Key Takeaways
- The People’s Bank of China has said that it considers stablecoins illegal under China’s crypto ban.
- The latest crackdown serves as a blow to Hong Kong’s stablecoin ambitions.
- Hong Kong-listed crypto stocks tumbled on Monday morning.
When Hong Kong launched its new stablecoin regime earlier this year, it was meant to usher in a new golden age of regulated crypto for greater China.
However, Beijing’s crypto ban continues to cast a shadow over the sector.
With the People’s Bank of China (PBOC) reaffirming its position on Friday, Nov. 28, any hopes of looser rules have been dashed, undermining Hong Kong’s stablecoin narrative.
Stablecoins Still Illegal
While Hong Kong operates under a different regulatory regime from the rest of China, some businesses have viewed the territory’s stablecoin framework as a potential door to the mainland market.
Retail giants JD.com and Ant Group are among those that have lobbied the central bank to greenlight yuan-backed stablecoins in Hong Kong.
Initially, there were some promising indicators that Beijing might be open to the prospect.
However, after meeting with other government departments on Friday, the PBOC insisted that it considers stablecoins to be illegal under China’s crypto ban.
Virtual currencies, including stablecoins, “do not hold the same legal status as fiat currency and cannot be used as legal tender in the market,” it said in a widely reported statement.
Crypto Stocks Sink
After the central bank in Beijing vowed to crack down on stablecoin activity, Hong Kong crypto stocks took a beating when markets opened on Monday.
As of 10 a.m. UTC, Yunfeng Financial Group was down more than 11% since Friday, while shares in OSL Group had declined by over five percent.
Crypto-adjacent stocks like Guotai Junan International, Bright Smart Securities and Commodities Group also suffered.
China Struggles to Enforce Crypto Ban
Despite Beijing’s tough language, more than four years after China moved to ban crypto, the country remains a hub for Bitcoin mining. Retail interest in digital assets has also stubbornly persisted.
For mainland investors, underground trading desks, VPN-routed trading flows, and proximity to Hong Kong’s more flexible market underpin a shadow crypto economy.
For Hong Kong, this creates a strategic dilemma.
As the territory attempts to build a regulated crypto ecosystem, its largest potential market is legally off-limits.
But in reality, traffic from the mainland drives significant demand, creating a point of friction with Beijing that threatens to hamper its stablecoin ambitions.
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James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
