PBOC Clarifies Stance on Virtual Assets and Stablecoins
The People's Bank of China (PBOC) has stated that cryptocurrencies and stablecoins do not possess the same legal status as fiat currency and are not recognized as legal tender. Consequently, they must not be utilized as a medium of exchange in daily market transactions. The regulator has further clarified that businesses involved in facilitating virtual asset transactions could be deemed to be engaging in illegal financial activities. This action signifies China's continued adherence to a stringent approach regarding cryptocurrencies and its concern over the financial risks associated with digital assets.
Stablecoins and Associated Regulatory Risks
Regulators have specifically addressed stablecoins, which are designed to maintain a stable value pegged to fiat currencies. The PBOC highlighted that these tokens currently fall short of meeting robust know-your-customer (KYC) and anti-money laundering (AML) standards. Without adequate compliance measures, stablecoins can introduce significant risks, including money laundering, fundraising fraud, and illicit cross-border capital flows. Essentially, regulators are concerned that substantial amounts of unmonitored capital could be moved through these assets, circumventing traditional banking and oversight mechanisms.
This cautious stance reflects a broader global trend. For instance, the collapse of a prominent algorithmic stablecoin in the United States during 2023 demonstrated the potential for stablecoins to fail in protecting investors and the wider financial system. Since then, regulators in various countries have intensified their scrutiny of crypto assets to ensure investor safety and prevent systemic risks. China's warnings align with this global movement, indicating that even widely adopted digital tokens remain under strict oversight in key markets.
Implications for Crypto Users and Businesses
The PBOC's pronouncements serve as a crucial reminder for cryptocurrency users and companies operating within or adjacent to China. Virtual assets carry inherent high risks, particularly in environments with weak legal protections and limited compliance regulations. Investors are advised to be aware that while cryptocurrencies may present opportunities, their use in ways that mimic currency can lead to legal repercussions. The message to businesses is clear: prioritize compliance, or face the possibility of authorities classifying grey-area operations as illegal.
On Nov. 28, China’s central bank (PBOC) convened a coordination meeting and reiterated that: Virtual assets do not have the same legal status as fiat, are not legal tender, and must not be used as currency in market circulation; related business activities constitute illegal…
— Wu Blockchain (@WuBlockchain) November 29, 2025
As China continues to refine its regulatory framework, both novice and experienced investors should pay close attention to the distinction between digital assets and fiat currency. While stablecoins may offer convenience and perceived stability, regulatory challenges remain substantial. A thorough understanding of legal frameworks and adherence to best compliance practices can assist users in navigating this complex environment while effectively mitigating risks.
JUST IN: 🇨🇳 China’s PBOC says virtual assets, including stablecoins, are not legal tender and related activities are illegal due to KYC, AML, and cross-border risk concerns. pic.twitter.com/l0JukYJ0Jj
— Whale Insider (@WhaleInsider) November 29, 2025