Wang Yongli: Why did China resolutely halt stablecoins?

China is accelerating the development of the digital RMB and has made its policy stance of resolutely curbing virtual currencies, including stablecoins, completely clear. This is a comprehensive consideration based on multiple factors, such as China’s global leading advantage in mobile payments and the digital RMB, RMB sovereign security, and the stability of the monetary and financial system.

Written by: Wang Yongli, former Vice President of Bank of China

Since May 2025, the United States and Hong Kong have been competing to advance stablecoin legislation, sparking a global wave of legislation for stablecoins and crypto assets (also called "cryptocurrencies" or "virtual currencies"). Numerous institutions and capital are flocking to issue stablecoins and invest in crypto assets. This has also triggered heated debate in China over whether the country should fully promote stablecoin legislation and the development of RMB stablecoins (including offshore RMB stablecoins). Furthermore, after the US legislated to prohibit the Federal Reserve from issuing a digital dollar, whether China should continue to advance the digital RMB has also become a hot topic of debate.

For China, this involves the direction and path of national currency development. In the context of the global spread of USD stablecoins, increasingly sharp and complex international relations, and more intense international monetary competition, how to innovate and develop the RMB while safeguarding national security and achieving the strategic goal of a strong currency and financial power has a huge and far-reaching impact. It is necessary to calmly analyze, accurately grasp, and make early decisions—neither remaining indifferent or hesitant, nor blindly following the trend and making fundamentally disruptive mistakes.

Subsequently, the People’s Bank of China announced that it would optimize the positioning of the digital RMB within the monetary hierarchy (adjusting the previously determined M0 positioning. The author has repeatedly called for this from the very beginning; see Wang Yongli’s WeChat public account, January 6, 2021, "The Digital RMB Should Not Be Positioned as M0"), further optimize the digital RMB management system (establishing a digital RMB International Operations Center in Shanghai, responsible for cross-border cooperation and use of the digital RMB; establishing a digital RMB Operations Management Center in Beijing, responsible for the construction, operation, and maintenance of the digital RMB system), and promote and accelerate the development of the digital RMB.

On November 28, the People’s Bank of China and 13 other departments jointly held a meeting of the coordination mechanism for cracking down on virtual currency trading and speculation. The meeting pointed out that, due to various factors, speculation in virtual currencies has recently rebounded, related illegal and criminal activities occur from time to time, and risk prevention and control face new situations and challenges. It emphasized that all units should deepen coordination and cooperation, continue to adhere to the prohibitive policy on virtual currencies, and continue to crack down on illegal financial activities related to virtual currencies. It was made clear that stablecoins are a form of virtual currency, and their issuance, trading, and other business activities are also illegal and subject to crackdown. This has greatly disappointed those who believed that China would promote the development of RMB stablecoins and accordingly relax the ban on virtual currency (crypto asset) trading.

Thus, China’s policy orientation of accelerating the development of the digital RMB and resolutely curbing virtual currencies, including stablecoins, has become completely clear. Of course, this policy orientation is still the subject of intense debate both domestically and internationally, and people’s understanding is not unified.

So, how should we view this major policy orientation of China?

Here, I will first answer why China has resolutely halted stablecoins. How to accelerate the innovative development of the digital RMB will be discussed in another article.

There Is Little Room or Opportunity for the Development of Non-USD Stablecoins

Since Tether launched the USD-pegged stablecoin USDT in 2014, USD stablecoins have been operating for more than a decade, forming a complete international operating system and basically occupying the entire crypto asset trading market. Their share of the global fiat stablecoin market capitalization and trading volume both exceed 99%.

This situation has arisen, on the one hand, because the US dollar is the world’s most liquid and best-supported international central currency, and USD-pegged stablecoins are the easiest to be accepted globally. On the other hand, it is also the result of the United States’ long-term tolerant policy towards bitcoin and other crypto assets and USD stablecoins, rather than leading the international community in strengthening necessary regulation to safeguard the fundamental interests of all humanity. Even this year, as the US promotes legislation on stablecoins and crypto assets, it is mainly because USD stablecoins are believed to increase global demand for the dollar and US Treasury bonds and other dollar assets, reduce the financing costs of the US government and society, and strengthen the dollar’s international dominance. Supporting and controlling USD stablecoins is a choice made to maximize national interests, with little consideration for controlling the international risks of stablecoins.

With the US vigorously promoting USD stablecoins, it is now very difficult for other countries or regions to launch non-USD fiat stablecoins. Except for some market space and opportunities within the sovereign scope of the fiat currency or on the issuing institution’s own e-commerce platform, it is hard to compete with USD stablecoins internationally, and the development space and practical significance are limited. Lacking a strong ecosystem and application scenario support, without obvious advantages over USD stablecoins or the ability to attract traders and trading volume, the input-output ratio for issuing non-USD fiat stablecoins is unlikely to meet expectations, and it will be difficult to survive as countries tighten legislation and regulation.

US Stablecoin Legislation Still Faces Many Problems and Challenges

After US President Trump’s second successful election, his strong advocacy for bitcoin and other crypto assets has fueled a new international boom in crypto asset trading and speculation, driving rapid growth in USD stablecoin trading and a rapid expansion of stablecoin market capitalization. This has not only increased demand for the dollar and US Treasury bonds, strengthening the dollar’s international status, but also brought huge profits to the Trump family and their crypto circle friends. However, it has also brought new shocks to the global circulation monitoring of the dollar and the stability of the US traditional financial system. At the same time, crypto asset trading and transfers supported by USD stablecoins have become a new type of wealth-harvesting machine for the US that is harder to guard against, posing serious threats to other countries’ monetary sovereignty and wealth security.

For this reason, the US has accelerated legislation on USD stablecoins, but its legislation is more about insisting on America First and maximizing US or group interests, even at the expense of other countries’ interests and the common interests of the world.

After the USD stablecoin legislation takes effect, institutions that have not been approved by US regulators and obtained operating licenses will find it difficult to issue and operate USD stablecoins in the US (for this reason, Tether has announced it will apply to issue USDT for the US market). Stablecoin issuers subject to US regulation must meet regulatory requirements such as Know Your Customer (KYC), Anti-Money Laundering (AML), and Anti-Terrorism Financing (FTC), be able to screen customers against government watchlists and report suspicious activity to regulators, and their systems must be able to freeze or intercept specific stablecoins when ordered by law enforcement. Issuing stablecoins requires holding no less than 100% of regulator-approved USD assets (including cash assets, short-term Treasury bonds, Treasury-backed repurchase agreements, etc.) as reserves, and US customer funds must be kept in US banks and not transferred overseas. It is forbidden to pay interest or returns on stablecoins, over-issuance and proprietary manipulation of stablecoins are strictly controlled, reserve assets must be held by independent institutions recognized by regulators, and must be audited and have audit reports published at least monthly. This will greatly enhance the value stability of stablecoins relative to the dollar, strengthen their payment function and compliance, and weaken their investment attributes and illegal use; it will also significantly increase the regulatory cost of stablecoins and correspondingly reduce their profitability in an unregulated state.

US stablecoin legislation officially took effect on July 18, but there are still many problems and challenges: although the range of reserve assets for issuing stablecoins is specified (bank deposits, short-term Treasury bonds, Treasury-backed repurchase agreements, etc.), since these mainly include types such as Treasury bonds whose market prices fluctuate, even if reserves are sufficient at issuance, a subsequent drop in Treasury prices could lead to insufficient reserves; if the reserve asset structures of different issuers are not identical and there is no central bank backstop, the USD stablecoins they issue are not the same, creating arbitrage opportunities and posing challenges for regulation and market stability; even if there is no over-issuance at issuance, if decentralized finance (DeFi) is allowed to engage in stablecoin lending, stablecoin derivatives and over-issuance may still arise, unless it is purely matchmaking between borrowers and lenders and not proprietary; requiring non-financial-institution stablecoin issuers to meet regulatory requirements is not easy, and regulation itself faces great challenges, etc.

More importantly, the earliest and most fundamental demand for stablecoins is for pricing and settlement in 24/7 borderless, decentralized blockchain crypto asset trading. Because bitcoin and other crypto assets cannot meet the basic requirement for money as a measure of value and value token—that the total money supply must be able to change in line with the total value of tradable wealth requiring monetary pricing and settlement, thereby maintaining basic currency stability—their prices fluctuate sharply relative to fiat currencies (so using bitcoin and other crypto assets as collateral or strategic reserves carries great risk), making them difficult to become true circulating currencies. This gave rise to fiat stablecoins pegged to fiat currencies. (Therefore, bitcoin and others are only crypto assets, and calling them "cryptocurrencies" or "virtual currencies" is inaccurate; translating the English "Token" as "coin" or "token" is also inappropriate—it should be transliterated as "Tongzheng" and clearly defined as an asset, not a currency.) The emergence and development of fiat stablecoins has brought fiat currencies and more real-world assets (RWA) on-chain, strongly supporting on-chain crypto asset trading and development, and becoming a channel connecting the on-chain crypto world and the off-chain real world. This has strengthened the integration and influence of the crypto world on the real world, greatly enhancing the scope, speed, scale, and volatility of global wealth financialization and financial transactions, and accelerating the transfer and concentration of global wealth to a few countries or groups. In this situation, without strengthening global joint regulation of stablecoin and crypto asset issuance and trading, the risks are enormous and extremely dangerous. For this reason, the stablecoin and crypto asset boom vigorously promoted by the Trump administration has already produced huge bubbles and potential risks and is unsustainable. The international community needs to be highly vigilant!

Stablecoin Legislation May Seriously Backfire on Stablecoins

An outcome beyond the expectations of stablecoin legislation is that, once fiat stablecoins are brought under legislative regulation, it will inevitably drive the legislative regulation of crypto asset trading that uses fiat stablecoins for pricing and settlement, including both on-chain assets such as bitcoin and real-world assets (RWA) running on-chain. This will have a profound impact on stablecoins.

Before crypto assets are brought under legislative regulation and compliance protection, licensed financial institutions such as banks cannot directly participate in crypto asset trading, settlement, custody, and related activities, leaving opportunities to private organizations outside the financial sector. Due to the lack of regulation and regulatory costs, existing stablecoin issuers and crypto asset trading platforms have become highly profitable and attractive organizations, increasingly impacting banks and the financial system, forcing governments or monetary authorities such as the US to accelerate stablecoin legislative regulation. However, once crypto assets are brought under legislative regulation and compliance protection, banks and other financial institutions will certainly participate fully. Payment institutions such as banks can directly promote on-chain operation of fiat deposits (deposit tokenization), which can completely replace stablecoins as the new channel and hub connecting the crypto world and the real world. Existing exchanges for financial products such as stocks, bonds, money market funds, and ETFs can also promote these relatively standardized financial products to be traded on-chain as RWAs. Having sufficiently regulated banks and other financial institutions as the main bodies for on-chaining and connecting the crypto world and the real world is more conducive to implementing current legislative regulatory requirements for stablecoins, enforcing the principle of "same business, same regulation" for all institutions, and reducing the impact and risk of crypto asset development on the existing monetary and financial system. This trend has already emerged in the US and is rapidly strengthening and becoming unstoppable.

Thus, stablecoin legislation may seriously backfire on or even overturn stablecoins (see Wang Yongli’s WeChat public account, September 3, 2025, article "Stablecoin Legislation May Seriously Backfire on Stablecoins").

In this situation, it is not a reasonable choice for other countries to imitate the US and fully promote stablecoin legislation and development.

China Cannot Follow the US Path on Stablecoins

China already has a global leading advantage in mobile payments and the digital RMB. Promoting RMB stablecoins domestically has no advantage, and internationally there is little room for development or influence. China should not follow the path of USD stablecoins or fully promote the development of both onshore and offshore RMB stablecoins.

More importantly, bitcoin and other crypto assets and stablecoins can use borderless blockchains and crypto asset trading platforms to achieve global 24/7 uninterrupted trading and settlement. Although efficiency is greatly improved, the highly anonymous, high-frequency, and efficient global flows, lacking coordinated international regulation, also make it difficult to meet KYC, AML, FTC, and other regulatory requirements. There are obvious risks and real cases of being used for money laundering, fundraising fraud, and illegal cross-border fund transfers. With USD stablecoins already dominating the crypto asset trading market, and the US having greater control or influence over major global blockchain operating systems, crypto asset trading platforms, and crypto asset-to-USD exchanges (the US can trace, identify, freeze, and confiscate the crypto asset accounts of certain institutions and individuals, and can punish or even arrest some crypto asset trading platforms and their leaders, as evidence), if China follows the path of USD stablecoins to develop RMB stablecoins, it will not only be unable to challenge the international status of USD stablecoins, but may even make RMB stablecoins a vassal of USD stablecoins, impacting national tax collection and administration, foreign exchange management, and cross-border capital flows, and posing serious threats to RMB sovereign security and the stability of the monetary and financial system. Faced with an increasingly sharp and complex international situation, China should place national security in a prominent position, be highly vigilant and strictly guard against speculation in crypto assets, including stablecoins, and not simply pursue efficiency improvements and cost reductions. It is necessary to accelerate the improvement of relevant regulatory policies and legal bases, focus on key links such as information flow and capital flow, strengthen information sharing among relevant departments, further enhance monitoring and tracking capabilities, and severely crack down on illegal and criminal activities involving crypto assets.

Of course, while resolutely halting stablecoins and cracking down on virtual currency trading and speculation, it is also necessary to accelerate the innovative development and widespread domestic and international application of the digital RMB, form an internationally leading advantage for the digital RMB, blaze a path for digital currency development with Chinese characteristics, and actively explore the establishment of a fair, reasonable, and secure new international monetary and financial system.

Based on the comprehensive consideration of the above factors, it is not difficult to understand why China has chosen to resolutely curb virtual currencies, including stablecoins, while firmly advancing and accelerating the development of the digital RMB.