China has expanded its crypto crackdown, banning stablecoin issuance and real-world asset (RWA) tokenization, including offshore structures. Regulators aim to protect monetary sovereignty and strengthen control over digital finance.
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Chinese financial regulators have announced a sweeping expansion of restrictions on digital assets, formally extending the country’s crypto ban to cover stablecoin issuance and real-world asset (RWA) tokenization — including activities conducted through offshore entities linked to Chinese firms.
The move is widely viewed as the most aggressive tightening of capital controls since Beijing outlawed Bitcoin mining in 2021. It underscores a clear policy direction: all digital financial innovation must operate strictly within state-approved infrastructure and under direct regulatory supervision.
Joint Directive from Eight Government Agencies
On February 6, eight major regulatory bodies — including the People’s Bank of China (PBOC) and the China Securities Regulatory Commission (CSRC) — issued a joint notice significantly expanding existing cryptocurrency restrictions.
The directive explicitly states that:
- The issuance of stablecoins without government approval is illegal.
- Unauthorized tokenization of real-world assets constitutes an illegal public securities offering.
- Foreign institutions are prohibited from providing stablecoin or tokenization services to Chinese residents.
- Chinese companies and their offshore affiliates are barred from bypassing restrictions through overseas structures.
In effect, regulators are closing what they describe as “offshore loopholes” that previously allowed Chinese technology and financial firms to experiment with blockchain-based products in jurisdictions such as Hong Kong or Singapore.
Related: Bitcoin Mining Difficulty Drops 11% Amid Storms and Rising Costs
Stablecoins Framed as a Threat to Monetary Sovereignty
The directive places particular emphasis on stablecoins, especially those pegged to fiat currencies. The PBOC stated that such instruments exhibit characteristics of sovereign money and therefore pose systemic risks.
Authorities argue that private stablecoins could:
- Undermine state control over money supply,
- Facilitate capital outflows,
- Create parallel financial systems outside government oversight,
- Circumvent AML and KYC requirements.
The notice specifically bans the offshore issuance of yuan-pegged stablecoins. Analysts interpret this as a direct measure to protect the digital yuan (e-CNY), China’s central bank digital currency (CBDC).
Beijing has consistently promoted e-CNY as the only legitimate form of digital currency within its financial system. Private stablecoins are seen as competitors to the state-backed digital monetary framework.
Crackdown on the $24 Billion RWA Tokenization Sector
Beyond stablecoins, the directive targets the rapidly growing real-world asset tokenization market, currently valued at approximately $24 billion globally.
The restrictions effectively prohibit:
- Fractional ownership tokenization of real estate,
- Issuance of tokenized securities,
- Blockchain-based investment products,
- Intermediary and informational services related to unauthorized RWA activities.
Regulators have reclassified unsanctioned tokenization as an “illegal public securities offering.” The document also references risks associated with unlawful fundraising and unauthorized futures trading.
A narrow pathway remains open for activity conducted strictly within government-approved financial infrastructure. Companies engaging in tokenization abroad must obtain domestic approval and adhere to enhanced compliance standards.
Centralized Enforcement Mechanism
To ensure compliance, the central government will establish a coordinated supervisory mechanism involving both national and local regulators. The objective is to eliminate regulatory arbitrage and prevent the use of foreign jurisdictions to circumvent Chinese law.
This coordinated framework reflects Beijing’s broader strategic priorities:
- Preserving monetary sovereignty,
- Controlling cross-border capital flows,
- Centralizing digital finance around the e-CNY,
- Reducing systemic financial risks.
Implications for the Global Digital Asset Market
While China’s restrictions are unlikely to halt global growth in stablecoins and RWA tokenization, they deepen regulatory fragmentation across jurisdictions.
In contrast to the European Union’s MiCA framework — which provides a structured regulatory regime for stablecoin issuers — and ongoing legislative efforts in the United States, China has opted for a state-centric model that limits private-sector participation in digital monetary systems.
For international fintech firms, the directive implies:
- Inability to legally offer stablecoin services to mainland Chinese residents,
- Mandatory segmentation of Chinese users,
- Heightened compliance scrutiny for companies with Chinese ownership or exposure.
A Strategic Signal to the Market
The expanded restrictions send a clear message: the next phase of digital finance in China will remain firmly within state-controlled systems.
Private stablecoins and independent asset tokenization are not viewed as innovation drivers but as potential threats to financial stability and sovereign monetary authority.
As global competition intensifies in the race for digital financial leadership, China is doubling down on centralized oversight — with the digital yuan positioned at the core of its future financial architecture.
