TLDRs:
- China’s central bank warns of increasing crypto risks, calling for stricter regulation nationwide.
- Stablecoins flagged for money laundering and fraud risks, prompting tighter enforcement measures.
- OTC and P2P trading continue despite bans, complicating regulatory efforts in China.
- Asia-Pacific firms brace for compliance challenges amid evolving stablecoin frameworks.
China’s central bank, the People’s Bank of China (PBOC), convened a high-level meeting on November 28, 2025, with key government agencies to address escalating risks in cryptocurrency markets.
Authorities reported a notable rise in illegal virtual currency activities, which they warned could undermine financial stability. The PBOC reaffirmed that virtual currencies, including stablecoins, are not recognized as legal tender and remain illegal for market use.
Regulators highlighted that stablecoins, in particular, present heightened risks for money laundering and fraud due to insufficient customer verification and oversight. The meeting emphasized the need for stricter enforcement, stronger coordination among government bodies, and enhanced monitoring of capital and information flows to combat illegal crypto activity.
Stablecoins Under the Microscope
Stablecoins, which are digital currencies pegged to traditional assets like the U.S. dollar, have come under intense scrutiny. Chinese authorities view them as a potential vehicle for illicit financial activity, including fraud and money laundering, given gaps in regulatory supervision.
Despite the PBOC’s repeated warnings, stablecoins continue to attract users seeking alternatives to traditional financial markets, particularly during periods of economic uncertainty.
Analysts note that investors often turn to these digital assets to preserve wealth when China’s real estate and stock markets face turbulence.
OTC and P2P Trading Persist
Although China imposed a broad ban on cryptocurrency trading in 2021, over-the-counter (OTC) and peer-to-peer (P2P) channels remain active. According to blockchain analytics firm Chainalysis, these trading flows have grown steadily since mid-2023.
Officials at the November 28 meeting recognized the challenges of enforcing bans in these decentralized networks. Cross-border transactions and OTC platforms make it difficult for authorities to fully curb crypto activity. Enforcement measures have intensified, but regulators acknowledge that shutting down these channels entirely remains a complex task.
Asia-Pacific Firms Face Compliance Pressures
The crackdown in China has ripple effects across the Asia-Pacific region, where regulators are tightening oversight of digital assets.
Hong Kong introduced a stablecoin licensing regime in August 2025, requiring issuers to meet stringent anti-money laundering (AML) and counter-terrorism financing (CFT) standards, and restricting distribution to authorized intermediaries.
Similarly, Singapore’s stablecoin framework, effective since August 2023, and its crypto custody licensing rules, effective April 2024, require exchanges and issuers to adopt strong compliance measures. Service providers offering Know Your Customer (KYC) tools, transaction monitoring, and risk assessment solutions are seeing increased demand from firms navigating these new regulations.
Implications for Global Crypto Markets
China’s renewed regulatory stance signals heightened scrutiny for all digital assets in the country and sends a clear message to investors worldwide.
Firms operating in the region must enhance compliance programs and prepare for rigorous oversight, while OTC and P2P activity will continue to test enforcement efforts.
As authorities tighten the reins, the future of cryptocurrency trading in China, and its influence on regional and global markets, remains closely watched. Investors and regulators alike are navigating a delicate balance between innovation and risk management in the rapidly evolving digital asset landscape.
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