BEIJING, Feb 6 (Reuters) – China vowed to further tighten its crackdown on virtual currencies on Friday and banned unauthorised offshore issuance of yuan-pegged stablecoins.
Authorities will also strictly vet offshore issuance of tokens backed by Chinese onshore assets, according to a notice published on the central bank’s website.
Although the statement largely reiterates Beijing’s existing ban on cryptocurrency, some are encouraged by signs China is setting up a legal framework for the real-world asset (RWA) tokenisation business.
“The biggest breakthrough is a clear separation between virtual currencies and RWA,” said Louis Wan, CEO of Unified Labs.
“Virtual currencies will still be outlawed, but RWA is being included in the regulatory system. For China’s RWA business, this is a milestone.”
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Winston Ma, an adjunct professor at NYU School of Law, said that China’s central bank is essentially highlighting that only its own digital yuan is legitimate, “not a patchwork of private RMB (yuan) stablecoins circulating on global crypto exchanges.”
Beijing has long taken a tough stance on virtual currencies, but officials said recent “speculative activities” posed new challenges that warranted additional measures.
“Virtual currencies do not have the same legal status as fiat currencies,” the People’s Bank of China and seven other agencies said in a joint statement, adding that business activities related to virtual currencies are “illegal financial activities.”
Without official approval, “domestic entities and their controlled overseas entities are prohibited from issuing virtual currencies overseas,” they said.
Regulators also banned domestic and foreign entities from issuing offshore stablecoins pegged to the yuan without authorization.
“Stablecoins pegged to fiat currencies effectively perform some of the functions of fiat currencies in circulation,” they said.
The central bank also warned financial institutions against providing banking and clearing services to virtual currency-related businesses.
Regarding the RWA business, under which all kinds of Chinese goods are being turned into digital assets with little oversight, offshore issuance of tokens must be strictly regulated by relevant authorities, according to the notice.
“To some extent, this means China is allowing the issuance of offshore tokens based on onshore assets,” said Alex Zuo, senior vice president of Singapore-based crypto custodian provider Cobo.
Previously, such a business was in a grey area.
“Next, we need to see if there will be detailed rules for execution, and whether there will be successful cases,” Zuo said.
(Reporting by Xiuhao Chen and Ryan Woo; Editing by Toby Chopra, Susan Fenton, Philippa Fletcher)
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