While the Chinese crypto community is thriving, the government is building high walls. On November 29, the People's Bank of China announced another major development in its crackdown on virtual currencies (cryptocurrencies), stating that more than ten ministries participated in a closed-door meeting and declared that the crypto ban established in 2021 would not only remain in effect but would be further tightened.
Faced with a warming attitude from the United States toward crypto assets after Trump's return to the White House, Beijing has chosen to build walls inward, for a clear reason: to prevent capital from flowing out.
Crackdown escalates, old bans face new challenges
The official name for this operation is the "Coordination Mechanism for Combating Virtual Currency Trading and Speculation." The meeting was of high caliber, with the People's Bank of China leading the effort, and relevant officials from the Ministry of Public Security, the Cyberspace Administration of China, the Central Financial Stability and Development Office, the Supreme People's Court, the Supreme People's Procuratorate, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Justice, the People's Bank of China, the State Administration for Market Regulation, the State Financial Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange in attendance.
This reflects the anxiety of Chinese regulators about the "resurrection" of cryptocurrencies. According to an analysis of China's crackdown on cryptocurrencies and its impact on the global market, although exchanges have gone overseas and mining farms have moved over the past four years, over-the-counter (OTC) trading and cross-border money laundering have continued to emerge, leading officials to believe that the existing restrictions still need to be strengthened.
This joint operation by various agencies, encompassing the parallel efforts of fund flows, law enforcement, and information control, demonstrates that China's efforts to curb the use of cryptocurrencies by the public are considered a "financial defense war."
Stablecoins become the primary target
The initial focus of the crackdown is on USD-denominated stablecoins such as Tether (USDT). To Chinese regulators, these tokens are like cash disguised with blockchain technology, allowing them to bypass foreign exchange controls and create a fast track for capital flight.
At the opening ceremony of the 2025 Financial Street Forum Annual Meeting in October, Pan Gongsheng, Governor of the People's Bank of China, stated frankly that stablecoins lack a sound anti-money laundering mechanism and are easily exploited by criminal groups.
Earlier this year, a Beijing court adjudicated a money laundering case involving 166 million yuan, in which the defendant transferred funds overseas using USDT. For exporters and asset hedgers, stablecoins have become a direct channel, but this has also crossed the red line set by the authorities to stabilize the foreign exchange market.
Domestic containment, Hong Kong trial
Beijing is simultaneously promoting a renminbi-denominated stablecoin and a digital renminbi (e-CNY) in an attempt to squeeze out the underground market with regulated official products, while Hong Kong in the south is moving towards "controlled opening up".
Hong Kong's Stablecoin Issuer Regulation, which came into effect in August, allows licensed institutions to operate within a sandbox. While pursuing two paths simultaneously may seem contradictory, it is actually a carefully orchestrated separation. Maintaining high pressure domestically and limited testing overseas allows the RMB to participate in global settlements through offshore venues while ensuring that risks do not flow back into the mainland. At least in terms of the widespread adoption of financial technology, China does not intend for other countries to lead the way.
The Currency Sovereign Game
Zooming out, the background is the Trump administration's crypto-friendly "second term." Washington's policy shift has given the dollar the opportunity to accelerate its global circulation through cryptocurrencies, while Beijing's response is to consolidate its ultimate control over the issuance and flow of currency.
If stablecoins become rampant within a country, it means that the country loses control over highly liquid capital and its ledger.
Chinese authorities want Bitcoin and cryptocurrencies, but the core of their control has never been about Bitcoin's price fluctuations, but rather who controls the power to issue and clear currency. Chinese crypto investors are once again reminded that the wall is still there, and will only grow thicker in the short term.
