China Warns of Rising Crypto Risks and Promises Strong Crackdown

Post by : Saif Nasser

China has once again made its position clear on virtual currencies, warning that new risks are growing and that strong action will be taken to protect the country’s financial system. The People's Bank of China, the nation’s central bank, issued the warning after a meeting on virtual currency regulation held on Friday. The bank said that speculation in digital assets has been rising again, driven by several factors inside and outside the country, and this has created fresh challenges for regulators trying to keep markets stable.

The central bank stressed that virtual currencies, including well-known ones like Bitcoin, do not have the same legal standing as the Chinese yuan. They cannot be used as official money for buying goods or services in the country. China already banned cryptocurrency trading in 2021, and authorities have repeatedly reminded the public that any business activity involving virtual currencies is illegal. The bank said these rules must be enforced strictly to prevent people from falling into financial traps.

A major part of the central bank’s warning focused on stablecoins, which are digital tokens usually linked to stable assets like the U.S. dollar. Regulators said stablecoins do not meet China’s strict requirements for customer identity verification, anti-money-laundering checks, or risk controls. According to the central bank, these weaknesses make stablecoins attractive for criminal uses, including fraud, money laundering, and secret cross-border transfers of money. The bank said it will increase its efforts to uncover and punish all illegal financial activities connected to such digital assets.

Officials also said they want to keep China’s financial system safe and steady during a time of global economic change. The bank promised stronger monitoring of both domestic and overseas digital currency trends. In October, Governor Pan Gongsheng had already stated that China would continue to act firmly against both the trading and speculation of virtual currencies inside the country, while also studying the fast-changing world of overseas stablecoins.

While mainland China maintains a total ban, Hong Kong has taken a different approach by setting up a legal framework for stablecoin issuers. However, Hong Kong has not issued any licences yet, showing that regulators in the region are still being cautious. The contrast highlights how mainland China prefers complete control, while Hong Kong is trying to build a regulated environment without encouraging risky behaviour.

Even with the ban, cryptocurrency mining has quietly started to reappear in some parts of China. Reports from miners and industry data show that companies and individuals are using cheap electricity and new data centres in energy-rich provinces to carry out mining operations. This suggests that the crypto industry continues to adapt and shift underground despite strict government policies.

China’s latest warning signals that authorities are preparing for more oversight, more monitoring, and more enforcement. As digital currencies grow in popularity around the world, China continues to take a firm stance. The government believes that tight control is necessary to prevent financial crimes, protect consumers, and keep the economy stable. For now, the message from the central bank remains unchanged: virtual currencies have no place in China’s official financial system, and any attempt to use or promote them will face strict consequences.