The People’s Bank of China (PBoC), the country’s central bank, has reaffirmed its hard-line stance on the digital asset sector, committing to continuing China’s prohibition on digital currencies while highlighting the particular risks associated with stablecoins.
“Virtual currencies do not hold the same legal status as fiat currency and cannot be used as legal tender in the market,” said the PBoC, in a translated statement published by local outlet the National Business Daily on Saturday. The Bank added that digital asset-related business activities are still classified as “illegal financial activities” in mainland China.
Digital asset-related activities have been banned in China since 2021, when the PBoC—along with various Government departments—jointly issued the “notice on further preventing and disposing of the risk of virtual currency trading speculation.”
According to the PBoC’s latest statement, the bank held a meeting on November 28 with various government offices and departments, including the Ministry of Public Security, the Cyberspace Administration of China, the Central Financial Office, the Supreme People’s Court, the Ministry of Justice, and the China Securities Regulatory Commission, in which they discussed combating speculation in digital currency transactions.
“The meeting emphasized that virtual currency does not have the same legal status as legal tender, do not have legal compensation, should not and cannot be circulated and used as currency in the market, and virtual currency-related business activities are illegal financial activities,” said the Bank.
It went on to highlight stablecoins as an area of particular concern as they “currently cannot effectively meet the requirements of customer identification and anti-money laundering,” and thus present a risk of being abused for illegal activities, such as “money laundering, fundraising fraud, and illegal cross-border transfer of funds.”
The PBoC concluded its Saturday statement by committing itself, and the People’s Republic of China, to “adhere to the prohibition policy on virtual currency and continue to crack down on illegal financial activities related to virtual currency.”
This reaffirming by the country, in no uncertain terms, to its ban on digital assets stands in stark contrast to the continuing opening up of Hong Kong to the space.
Hong Kong, the guinea pig
The special administrative region of Hong Kong has been moving in a distinctly different direction from mainland China in its approach to digital assets over the past year.
In 2023, a raft of regulations was announced in Hong Kong, which sought to shore up digital asset rules while potentially laying the groundwork for the territory to become the next “crypto-hub.”
While the PBoC highlighted stablecoins as a risk in its recent statement, in January of last year, the Hong Kong Monetary Authority (HKMA) laid out plans for the comprehensive regulation of stablecoins to support the sector. This would include regulating the governance, issuance, creation, and destruction of ‘in-scope’ stablecoins, as well as the stabilization and reserve management arrangements for stablecoins and wallets.
This was followed, in April 2024, by Hong Kong’s top financial sector regulator, the Securities and Futures Commission (SFC), which signaled a further embrace of the space by approving the applications of several spot BTC and ETH exchange-traded funds (ETFs).
More recently, only last month, Julia Leung, CEO of the SFC, announced that the territory would further ease its stringent digital asset regulations to attract international investors.
Speaking at a fintech event earlier in November, Leung announced that local exchanges would now be allowed to tap into global order books from offshore affiliates, in a move expected to attract foreign investors and deepen liquidity for local traders.
Considering the tight grip the People’s Republic of China keeps on Hong Kong in other area, it can only be assumed that the territory has been given the green light to make a digital asset hub of itself and attract investment, making it the guinea pig for an embracing of the booming but volatile sector, while mainland China walls itself off from potential digital asset crashes or scandals.
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Source: https://coingeek.com/china-central-bank-reaffirms-commitment-to-digital-asset-ban/
