The regulators of China have now tightened control for digital assets and have prohibited the unauthorised issuance of yuan-pegged stablecoins overseas and widened the prohibition to real-world assets associated with the currency of the country.
On February 6, the People’s Bank of China (PBOC), with seven government agencies, released a joint statement stating that individuals and companies, domestic or foreign, may not issue renminbi-linked stablecoins without having official approval.
The regulators said that such tokens imitate prominent functions of money and could intimidate monetary sovereignty. Stablecoins attached to fiat currencies do some of the functions of fiat currencies, as per the notice.
The notice also warned that circulation outside regulatory oversight could reduce the stability of the yuan. The rules also aim at services associated with tokenised financial assets, comprising blockchain-based representations of bonds or equities.
What Does the Ban Further Comprise?
Overseas bodies are not allowed to offer associated products to users inside China if they lack permission from regulators. Beijing acknowledged its established position on crypto payments, confirming that assets like Bitcoin and ETH do not have legal tender status and that easing transactions or associated services includes illegal activity.
The policy created a sweeping ban rolled out by the central bank in 2021 that successfully eliminated crypto trading and payments from the domestic financial system. A legal polymath and ex-sovereign wealth fund official, Winston Ma, stated that the prohibition is applied to both onshore and offshore versions of the renminbi.
The offshore yuan, called CNH, is made for foreign exchange flexibility along with keeping capital controls. The steps seem to suit a broader strategy of prohibiting privately issued digital currencies while boosting the state-backed digital yuan.
China has spent many years developing an e-CNY central bank digital currency, and not long ago, it permitted commercial banks to share interest with users holding digital yuan wallets to boost adoption.
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