agencies, officials warned that there has been a recent resurgence in speculative trading that brings new risks and challenges.

It was reiterated at the meeting that virtual currencies have no legal status equivalent to fiat money and "must not be used in the market as currency". All related activities are deemed illegal financial activity.

The PBOC stressed that, as a form of virtual currency, stablecoins currently fail to meet requirements for customer identification and anti–money laundering safeguards, and could be used for fraud, money laundering and illicit cross-border fund transfers.

Authorities pledged to keep risk prevention at the core of financial work, uphold China's ban on virtual currency activities and strengthen coordination, information sharing and enforcement to safeguard financial stability and protect the public.

Speaking publicly in late October, Pan Gongsheng, governor of the PBOC, said that although stablecoins issued by market institutions have continued to emerge in recent years, the sector remains in its early stages of development.

He noted that international financial organizations and central banks generally take a cautious attitude toward stablecoins due to potential risks.