Chinese regulators have expanded their crackdown on crypto activities, imposing strict supervision over tokenization and the issuance of stablecoins in a notice on Friday.
“Recently, influenced by various factors, speculative activities related to virtual currencies and tokenization of real-world assets have occurred frequently, posing new challenges and situations for risk prevention and control,” said the notice, jointly issued by eight national organizations including the People’s Bank of China (PBOC) and the China Securities Regulatory Commission (CSRC).
The notice reiterates China’s blanket ban on cryptocurrencies, saying that trading, issuing or facilitating transactions involving digital currencies such as bitcoin ether or stablecoins like Tether’s USDT It’s illegal.
The ban extends to foreign entities and individuals offering such services within China. It also prohibits domestic entities from issuing digital currencies abroad without regulatory approval.
The notice singles out stablecoins (cryptocurrencies pegged to fiat currencies) for special scrutiny. Authorities argue that stablecoins replicate key functions of sovereign money and therefore threaten monetary control.
The new rules make clear that no entity, Chinese or foreign, can issue a renminbi-pegged stablecoin abroad without government approval. That includes foreign branches of domestic companies.
The rules also tighten control over tokenization, the rapidly growing trend of converting ownership of real-world assets such as stocks, real estate or funds into digital tokens.
Chinese companies that want to tokenize overseas assets must now obtain approvals or apply to regulators, and their financial and technology partners must meet stricter compliance standards, according to the notice.
China’s crackdown on cryptocurrencies and related activities has been a staple in recent years. The new set of rules is based on the fact that Chinese authorities in 2021 will consider all commercial activities related to cryptocurrencies illegal and will ban cryptocurrency mining, often called the “China ban.” In 2017, authorities banned Initial Coin Offerings (ICOs), calling them illegal fundraising and financial fraud, and ordered domestic cryptocurrency exchanges to shut down fiat-to-crypto trading operations.
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