In a significant shift signaling potential policy change, a major Shanghai financial regulator recently convened a high-level meeting to explore strategic responses to stablecoins and cryptocurrencies. This meeting marks a notable departure from China's previously stringent stance on cryptocurrencies, where trading has been strictly banned since 2021.
The discussions, reportedly involving dozens of local government officials, signal China's increasing openness to explore regulated blockchain-based financial solutions, especially yuan-pegged stablecoins.
Organized by the Shanghai State-owned Assets Supervision and Administration Commission (SASAC), the high-profile meeting took place last Thursday. It drew participation from approximately 60-70 attendees, including local officials and policy experts. The SASAC director, He Qing, emphasized during the session the need for Chinese policymakers to cultivate greater awareness of and sensitivity to emerging digital technologies. He urged officials to deepen research into digital currencies and the broader blockchain ecosystem, highlighting the strategic significance of these technologies for China’s economic future.
Photos of the meeting, shared on the SASAC's official WeChat account, depict robust participation, underscoring the seriousness with which local authorities are reconsidering their approach toward digital currencies.
The Shanghai regulator’s initiative follows growing calls from Chinese technology giants and financial institutions for the government to authorize yuan-backed stablecoins. Companies such as JD.com and fintech behemoth Ant Group have reportedly urged the People’s Bank of China (PBOC) to authorize yuan-based stablecoins. Their objective is to provide a counterweight to the dominance of U.S. dollar-pegged cryptocurrencies, which are rapidly gaining global traction.
These firms are actively planning to apply for stablecoin licenses in Hong Kong, capitalizing on the region's new stablecoin regulatory framework scheduled to come into force on August 1. Their proactive stance illustrates a growing consensus within China’s private sector on the necessity of adopting blockchain-based payment solutions, which promise greater transaction efficiency and financial innovation.
Global Momentum and China's Fintech Potential
Stablecoins, digital assets typically pegged to fiat currencies like the U.S. dollar or Chinese yuan, have been gaining global popularity due to their potential for faster and cheaper cross-border transactions. According to a recent report by ARK Investment Management, stablecoins accounted for transaction volumes totaling around $15.6 trillion globally last year, exceeding even major traditional payment processors such as Visa. This remarkable growth highlights the significant potential stablecoins hold for reshaping the global payments landscape.
Experts like Nick Ruck, Director at LVRG Research, assert that given China's robust fintech ecosystem, the country could play a pivotal role in shaping the future of blockchain-based financial transactions. He noted that with appropriate regulatory support and strategic implementation, China could become a central hub for stablecoin innovation, significantly enhancing its financial competitiveness internationally.
Globally, there is increasing interest in stablecoins from prominent corporations, especially in the United States, where regulatory frameworks are relatively advanced. Major corporations such as Amazon and Walmart are reportedly considering launching their own stablecoins to streamline payments and enhance customer loyalty programs. Such developments highlight stablecoins' increasing legitimacy and utility as an alternative financial medium.
In Asia, South Korea's government has also expressed clear intentions to foster won-based stablecoins and develop requisite infrastructure. Despite caution from the country's central bank urging gradual adoption, this represents another key regional shift toward embracing stablecoin technology.
Policy Expert Insights at Shanghai Meeting
During the Shanghai meeting, experts from Guotai Haitong Securities offered detailed analyses on cryptocurrencies and stablecoins, outlining their history, varieties, and global regulatory landscapes. These experts highlighted both the opportunities stablecoins present - such as improved efficiency, cost savings, and financial inclusivity - as well as the challenges, including regulatory uncertainty and potential impacts on monetary policy.
Separately, Yang Tao, Deputy Director of the National Institution for Finance and Development, proposed that China should pilot yuan-based stablecoins within the Shanghai Pilot Free Trade Zone and Hong Kong simultaneously. This suggestion points toward a controlled and geographically targeted approach to experimentation, allowing regulators to manage risks carefully while exploring potential benefits.
Despite the positive developments, significant hurdles remain for China’s adoption of stablecoins. Strict capital controls enforced by Beijing pose major challenges, limiting the free movement of currency across borders. Furthermore, Pan Gongsheng, governor of China's central bank, warned recently that the rapid proliferation of digital currencies and stablecoins poses substantial regulatory challenges and risks to financial stability.
These cautionary statements underline that any shift toward stablecoins in China will likely be incremental and subject to tight regulatory oversight. Nonetheless, the discussions in Shanghai reflect an increasing willingness among Chinese policymakers to explore balanced and innovative financial solutions amid growing global competition.
Final thoughts
While stablecoins are increasingly under consideration in China, the outlook for other cryptocurrencies remains uncertain. Mainland China banned cryptocurrency trading and mining activities in 2021 over concerns regarding financial stability and regulatory control.
Despite this domestic prohibition, cryptocurrencies, particularly Bitcoin, continue gaining popularity outside China. Bitcoin recently surged to an all-time high above $118,000, indicating robust global interest.
The contrasting attitudes toward stablecoins versus traditional cryptocurrencies highlight China's cautious yet evolving stance toward digital finance, underscoring the nuanced and strategic nature of its regulatory approach.