China clarifies that "stablecoins are virtual money", and the regulatory red line cannot be crossed!

On November 29, 2025, a milestone moment arrived in the Chinese financial regulatory field. The central bank, along with the Securities Regulatory Commission and other departments, held a high-level meeting, clearly stating that "stablecoins are a form of Virtual Money," effectively closing the door on the development of stablecoins in China. This is not just an ordinary policy adjustment; it is the regulatory authorities' most explicit stance, drawing a definitive red line that all entrepreneurs dreaming of a "gray area" must not cross.

The logic behind the regulatory storm

On the surface, the regulatory attitude seems to have suddenly become strict, but the logic behind it has always been consistent — on the regulatory scale, risk is always greater than innovation. When weighing the limited benefits that technological innovation may bring against the huge risks of threatening financial stability and capital control, the choice is obvious: first suppress the risks, and we can discuss innovation later.

What regulators are most concerned about is a clear illegal chain: various fraud schemes serve as the starting point, stablecoins become tools for laundering illegal gains, and ultimately form a channel for the illegal flow of funds overseas. This concern is not unfounded; there have already been multiple financial cases globally caused by the lack of regulation on stablecoins, each ringing alarm bells.

A stark contrast between global layout and China's choices

As China closes the door on stablecoins, other financial centers around the world are accelerating their layouts. Places like Hong Kong, Singapore, and the European Union are diligently formulating rules in an attempt to enhance their financial competitiveness by regulating stablecoins.

Singapore's regulatory framework has been refined in multiple dimensions such as "reserve management" and "professional qualifications," while the EU's MiCA legislation directly provides a legal basis for stablecoin issuance. These regions have chosen a path of "guidance rather than prohibition," attempting to seize the opportunities of digital currency innovation while managing risks.

Deep considerations of China's choices

China's choice appears conservative, but it is based on a profound understanding of national conditions. In the context where capital controls are still necessary, the disorderly flow of funds that stablecoins may bring is an unbearable risk. In addition, China has already established a mature digital payment system, and the payment function of stablecoins has relatively limited substitute value.

Moreover, regulatory resources are limited, and in the face of innovations that may jeopardize financial stability, decisively halting them is more in line with the cost-effectiveness principle than gradually regulating them. This "safety first" approach is not the first instance in the history of financial regulation in China, but rather a consistent tradition.

Possible future trends

This regulatory statement is not only about the stablecoin itself but also sets the tone for the regulation of the entire cryptocurrency asset sector in China. In the short term, any stablecoin project attempting to skirt the edges will face strict rectification.

In the medium to long term, China may explore more application scenarios for central bank digital currency, promoting financial innovation within a fully controllable framework. Meanwhile, the capital and talent that were once attracted by the concept of stablecoin will have to turn to other compliant areas.

The delineation of this red line marks China's choice of a uniquely characteristic path of financial innovation—a development path that balances innovation and stability, while taking into account efficiency and safety. At the crossroads of global stablecoin development, China's choice offers another approach to solving the problem, and its long-term impact is worth continuous observation.

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