China Clamps Down on Stablecoins as Hong Kong Charges Full Speed into Crypto Future

Beijing slams the brakes—again—while its special administrative region floors the accelerator. Two Chinas, two radically different crypto strategies.

Mainland regulators just tightened restrictions on stablecoin transactions, citing 'financial stability risks.' Meanwhile, Hong Kong's Securities and Futures Commission greenlit three new stablecoin issuers this week alone.

The great crypto divergence continues. While mainland China maintains its hardline stance, Hong Kong's pro-innovation approach keeps attracting blockchain firms fleeing Singapore's regulatory chill. Traders joke that the only stable thing in Chinese finance these days is the government's opposition to decentralized alternatives.

Will Hong Kong's crypto hub ambitions survive Beijing's long shadow? For now, the special administrative region keeps stacking wins—and quietly proving that not all Chinese policymakers fear the blockchain revolution.

Regulatory Differences: Mainland vs. Hong Kong

Stablecoins, typically pegged to the US dollar and backed by cash and short-term Treasury securities, serve as payment instruments within the blockchain ecosystem. Although Chinese authorities acknowledge the increasing use of these payment tools for trading in the cryptocurrency market and for cross-border transfers, they view them as risky financial instruments.

Prior to issuing directives to brokerages, Chinese financial regulators had warned citizens about scams conducted under the guise of stablecoin investments, particularly following alerts from authorities in Shenzhen. These warnings came amidst a broader campaign to inform the public about such risks nationwide.

Hong Kong’s Approach to Stablecoins

Under the “One Country, Two Systems” principle, Hong Kong has diverged from the mainland by promoting a framework targeting stablecoin issuers. The city’s ambition to become a hub for cryptocurrencies is spearheading a distinct regulatory regime, in contrast to the mainland’s stricter controls. This dichotomy accentuates regional competition and presents diverse channels for market participants.

Furthermore, over-the-counter cryptocurrency activities in China continue to remain robust. Chainalysis has projected OTC transactions to reach approximately 75 billion dollars in the first nine months of 2024. On an international scale, the United States takes a different approach from Beijing. Last month, President Donald Trump signed the GENIUS Act, the country’s first federal stablecoin law, crystallizing the split between deterrent regulations and supportive policies.