- Stablecoin risks highlighted by Shenzhen on July 7.
- Tech giants lobby for yuan-based tokens.
- No immediate market shifts or sanctions reported.
The Shenzhen Office’s alert aims to curb illegal financial activities by addressing stablecoin risks. This could signal tighter regulations in the future.
The Office of the Special Working Group for Preventing and Combating Illegal Financial Activities has warned about the threats posed by stablecoins, detailing how these assets contribute to illegal fundraising and fraud. This move suggests a potential tightening of regulations, echoing past Chinese actions against cryptocurrency.
“These entities exploit new concepts such as stablecoins to hype up so-called investment projects involving ‘virtual currencies,’ ‘virtual assets,’ and ‘digital assets.’ They engage in false public advertising to solicit funds from the public, giving rise to illegal activities such as fundraising, gambling, fraud, pyramid schemes, and money laundering.”
Tech leaders like JD.com and Ant Group are urging the central bank to authorize yuan-based stablecoins to counter U.S. dollar-backed assets. They are advocating for changes in cryptocurrency regulation, targeting USDT and USDC due to their usage in grey-market transactions.
The warning specifically targets US dollar-pegged stablecoins, focusing on their prevalence in grey-market networks. While the tech industry calls for yuan-backed alternatives, no immediate funding reallocations or institutional shifts have been observed.
Past regulatory actions in China, such as the 2017 ICO ban, illustrate the potential for similar restrictive measures following these warnings. This might affect platforms reliant on stablecoin liquidity.
Potential outcomes may see tightening regulations and increased scrutiny. Although no direct enforcement actions have been cited, companies may face significant shifts if yuan-backed tokens gain approval.
