- China orders an end to stablecoin activities.
- Impacts domestic research and global crypto flows.
- Reflects ongoing regulatory caution in China.
In a rapid policy reversal, Chinese regulators have ordered a halt to all domestic stablecoin research and promotion activities, impacting prominent financial institutions and think tanks across China.
The directive underscores China’s strict oversight of cryptocurrencies, potentially affecting stablecoin markets and associated assets, with immediate implications for firms previously exploring stablecoin projects.
Chinese regulators have issued a directive to cease all stablecoin research and promotional activities. This comes after a cautious exploration phase by financial institutions.
Domestic firms, brokerages, and think tanks are involved in this directive. This marks a reversal from previous regulatory caution around stablecoins.
The immediate market impact includes potential outflows from Chinese associated DeFi protocols. Stablecoins pegged to the US dollar or yuan face significant restrictions. Market sentiment may shift due to decreased local innovation.
The directive could affect funding and projects related to stablecoins. Past government actions like the 2017 exchange ban saw temporary declines before markets adjusted.
Stablecoins, such as USDT and USDC, are directly impacted. Indirect effects may spread to Bitcoin and Ethereum due to their use in cross-border flows. Market volume and TVL in China-associated entities might decline.
Insights on regulatory effects suggest historical trends of rapid market disruption followed by stabilization. Future technological outcomes could include redirection of resources to alternative digital asset classes within China.
Policymakers are trying to avoid herd mentality from inexperienced investors who may not understand the crypto risks. — Christopher Wong, Currency Strategist, Oversea-Chinese Banking Corp.
