China Renews Crackdown on Virtual Currency Activity

• PBOC issues new warning as crypto speculation rises despite China’s ongoing ban.
• China says stablecoins lack core compliance checks, increasing financial and legal risks.
• Agencies plan tighter monitoring of underground trading and cross-border crypto transfers.

China has issued a new warning over rising virtual currency activity, following a meeting on November 28 in Beijing between the People’s Bank of China and officials to address renewed speculation. The meeting involved law enforcement and regulatory agencies, which assessed new risks linked to digital assets. Officials said speculation increased again due to market changes and unlicensed activity, prompting a renewed call for tighter action.

PBOC Warns of Illegal Activity

The PBOC said virtual currencies lack legal tender status in China, according to its statement after the coordination meeting. It stressed that cryptocurrencies cannot circulate as payment tools and that related business activity remains illegal. This position follows China’s 2021 ban on crypto transactions, which the authorities introduced.

However, officials said speculation had recently picked up pace despite the ban. They cited underground trading platforms and offshore channels as the main drivers of renewed activity. Agencies at the meeting included the Ministry of Public Security, the Supreme People’s Court, the securities regulator, and the foreign exchange authority. Their attendance highlighted the scale of the concerns.

Authorities also said criminal cases often involve digital assets. They linked these assets to fraud, money laundering, and cross-border fund transfers. This point set the stage for tighter law enforcement cooperation among the agencies present.

Stablecoins Draw Strong Scrutiny

The PBOC raised concerns about stablecoins during the meeting. It said they fail to meet core requirements such as Know Your Customer checks and anti-money laundering controls. Because of this, stablecoins pose rising risks to China’s financial security, especially as they grow across overseas markets.

PBOC Governor Pan Gongsheng warned that stablecoins could amplify vulnerabilities in global markets rather than reduce them. He said these assets are still in an early stage of development, yet they already exhibit serious compliance weaknesses. Pan noted that their structure can enable unapproved cross-border transfers, increasing risks tied to capital flight.

Moreover, China continues to track stablecoin projects outside its borders. Officials said new offshore products require close monitoring because users may try to bypass China’s strict currency rules. In recent months, the foreign exchange regulator instructed banks to flag suspicious transfers linked to crypto to help close remaining loopholes.

This approach also contrasts with Hong Kong, which introduced a licensing regime for stablecoin issuers. However, Hong Kong has not granted any licences to date, showing its cautious posture. The PBOC mentioned this difference while reaffirming its own zero-tolerance stance.

Related: PBOC Governor Warns Stablecoins Threaten Global Stability

China Maintains Ban as Digital Yuan Expands

China banned domestic exchanges, trading, and mining operations in stages beginning in 2017. That policy has remained in place through 2025 with no signs of easing. Officials said these rules protect China’s financial order from disruptive risks linked to private digital assets.

However, Chinese courts have said individuals may still hold crypto as property. A 2023 court report confirmed this protection, though the assets cannot serve as currency. This distinction is important as China promotes its state-backed digital yuan, also known as the e-CNY.

Despite the ban, some miners restarted operations. Industry data and miners said activity resumed quietly in certain provinces where cheap energy supports data centers. Officials referenced this resurgence as part of the broader challenge they face while enforcing restrictions.

The PBOC said it would intensify efforts to target illegal activity linked to crypto use. The bank said enforcement will cover trading platforms, cross-border transfers, and payment support for digital assets. Officials also warned that individuals and businesses involved in crypto activity may face severe consequences under existing law.

China’s latest warning underscores its continued efforts to control the use of virtual currencies and related financial risks. Officials detailed renewed speculation, rising illegal activity, and specific concerns about stablecoins. The PBOC and other agencies signaled that enforcement will strengthen as they work to limit unauthorized crypto activity within the country.