China Regulators Declare Stablecoins Illegal Financial Activity

China's central bank, along with several key regulatory bodies, issued a stern warning on November 29 against virtual currencies, particularly stablecoins, declaring them illegal financial activities that threaten economic stability. The statement from the People's Bank of China (PBOC), joined by the Ministry of Public Security, Cyberspace Administration of China, Supreme People's Court, and other agencies, came after a high-level meeting and highlighted a recent uptick in cryptocurrency speculation.

The regulators emphasized that virtual currencies, including stablecoins pegged to fiat money, lack the legal status of legal tender and cannot be used as currency in the market. Stablecoins specifically fail to comply with mainland China's customer identification and anti-money laundering requirements, the PBOC stated, posing risks of money laundering, fraud, and unauthorized cross-border fund transfers. "Virtual currency-related business activities constitute illegal financial activities," the bank said, vowing to intensify crackdowns to safeguard financial order.

This renewed focus follows China's comprehensive ban on cryptocurrency trading and mining in 2021, which aimed to curb...