by Coinstrooper Crypto Articles
Quick Take
  • dollar, have created new vulnerabilities in the global financial system and could undermine the monetary sovereignty of smaller economies.
  • Pan said virtual currencies remain in their early stages of development, despite the rapid expansion of the market in recent years.
  • “Stablecoins, as a form of financial activity, still cannot meet the basic requirements of financial supervision,” Pan told the conference.
  • “They expose loopholes that can facilitate illegal fund transfers, terrorist financing, and money laundering.”

What Happened

China’s central bank has issued one of its strongest warnings yet against stablecoins, calling them a threat to global financial stability and vowing to tighten its crackdown on domestic cryptocurrency activities.

Can Stablecoins Ever Meet China’s Strict Financial Standards?

“Stablecoins, as a form of financial activity, still cannot meet the basic requirements of financial supervision,” Pan told the conference.

Market Context

Pan said virtual currencies remain in their early stages of development, despite the rapid expansion of the market in recent years.

He warned that “stablecoins have amplified weaknesses in the global financial system,” citing their role in market speculation and their failure to meet key compliance standards such as customer identification and anti-money laundering (AML) requirements.

China has maintained a sweeping ban on crypto trading, mining, and exchange operations since 2017, citing financial risks and the potential for consumer harm.

Pan also said the central bank would “closely monitor and assess the development of stablecoins in overseas markets,” suggesting that the PBoC remains wary of how foreign stablecoin growth could influence China’s financial stability.

According to data from blockchain analytics firm DefiLlama, the total market capitalization of stablecoins has reached about $308 billion, with Tether (USDT) and USD Coin (USDC) accounting for nearly 87% of the supply.

Stablecoin transaction volumes have surged to $46 trillion in total value over the past twelve months, roughly comparable to the U.S. Automated Clearing House (ACH) system that underpins much of the American banking network.

Even when adjusted for artificial trading activity, the sector processed about $9 trillion, representing more than half of Visa’s global payment volume.

Wang Yongli, a former deputy governor of the Bank of China, wrote in June that the dominance of USD-pegged stablecoins “poses a strategic challenge” to the renminbi’s internationalization.

Why It Matters

Speaking at the 2025 Financial Street Annual Meeting in Beijing, Pan Gongsheng, governor of the People’s Bank of China (PBoC), said that stablecoins, digital assets pegged to fiat currencies like the U.S. dollar, have created new vulnerabilities in the global financial system and could undermine the monetary sovereignty of smaller economies.

During the recent International Monetary Fund (IMF) and World Bank Annual Meetings in Washington, D.C., global finance ministers and central bank governors raised concerns about the systemic risks posed by stablecoins.

Many officials echoed Pan’s comments, saying the tokens fall short of basic AML and know-your-customer (KYC) standards and could enable illicit financial flows.

Economists in China have also voiced concerns that the global rise of U.S. dollar-backed stablecoins could weaken the country’s financial autonomy.

He warned that if the digital yuan cannot compete with the efficiency and global reach of these tokens, China’s efforts to promote its currency abroad could face “serious obstacles.”

Details

“They expose loopholes that can facilitate illegal fund transfers, terrorist financing, and money laundering.”

Pan said the central bank would continue to work closely with law enforcement to crack down on cryptocurrency operations and speculative activities within mainland China.

He described the measures implemented by the PBoC in recent years as “effective,” reaffirming the country’s zero-tolerance policy toward private digital currencies.

The PBoC has consistently positioned digital assets as a threat to economic order while promoting the state-backed digital yuan (e-CNY) as a safer alternative.

The warning comes amid growing global debate over the rapid expansion of the stablecoin sector.

Chinese Economists Warn USD Stablecoin Growth Threatens Yuan Internationalization

The two tokens have processed more than $27 trillion in settlements over the past year, according to research from Andreessen Horowitz.

This explosive growth has sparked warnings not only from China but also from international regulators.