China Reaffirms Crypto Crackdown, Expands Digital Yuan

China’s central bank governor Pan Gongsheng has reinforced the country’s hardline position on cryptocurrency, emphasizing that policies implemented since 2017 to address virtual currency risks “remain in effect.” This reaffirmation comes as the United States moves in the opposite direction with the passage of the GENIUS Act, the first comprehensive crypto legislation aimed at creating a framework for dollar-pegged digital assets. The contrasting approaches highlight a fundamental divergence in how the world’s two largest economies view the role of private digital currencies in the global financial system.

Pan Gongsheng specifically targeted stablecoins in his remarks, noting they “are still in their early stages of development” and fail to meet essential regulatory requirements such as customer identification and anti-money laundering measures. His comments reflect broader concerns among Chinese financial regulators that these dollar-pegged assets could exacerbate gaps in global financial regulation and potentially solidify U.S. dollar dominance through digital means. The People’s Bank of China plans to continue collaborating with law enforcement to crack down on domestic crypto operations and speculation.

While maintaining its cryptocurrency prohibition, China is aggressively expanding its central bank digital currency (CBDC) initiative. The digital yuan, known as e-CNY, will see increased participation from commercial banks as the pilot program expands beyond the two dozen cities where it has been operating since 2019. The program has already accumulated a transaction value exceeding 14 trillion yuan, demonstrating significant scale and adoption within China’s controlled digital currency ecosystem.

The central bank’s plans to “optimize the positioning of the digital yuan” coincide with broader financial modernization efforts. Zhu Hexin, director of the State Administration of Foreign Exchange, indicated that nine new policy measures would soon be introduced to promote trade innovation and development. Simultaneously, Wu Qing, chairman of the China Securities Regulatory Commission, hinted at potential revisions to listing standards on the Shenzhen Stock Exchange’s ChiNext board to better accommodate emerging fields and future industries, suggesting a coordinated approach to financial innovation within strictly defined parameters.

Despite the public crackdown on cryptocurrency, China’s approach to digital assets reveals more nuance behind the scenes. The country’s largest government-backed research fund recently opened applications for studies focused on stablecoins and their cross-border monitoring systems, offering grants ranging from 200,000 yuan (approximately $28,083) to 300,000 yuan ($42,126). This research initiative suggests that Chinese authorities recognize the potential long-term significance of stablecoin technology, even as they maintain public opposition to its current implementation.

Pan Gongsheng expressed particular concern that stablecoins foster a “speculative market atmosphere” that increases vulnerabilities in the global financial system and affects the monetary sovereignty of less developed economies. These warnings reflect China’s broader strategic positioning in global finance, where it seeks to counter perceived U.S. dollar dominance while maintaining strict control over its own financial system. The simultaneous expansion of the e-CNY pilot and research into stablecoin monitoring indicates China is preparing for multiple potential futures in digital finance, all while maintaining its prohibition on private cryptocurrencies.