China Draws a Line Against Private Money: “Stablecoins Banned, Monetary Power Belongs to the Center”

Beijing Strengthens Its Single Digital-Yuan Framework
Shuts Down Private Stablecoin Pathways
Focus Turns to Defending Monetary Sovereignty

China has banned the issuance of stablecoins, effectively halting all privately led digital currency experiments. The People’s Bank of China (PBOC) classified stablecoins as financial destabilizers tied to money laundering and illicit transfers, reaffirming the principle that “the power to issue money rests with the center.” While the United States is incorporating stablecoins into its regulated financial system to expand the dollar’s influence, Beijing is moving in the opposite direction—tightening state control over digital money through its central bank digital currency (e-CNY). Analysts agree that the credibility and scalability of the digital yuan will determine the success of China’s broader monetary strategy.

Regulatory Logic: “Financial Stability at Risk” and “Speculative Excess”

According to Xinhua News Agency on the 29th, PBOC Governor Pan Gongsheng called stablecoins “potential variables that could threaten the financial system” at the Financial Street Forum in Beijing on the 27th. He said, “Stablecoins remain in their infancy, lacking institutional foundations, and global financial regulators, including the BIS, continue to approach them with caution.” Pan warned that “stablecoins can serve as channels for money laundering, illicit cross-border transfers, and terrorist financing,” noting that such patterns “are already observable in multiple regions.”

At first glance, the remarks appear consistent with Beijing’s long-running crackdown on cryptocurrencies. Yet this time, China made explicit its intention to concentrate digital monetary authority in the hands of the central bank. Pan added that the rapid growth of stablecoins “has fueled speculative expectations and, in some cases, even shaken monetary sovereignty in smaller economies.” The BIS and other regulators, he said, increasingly view stablecoins as “digital avatars of the U.S. dollar” that reinforce dollar dominance in global payment networks while widening the gaps in oversight.

Pan also outlined plans to further institutionalize the e-CNY within China’s monetary structure, encouraging more commercial banks to serve as operating partners. The PBOC has already established an international digital yuan operations center in Shanghai to oversee cross-border settlements and a CBDC management hub in Beijing to anchor payment infrastructure within administrative control. In effect, China is signaling a clear pivot from the “private innovation and diffusion” model to a “centralized, state-managed” one—cementing the e-CNY as the sole legitimate digital payment rail.

The shift reflects lessons learned from recent experience. Although China banned cryptocurrency trading and mining in 2021 under the banner of financial stability, underground Bitcoin mining has quietly rebounded—especially in Xinjiang—where China still accounts for the world’s third-largest share of global hash rate. Beijing has realized that total prohibition alone cannot fully seal off speculative capital or prevent asset flight. This time, rather than simply enforcing another ban, the government has drawn a red line by designating stablecoins as instruments of speculation and illegal transfer, leaving the e-CNY as the only legal form of digital money.

Centralizing Policy Power in the CBDC

The new directive effectively freezes all private digital currency experiments. Tech giants such as Ant Group and JD.com had been exploring Hong Kong-based stablecoin projects pegged to the dollar or yuan, and local regulators had even introduced a licensing framework in August to allow well-capitalized issuers to operate under supervision. But these initiatives were abruptly halted after the PBOC and the Cyberspace Administration of China ordered a suspension. Regulators declared that “no private entity may participate directly in the issuance or circulation of money,” elevating the matter from a technical or commercial issue to one of principle. Stablecoins, in Beijing’s view, are not payment tools but potential threats to monetary sovereignty.

China’s stated concern centers on trust and stability. Though stablecoins are nominally backed one-to-one by fiat or physical assets, questions persist over the adequacy and transparency of those reserves. Former PBOC Governor Zhou Xiaochuan highlighted this at a closed-door forum in August, warning of “unchecked supply expansion without sufficient reserves, the leverage inherent in derivative-like structures, and the replication of speculative assets disguised as payment instruments.” He urged regulators to assess “whether the real demand for stablecoins truly reflects underlying economic activity.”

Beyond reliability, Chinese authorities worry about a deeper threat: the erosion of their macroeconomic levers—monetary policy, exchange-rate management, and capital control. For decades, Beijing has treated cross-border capital flow management and currency stability as strategic priorities. A privately issued yuan-pegged stablecoin could appear to advance “yuan internationalization,” but in practice it would create a parallel channel for currency circulation beyond central oversight, weakening the state’s control over monetary power. Thus, the latest ban doubles as a policy statement: “Only a CBDC is safe within a state-controlled digital currency system,” reaffirming that “money issuance belongs to the center, not the market.”

A Conservative Bet in the Global Currency Race

The BIS recently reported that more than 99% of all stablecoins in circulation are pegged to the U.S. dollar. In reality, this makes stablecoins less a new form of cryptocurrency than a “digital distribution network for the dollar.” Once dollar-backed tokens can move across borders via mobile wallets, the dollar’s reach extends into everyday transactions, remittances, and trade settlements—bypassing banks altogether. This dynamic has taken hold across Latin America and parts of the developing world, where local currencies are unstable and stablecoins are seen as safer, more convenient alternatives.

The United States has begun to formalize this system as a strategic asset. Payment giants Visa and Mastercard have integrated stablecoin settlement into their networks, while asset managers such as BlackRock are building on-chain funds backed by U.S. Treasuries to classify stablecoins as regulated, dollar-denominated cash equivalents. Washington and Congress are also working to establish a legal framework that brings stablecoins into mainstream finance. The goal is clear: to extend the dollar’s payment dominance into emerging markets in Latin America, Southeast Asia, and Africa—regions where traditional banking infrastructure is weak.

China is acutely aware of the implications. Earlier this year, the State Council even considered introducing a yuan-pegged stablecoin as part of its yuan internationalization roadmap, which outlined roles for regulators, risk management systems, and trade-settlement use cases. The idea was that yuan-based stablecoins could increase the currency’s share in global trade and supply-chain settlements.

Ultimately, however, Beijing chose a different path. Concluding that decentralizing monetary issuance, payment infrastructure, and data collection would undermine control over the yuan, the government has moved to block all privately issued stablecoins. Whereas the U.S. strategy combines “private stablecoins + the dollar” to project power outward, China’s model consolidates “e-CNY + central bank” control internally before seeking to expand abroad. The central question now is whether that state-centric model can gain traction in global trade and settlement networks—and whether the digital yuan, without private stablecoins, can serve as a credible vehicle for yuan internationalization.