Stablecoins are not recognized as "prohibited items" in the sense of criminal law.

Zhao Binghao, the director of the Financial Technology Law Research Institute at China University of Political Science and Law, pointed out that the Central Bank has clearly classified stablecoins as virtual money, and this definition does not mean that stablecoins are recognized as “prohibited items” in the sense of criminal law.

Recently, the People's Bank of China held a meeting of the coordination mechanism for combating virtual money trading speculation, clarifying for the first time that stablecoins are a form of virtual money. The meeting pointed out that stablecoins cannot effectively meet the requirements for customer identification, anti-money laundering, and other aspects, and there is a risk of being used for illegal activities such as money laundering, fundraising fraud, and illegal cross-border fund transfers.

Zhao Binghao, the director of the Fintech Law Research Institute at China University of Political Science and Law, interprets this as the Central Bank's definition not categorizing stablecoins themselves as “prohibited items” in the criminal law sense, but rather including the operational, intermediary, and clearing activities surrounding stablecoins within the scope of regulation.

The Central Bank's characterization of stablecoins this time continues China's consistent strict regulatory policy on virtual money. The meeting reiterated that virtual money does not have the same legal status as fiat currency, does not possess legal tender status, and should not and cannot be circulated as money in the market.

Director Zhao Binghao clarified the legal boundaries of this regulatory definition: the core is to regulate various business activities surrounding stablecoins, rather than prohibiting the stablecoins themselves. Stablecoins can achieve instant settlement similar to the US dollar on-chain, bypassing the traditional banking system and foreign exchange controls. If used on a large scale, it may weaken the status of the local currency in pricing and settlement.

Against the backdrop of tightening regulations within the country, the technologies and liquidity related to stablecoins will increasingly migrate to offshore and regional financial centers. Domestic institutions deploying stablecoins abroad will find their “imagination space will be infinitely narrowed,” and will be more limited to practical application scenarios such as cross-border payments and supply chain finance.

With the Central Bank's clear inclusion of stablecoins in the regulatory framework for virtual money, it has become an industry consensus that the development space for stablecoins domestically will continue to shrink.