- China has ordered brokerages to stop stablecoin research after a surge in investor interest.
- Local governments are liquidating seized crypto assets to boost state revenue.
- Hong Kong platforms are helping China liquidate crypto under strict compliance rules.
Chinese regulators have directed major brokerages to halt publishing research or commentary endorsing stablecoins, aiming to slow the growing domestic interest in the assets. The instruction, issued in late July and reinforced earlier this month, follows a surge in investor inquiries since Hong Kong passed a stablecoin bill in May. Brokerages told Reuters that requests for stablecoin-related information had increased sharply despite China’s ban on cryptocurrency trading.
Bloomberg reported that financial regulators also instructed think tanks to cancel seminars related to stablecoins. This policy move continues Beijing’s long-standing stance that stablecoins such as Tether’s USDT pose systemic risks to the financial system and could be misused in illegal transactions.
PBOC Governor Pan Gongsheng said in June that the rapid growth of digital currencies and stablecoins creates major challenges for financial regulation. Shanghai authorities also reportedly held a closed meeting last month for local government officials to discuss potential responses to stablecoins and digital currency.
Judicial Use of Digital Assets
While public regulators restrict the promotion of stablecoins, China’s judiciary and local governments are quietly employing virtual assets in enforcement. In several provinces, officials have worked with private firms to liquidate confiscated cryptocurrencies and redirect the funds to public finances during the current economic slowdown.
Reports indicate that local governments collectively hold around 15,000 Bitcoin, valued at approximately US$1.4 billion at the end of 2023. These holdings are largely the result of criminal seizures and fraud-related enforcement actions, with authorities often repurposing the assets to compensate victims or support state resources without reintroducing banned trading activity into the domestic market.
China’s Supreme People’s Court has engaged legal scholars to establish clear procedures for handling digital asset disputes. According to court statements, the discussions focus on secure storage, transparent valuation, and liquidation processes for seized cryptocurrencies. District-level courts are also calling for unified guidelines to ensure consistent handling of crypto assets across jurisdictions.
Related: China’s Stablecoin Push Challenges U.S. Dollar Dominance
Hong Kong as a Liquidation Gateway
Internationally, Hong Kong is serving as the primary channel for China’s seized-crypto disposals. Authorities are reportedly using licensed platforms in the territory to convert confiscated assets into cash. This approach aligns with Hong Kong’s 2025 Stablecoin Ordinance, the 2022 Anti-Money Laundering and Counter-Terrorist Financing (AMLO) reforms, and the LEAP Digital Assets Policy 2.0 framework.
By conducting liquidations through Hong Kong, Beijing maintains regulatory control over transactions while benefiting from access to international liquidity pools. Licensed operators in Hong Kong ensure that conversions meet anti-money laundering requirements and provide a compliant pathway for state-directed digital asset sales.
This parallel track—restricting domestic stablecoin activity while exploiting crypto assets—has led analysts to question whether China’s long-term objective is a complete ban or a state-controlled crypto utility. Could China’s true strategy be to centralize digital asset use under government oversight rather than eliminate it entirely?
