A stark warning from the People’s Bank of China (PBOC) has sent shockwaves through Hong Kong’s digital asset sector, triggering a sharp sell-off in crypto-related stocks and clarifying Beijing’s unwavering stance on private stablecoins.
In a coordinated statement following a multi-agency meeting, the PBOC denounced a “resurgence in crypto speculation” and pledged a stringent crackdown on illegal stablecoin activities. Legal experts say the move eliminates any perceived ambiguity in China’s policy. “The regulators have drawn a concrete red line on what used to be a vague borderline. This erases any remaining speculation or illusions about the regulatory environment,” commented Liu Honglin, founder of Man Kun Law Firm, in an analysis covered by Reuters.
The market reaction was immediate and severe. Shares of Yunfeng Financial Group, which has been actively pursuing crypto and tokenization ventures, plunged over 10%, heading for their worst performance in two months. Bright Smart Securities and Commodities Group fell approximately 7%, while the licensed digital asset platform OSL Group dropped more than 5%.
This downturn follows a period of optimism fueled by Hong Kong’s own regulatory advancements. As reported by CoinDesk, the city’s passage of a stablecoin bill in May 2024 established a legal framework for fiat-backed cryptocurrencies, a cornerstone of its strategy to become a leading digital asset hub. This excitement had notably spilled over into mainland China, where outright cryptocurrency trading remains banned since 2021.
The PBOC’s latest critique zeroed in on stablecoins, asserting they fundamentally lack proper customer identification and anti-money laundering (AML) controls. This stance is not new; as the Financial Times previously revealed, concerns from Beijing led Chinese tech giants like Ant Group and JD.com to pause their own stablecoin issuance plans in Hong Kong as early as October 2023.
Furthermore, the crackdown appears part of a broader containment strategy. In September 2023, sources indicated to Bloomberg that China’s securities regulator had advised select domestic brokerages to halt their real-world-asset (RWA) tokenization businesses in Hong Kong.
The contrasting trajectories of Hong Kong and mainland China create a complex landscape for firms operating in the region. While Hong Kong continues to build its regulated crypto ecosystem, the PBOC’s forceful statement serves as a powerful reminder that mainland policies cast a long shadow, directly impacting market sentiment and the strategic decisions of major corporations with ties to both jurisdictions.