The Central Bank of China has issued a stern warning regarding "stablecoin"! A transaction volume of 27 trillion dollars has been classified as a financial threat.

China's Central Bank has issued its most severe warning to date regarding stablecoins, stating that they pose a threat to global financial stability. The Governor of the People's Bank of China, Pan Gongsheng, stated at the 2025 Financial Street Annual Conference that stablecoins amplify the vulnerabilities of the global financial system, potentially undermining the monetary sovereignty of smaller economies, and vowed to strengthen the crackdown on domestic Crypto Assets activities.

Pan Gongsheng defines stablecoin as a global financial risk

(Source: a16z)

Pan Gongsheng, the Governor of the People's Bank of China, stated at the 2025 Financial Street Annual Conference held in Beijing that stablecoins, which are digital assets pegged to fiat currencies such as the US dollar, have introduced new vulnerabilities to the global financial system and may undermine the monetary sovereignty of smaller economies. This is the most direct and severe official characterization by the Central Bank of China regarding stablecoins.

Pan Shiyi stated that despite the rapid expansion of the virtual currency market in recent years, it is still in the early stages of development. He warned that “stablecoins amplify the weaknesses of the global financial system” and pointed out the role that stablecoins play in market speculation and the failure to meet critical compliance standards such as customer identification and anti-money laundering (AML) requirements.

Pan stated at the meeting: “Stablecoins, as a form of financial activity, still cannot meet the basic requirements of financial regulation. They expose loopholes that may facilitate illegal fund transfers, terrorism financing, and money laundering.” This statement directly links stablecoins to financial crimes, demonstrating the Central Bank of China's tough stance on such assets.

Pan Gongsheng stated that the Central Bank of China will continue to work closely with law enforcement agencies to crack down on Crypto Assets operations and speculative activities within mainland China. He referred to the measures taken by the People's Bank of China in recent years as “effective” and reiterated China's zero tolerance policy towards private digital currencies. This statement indicates that China will not only not relax its regulation on Crypto Assets but may further tighten its policies.

Four Major Accusations by the Central Bank of China Against Stablecoins:

Amplifying Weaknesses in the Financial System: Stablecoins may play a transmission role in systemic risk.

Threat to Currency Sovereignty: The proliferation of US dollar stablecoins may undermine the internationalization process of the Renminbi.

Non-compliance with regulatory standards: Lack of basic compliance requirements such as KYC and AML.

Facilitation of Illegal Activities: May promote the illegal transfer of funds, terrorism financing, and money laundering.

Since 2017, China has fully banned Crypto Assets trading, mining, and exchange operations, citing financial risks and the potential harm to consumers. The People's Bank of China has positioned digital assets as a threat to the economic order while promoting the state-supported digital renminbi (e-CNY) as a safer alternative.

Pan Shiyi also stated that the Central Bank of China will “closely monitor and assess the development of overseas market stablecoins,” indicating that the People's Bank of China remains vigilant about how the growth of foreign stablecoins may impact China's financial stability. This statement shows that even if stablecoins operate overseas, China will closely track their development and assess the potential impact on the domestic market.

Stablecoin 27 trillion transaction volume threatens traditional financial systems

(Source: DefiLlama)

This warning was issued against the backdrop of increasing debate over the rapid expansion of the stablecoin industry globally. According to data from blockchain analysis firm DefiLlama, the total market capitalization of stablecoins has reached approximately $308 billion, with Tether (USDT) and USD Coin (USDC) accounting for nearly 87% of the supply. This highly concentrated market structure itself raises regulatory concerns, as a few companies control the entire stablecoin market.

Even more astonishing is the trading volume data. According to research by Andreessen Horowitz, these two tokens have processed over $27 trillion in settlements over the past year. In the past 12 months, stablecoin trading volume has surged to $46 trillion, roughly equivalent to the U.S. Automated Clearing House (ACH) system that supports most of the U.S. banking network.

Even after adjusting for human trading activities, the amount handled by the industry is approximately 9 trillion dollars, accounting for more than half of Visa's global payments. Such a scale of transaction volume can no longer be ignored; stablecoins have indeed become an important component of the global financial system. For regulators, such a vast and rapidly growing financial activity operating outside the regulatory framework does pose potential systemic risks.

This explosive growth has not only triggered warnings from China's Central Bank but also attracted the attention of international regulatory bodies. At the recent annual meetings of the International Monetary Fund (IMF) and the World Bank held in Washington D.C., global finance ministers and central bank governors expressed concerns about the systemic risks posed by stablecoins. Many officials agreed with Pan's comments, stating that these tokens do not meet basic anti-money laundering and Know Your Customer (KYC) standards, which could lead to illegal capital flows.

Stablecoins threaten the internationalization of the Renminbi, economists ring the alarm

Chinese economists have also expressed concerns that the rise of dollar-backed stablecoins globally may undermine China's financial autonomy. Wang Yongli, former deputy governor of the Bank of China, pointed out in an article this June that the dominance of stablecoins pegged to the dollar “poses a strategic challenge to the internationalization of the renminbi.” He warned that if the digital renminbi cannot compete with the efficiency and global influence of these tokens, China's efforts to promote its currency abroad may face “serious obstacles.”

This concern touches on the deeper reasons behind the Central Bank of China's tough stance on stablecoins. China has been promoting the internationalization of the renminbi, hoping to reduce dependence on the dollar and enhance its influence in the global financial system. However, the rapid proliferation of dollar stablecoins has actually reinforced the dollar's global dominance. When users around the world transact using USDT and USDC, they are essentially using digitized dollars, which runs counter to China's strategic objectives.

Wang Yi urged the government to accelerate the launch of the digital renminbi and explore the possibility of introducing offshore renminbi-denominated stablecoins through Hong Kong. This suggestion reflects a pragmatic strategy: since it is impossible to stop the development of stablecoins, it is better to launch a renminbi stablecoin to compete with the US dollar stablecoin. However, this strategy faces dual challenges of technology and market acceptance.

Ant and JD call for a halt, while Hong Kong opens up the licensing system

This issue has also affected major technology companies in China. Earlier this month, Ant Group and JD.com suspended their plans to issue stablecoins in Hong Kong based on the instructions from the People's Bank of China and the National Internet Information Office. According to reports, officials requested both companies to halt their projects to prevent private firms from issuing tokens with monetary functions, believing that the right to issue currency must remain in the hands of the state.

This intervention demonstrates the Central Bank of China's extremely tough stance. Ant Group and JD.com are among the largest tech companies in China, with a huge user base and technological strength. Their launch of a stablecoin in Hong Kong should have been a reasonable business decision, but the intervention by the Central Bank of China shows that even in Hong Kong under “one country, two systems,” Beijing's principle of financial sovereignty still applies.

However, Hong Kong is going against the tide. In August this year, Hong Kong launched the world's first dedicated stablecoin licensing system, inviting major financial institutions and blockchain companies to apply. The Hong Kong Monetary Authority (HKMA) has received letters of intent from over 40 companies, including Ant Group, JD.com, Circle, and Standard Chartered Bank. This divergence shows that Hong Kong is trying to find a balance between complying with Beijing's policies and maintaining its status as an international financial center.

Despite Hong Kong positioning itself as a global digital asset hub, Beijing's stance remains strict. In August this year, Chinese regulators required brokerages and think tanks to stop publishing reports or holding seminars promoting stablecoins, citing fraud and speculative risks. This all-encompassing blockade shows that China aims not only to crack down on the actual business of stablecoins but also to control the dissemination of related information and research activities.

Pan Shiyi's latest remarks again indicate that Beijing's long-standing cryptocurrency policy is unlikely to be relaxed anytime soon. He emphasized that although the prospects for blockchain technology are bright, its applications must “operate within a strict regulatory framework.” He stated, “Virtual assets and their derivatives must not undermine financial stability and monetary sovereignty. The People's Bank of China will continue to take decisive action to maintain economic and financial order.”