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China's Stablecoin Restrictions: Authorities Balance Technological Progress with Economic Security

China's Stablecoin Restrictions: Authorities Balance Technological Progress with Economic Security

Bitget-RWA2025/10/26 04:40
By: Bitget-RWA
- China's regulators halt mainland firms' stablecoin projects in Hong Kong to address financial stability risks. - Global stablecoin usage expands beyond crypto trading, but high fees persist, with USDT dominating the market. - Kyrgyzstan launches KGST stablecoin and plans a CBDC to boost international settlements and digital currency adoption. - Experts note China's regulatory actions aim to balance innovation with risk management, maintaining competitiveness against the U.S.

Chinese authorities have intensified their oversight of stablecoin projects in Hong Kong, with the People's Bank of China (PBOC) reportedly instructing mainland companies to halt their stablecoin launches in the city. This action, which targets both banks and non-bank payment providers, highlights growing apprehension over the dangers posed by unregulated digital currencies, especially as global stablecoin usage accelerates, according to

.

The South China Morning Post also reported that the PBOC and the Cyberspace Administration of China have told firms like Ant Group and JD.com to suspend their stablecoin initiatives. This move comes as Hong Kong has become a significant hub for digital assets since 2022, fostering a relatively open environment for the industry. Now, regulators are aiming to slow the rapid expansion of stablecoins and real-world asset (RWA) tokenization, citing worries about financial stability and the movement of capital across borders.

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Worldwide, stablecoins are increasingly being used for payments beyond crypto trading, though transaction costs remain a significant hurdle. Recent

, conducted by a blockchain analytics company in New York, shows that between January 2023 and August 2025, 33 companies processed $136 billion in stablecoin transactions. Business-to-business (B2B) payments lead the way, making up $76 billion each year, followed by peer-to-peer (P2P) and card-based transactions. Tether's commands 85% of the market, mainly operating on the network, while Circle's USDC is less dominant. Despite the sector's growth, Artemis points out that high transaction fees—especially on exchanges and for currency swaps—can diminish the cost benefits of stablecoins; for example, network congestion has pushed fees for small transfers above $1,000, as highlighted by Shark Tank investor Kevin O'Leary.

Elsewhere, Kyrgyzstan has introduced its own stablecoin, KGST, which is pegged to the som at a 1:1 ratio, in partnership with Binance founder Changpeng Zhao. The country also revealed a three-stage plan to test a Central Bank Digital Currency (CBDC), beginning with internal transfers and eventually including offline payments, according to

. The KGST stablecoin is intended to streamline cross-border payments without the need for traditional currency exchanges and is expected to be compatible with the digital som in the future. The same article notes that Kyrgyzstan saw over $10 billion in crypto trading volume in the first half of 2025, a 47% increase compared to the previous year.

Industry analysts believe that China's regulatory measures in Hong Kong do not indicate a withdrawal from digital assets as a whole. Despite the current pause, China continues to compete with the United States in the digital asset arena, with officials reaffirming their commitment to long-term strategic objectives, as noted by the South China Morning Post. The PBOC's actions reflect an effort to balance encouraging innovation with mitigating risks in a fast-changing sector. As stablecoins and CBDCs become more prevalent worldwide, regulators must find ways to maintain financial stability while supporting technological advancement.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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