China Orders Brokers to Stop Promoting Stablecoins

• China halts stablecoin research and seminars amid concerns over financial risks.
• OTC crypto trading in China remains high despite strict bans and local risk warnings.
• Hong Kong advances stablecoin regulation, issuing licenses to key Chinese-backed firms.

Chinese authorities have quietly told local brokerages and financial institutions to stop promoting stablecoins, a move designed to cool the growing frenzy around the asset class, according to a Bloomberg report.

Regulators Move to “Cool the Hype”

In recent weeks, several top brokerages reportedly received informal “guidance” from financial regulators to cancel seminars and pull research reports on stablecoins. 

The move shows a growing concern that these assets are being used for illegal activities inside mainland China, though neither the China Securities Regulatory Commission nor the central bank have made any public comments.

But why the crackdown? Regulators are worried on the growing number of illicit activities spread. CoinEdition had reported on a crypto money laundering ring busted in China.

Christopher Wong, a currency strategist in Singapore, noted that Chinese policymakers prefer to avoid excessive hype to prevent a “herd mentality” among investors who don’t understand the risks.

China’s Booming Underground Market

This quiet crackdown comes even as over-the-counter (OTC) digital asset trading continues to thrive in China, despite a strict ban on crypto transactions. A recent estimate from Chainalysis indicated that this underground trading activity reached approximately $75 billion in the first nine months of 2024 alone.

The global stablecoin supply, often used for these transactions, is projected to grow to $3.7 trillion by 2030. This reality has prompted local authorities in several provinces to issue fresh risk warnings about illicit fundraising activities involving virtual currencies.

The Hong Kong Contradiction

China’s move to tighten control on the mainland presents a sharp contrast to the controlled experiment happening in Hong Kong. The city is actively building a regulated crypto hub, with several state-backed Chinese firms like CMB International Securities and Guotai Junan Securities receiving crypto licenses to operate there.

Meanwhile, in Hong Kong… The rules are completely different. Here’s Hong Kong’s new stablecoin licensing report.

This dual approach is happening as China’s own central bank governor, Pan Gongsheng, has publicly praised stablecoins’ potential to transform international finance, especially given rising geopolitical tensions in traditional payment systems.