Dec, 05, 2025
< 1 min read
by Thisanka Siripala
for CryptoPolitan
China’s central bank is increasingly concerned about the rise of stablecoins, which it perceives as a significant challenge to its monetary sovereignty and the overall financial order. As the popularity of stablecoins surges, the People’s Bank of China (PBOC) has shifted its focus from volatile cryptocurrencies like Bitcoin to these seemingly stable tokens, which pose unique risks.
On November 28, 2025, the PBOC convened a multi-agency meeting to discuss the implications of a renewed surge in virtual currency activity. This gathering highlighted the urgency with which Chinese financial regulators are approaching the topic of stablecoins. Unlike cryptocurrencies that are subject to high volatility, stablecoins are often pegged to fiat currencies or commodities, for example, the US dollar, which creates an illusion of stability. However, this very characteristic is what raises alarms among Chinese officials.
One of the primary concerns is that stablecoins could undermine the Chinese yuan, which the government tightly controls. By allowing alternatives that might operate outside the traditional banking system, stablecoins can create a dual currency system, eroding the authority of the PBOC. A significant worry among regulators is that widespread adoption of stablecoins could lead to capital flight, as citizens may opt for these digital currencies over the yuan for transactions and savings.
Furthermore, the PBOC’s apprehension stems from the potential disruption stablecoins might cause to the financial sector. The central bank is already wary of the threat posed by decentralized finance (DeFi) platforms, which leverage smart contracts to offer financial services without the need for traditional intermediaries. The integration of stablecoins into these platforms could further complicate the financial landscape, making it even harder for regulators to effectively manage risks and ensure financial stability.
The regulatory framework surrounding cryptocurrencies in China has been tightening in recent years. Prior to this shift in focus, the government imposed extensive bans on crypto mining and trading activities. As they now pivot their attention to stablecoins, it suggests a strategic effort to maintain control over its financial ecosystem while also preparing for the evolution of digital currencies, particularly as the global trend towards central bank digital currencies (CBDCs) gains momentum.
Several innovations are emerging from China that blend traditional financial systems with digital currency initiatives. The PBOC has been at the forefront of developing its own digital yuan (e-CNY), which is expected to provide a state-controlled alternative to both cryptocurrencies and stablecoins. This system aims to bolster the central bank’s control over monetary policy while promoting the yuan’s adoption, both domestically and internationally.
In conclusion, China’s growing concerns about stablecoins illustrate the complex interplay between innovation and regulation in the digital currency space. While stablecoins may offer convenient and efficient alternatives for users, they challenge traditional monetary systems and raise significant questions for regulators. As this landscape continues to evolve, the PBOC’s strategies will be instrumental in determining how the balance between innovation and stability is achieved in China’s financial ecosystem.