China’s Central Bank Slams Stablecoins as a ‘Threat,’ Vows Brutal Crackdown

China’s unrelenting crusade against cryptocurrencies has sharpened its focus, with the People’s Bank of China (PBoC) branding stablecoins a direct menace to global financial stability. Speaking at the 2025 Financial Street Annual Meeting in Beijing, Governor Pan Gongsheng unleashed a blistering critique, accusing these digital assets of fueling speculation and enabling crime, while doubling down on the state-controlled digital yuan (e-CNY) as the sole path forward for digital finance in China.

• PBoC’s Hardline Stance: Stablecoins endanger financial systems through speculation and weak anti-money laundering (AML) compliance.
• Escalated Crackdown: China intensifies its crypto ban while pushing the e-CNY as the only acceptable digital currency.
• Global and Geopolitical Risks: A $308 billion stablecoin market raises alarms worldwide, with USD dominance threatening China’s currency ambitions.

China’s War on Stablecoins: A Deepening Offensive

For those new to the crypto space, stablecoins are digital currencies pegged to traditional assets like the U.S. dollar, designed to avoid the rollercoaster volatility of Bitcoin or Ethereum. They’re essentially digital cash, widely used for trading, decentralized finance (DeFi), and cross-border payments. Heavyweights like Tether (USDT) and USD Coin (USDC) dominate a massive $308 billion market, according to DefiLlama data, processing over $27 trillion in settlements annually. When adjusted for artificial trading activity, transaction volumes still hit $9 trillion—over half of Visa’s global payment volume, as per research from Andreessen Horowitz. Their utility is undeniable, but so are the risks, and China is leading the charge to stamp them out, as highlighted in a recent report on PBoC’s stance against stablecoins.

Governor Pan Gongsheng didn’t hold back in Beijing, tearing into stablecoins as a critical weak spot in the global financial architecture.

“Stablecoins have amplified weaknesses in the global financial system,”

he asserted, pointing to their regulatory blind spots as a gateway for chaos.

“Stablecoins, as a form of financial activity, still cannot meet the basic requirements of financial supervision. They expose loopholes that can facilitate illegal fund transfers, terrorist financing, and money laundering.”

Pan’s condemnation is rooted in China’s long-standing hostility toward decentralized digital assets. Since 2017, the nation has outlawed crypto trading, mining, and exchange operations, citing financial instability, consumer harm, and rampant capital outflows. This latest salvo against stablecoins signals no retreat from that ironclad position.

“Virtual assets and their derivatives must never undermine financial stability or monetary sovereignty. The People’s Bank of China will continue to act decisively to safeguard economic and financial order,”

Pan warned. Translation: if it’s not under Beijing’s thumb, it’s not allowed. This isn’t just policy—it’s a declaration of war on anything that challenges state control over money.

But what does this mean for everyday users in China? Traders who once relied on stablecoins like USDT for quick, borderless transactions are now forced underground or out of the game entirely. Businesses leveraging these tokens for remittances or international payments face a stark choice: comply with the ban or risk severe penalties. China’s sledgehammer approach isn’t just about protecting the system—it’s about ensuring no one dares to bypass it.

Global Echoes: Are Stablecoins Really the Villain?

China isn’t alone in sounding the alarm. At the IMF and World Bank Annual Meetings in Washington, D.C., international regulators mirrored the PBoC’s concerns, highlighting stablecoins’ systemic risks and patchy compliance with anti-money laundering (AML) and know-your-customer (KYC) standards. For the uninitiated, AML and KYC are bedrock regulations meant to curb financial crime by ensuring transactions are transparent and users are verified. Stablecoins, often operating in murky legal territory, frequently dodge these rules, making them a potential haven for illicit activity—or so the narrative goes. With total transaction volumes reaching $46 trillion (though adjusted figures are lower), it’s no wonder governments are on edge.

Let’s not whitewash the flaws here. Stablecoins aren’t squeaky clean. Take Tether (USDT), for instance—back in 2021, the U.S. Commodity Futures Trading Commission (CFTC) slapped it with a $41 million fine for misleading claims about its dollar reserves. Questions still linger about whether some of these tokens are fully backed by real assets, and their heavy use in DeFi—think of it as a digital banking system run by code, not people—has fueled scams and rug pulls galore. But let’s flip the script for a moment. Aren’t these issues more about lagging regulations than the tech itself? Stablecoins empower underserved markets with fast, cheap transactions, often where traditional banking fails. Squashing them outright, as China aims to do, might kill the weeds but also razes the garden of innovation. Surely there’s a smarter way to tackle the bad actors without torching the potential.

Geopolitical Currency Clash: USD Dominance vs. Yuan Dreams

China’s vendetta against stablecoins isn’t just about financial order—it’s a high-stakes game of global influence. With USDT and USDC commanding nearly 87% of the stablecoin market, the U.S. dollar’s stranglehold on digital finance is a bitter pill for Beijing to swallow. Chinese economists, like former Bank of China deputy governor Wang Yongli, have been blunt about the implications for the yuan, also known as the renminbi.

The dominance of USD-pegged stablecoins “poses a strategic challenge” to the renminbi’s internationalization, warning that without competitive efficiency, China’s currency efforts could face “serious obstacles.”

Put simply, as digital trade grows, the yuan struggles to gain a foothold when everyone’s using dollar-backed tokens. This isn’t just about numbers—it limits China’s economic clout on the world stage. Beijing’s answer? Fast-track the e-CNY, a fully state-run digital currency, and explore options like an offshore yuan stablecoin through a less restrictive zone like Hong Kong. But can a government-controlled coin match the borderless agility of decentralized alternatives? Face it—state projects rarely scream “cutting-edge.”

Hong Kong’s Divergent Path: Innovation or Illusion?

While mainland China swings its regulatory hammer, Hong Kong is playing a different tune. In August, the Hong Kong Monetary Authority (HKMA) launched a groundbreaking stablecoin licensing regime, drawing interest from over 40 companies, including global players like Circle (issuer of USDC) and Standard Chartered, as well as local titans like Ant Group and JD.com. This positions Hong Kong as a budding digital asset hub, a glaring contrast to Beijing’s zero-tolerance stance.

But don’t get too excited—Beijing still pulls the strings. Both Ant Group and JD.com were forced to ditch their stablecoin plans in Hong Kong after the PBoC and Cyberspace Administration of China stepped in, making it painfully clear that private currency issuance won’t be tolerated, even in a semi-autonomous region. Regulators also ordered brokerages and think tanks to stop hyping stablecoins, branding them as hotbeds of fraud and speculation. So, is Hong Kong’s crypto-friendly facade just a mirage? It’s walking a tightrope—trying to innovate while under the ever-watchful eye of the mainland. If Beijing tightens the leash further, this experiment could collapse faster than a leveraged altcoin trade.

Digital Yuan vs. Decentralization: Control or Freedom?

At the heart of China’s strategy lies the digital yuan, or e-CNY, a centralized digital currency designed to counter the chaos of private stablecoins and cryptocurrencies. Unlike Bitcoin or USDT, the e-CNY operates through state-controlled wallets, with every transaction trackable by the government. It’s pitched as a “safe” alternative—no speculation, no illicit flows, just pure monetary sovereignty. But let’s cut through the noise: it’s also a surveillance dream. Privacy? Forget it. Every move you make with e-CNY can be monitored, a far cry from the anonymity Bitcoin maximalists like myself champion.

From Beijing’s view, that’s the appeal. The e-CNY ensures control, aligning with China’s obsession with order. Yet, can it compete with the efficiency of USDT or USDC in global markets? Early trials show clunky user experiences and limited international adoption—hardly the hallmarks of a game-changer. And here’s where Bitcoin could sneak in as the dark horse. China’s crackdown might inadvertently drive users to BTC as a censorship-resistant alternative, free from both stablecoin oversight and e-CNY tracking. Of course, Bitcoin’s price swings make it a tough sell as “stable” money, but its ethos of freedom could still win hearts in a world of increasing state overreach. Could this be an unexpected boost for decentralization? Or will volatility keep it on the sidelines?

Balancing Act: Regulation vs. Revolution

As a staunch advocate for decentralization, I’ll always root for tech that disrupts the rigged financial status quo. Stablecoins, despite their baggage, embody that rebellious spirit, offering alternatives to a banking system that’s failed millions. They’re not perfect—Tether’s opacity and DeFi’s scam-riddled underbelly are real problems. But China’s blanket bans and authoritarian tactics aren’t the answer. They’re using a flamethrower to snuff out a candle, incinerating innovation alongside the risks. Compare this to other regions: Europe’s MiCA framework aims to regulate crypto with clear rules, while the U.S. debates stablecoin laws without outright prohibition. Hong Kong, too, is at least trying to carve a middle path, though Beijing’s shadow looms large.

Let’s play devil’s advocate for a second. China’s fears aren’t entirely baseless. A $308 billion stablecoin market with shaky oversight could spark systemic issues if a major player collapses—imagine a digital Lehman Brothers. And yes, illicit uses are a concern; money laundering via crypto isn’t fiction. But isn’t the solution smarter guardrails, not a wrecking ball? By crushing stablecoins, China risks alienating its own tech sector and driving talent offshore, while doing little to address the root causes of financial crime. Meanwhile, the clash between state control and decentralized ideals grows fiercer. Will China’s iron grip on digital money set a dangerous precedent for the globe, or will blockchain’s promise of freedom outpace the state’s reach?

Key Takeaways and Questions

• Why does China consider stablecoins a threat to financial stability?
  China views stablecoins as risky due to their role in speculation, lack of compliance with AML and KYC rules, and potential to enable crimes like money laundering and terrorist financing.
• What steps is China taking against stablecoins and cryptocurrencies?
  China is ramping up its long-standing ban on crypto activities, enforcing strict controls since 2017, while promoting the state-backed digital yuan (e-CNY) as the only sanctioned digital currency.
• How does Hong Kong’s stance on stablecoins differ from mainland China’s?
  Hong Kong is fostering a digital asset ecosystem with a new stablecoin licensing regime, attracting global firms, while mainland China maintains a total ban and blocks private issuance even in Hong Kong.
• Why are USD-backed stablecoins a geopolitical issue for China?
  Tokens like Tether (USDT) and USD Coin (USDC) reinforce U.S. dollar dominance in digital finance, undermining China’s push to internationalize the yuan and expand its global economic influence.
• Do stablecoins pose real dangers, or is China’s reaction overblown?
  Stablecoins carry genuine risks, including weak oversight and illicit use potential, but China’s all-out war ignores their value in fast, accessible finance, suggesting targeted regulation could better balance safety and innovation.
• Could China’s crackdown boost Bitcoin’s relevance?
  By stifling stablecoins and pushing the surveilled e-CNY, China might drive users toward Bitcoin as a decentralized, censorship-resistant option, though its volatility remains a hurdle for widespread adoption.