China’s 2025 Crackdown Targets Stablecoins, Pressures Hong Kong Crypto Market
China’s People’s Bank of China (PBoC) led a multi-agency enforcement push on November 28, 2025, that refocused the country’s crypto crackdown on stablecoins. Thirteen government bodies coordinated to reaffirm that virtual currencies are not legal tender and to close loopholes enabling capital flight and illicit cross-border transfers. Regulators highlighted weak KYC/AML controls in stablecoin operations and warned financial institutions to halt activities such as real-world-asset tokenisation. The move aims to protect the yuan and accelerate adoption of the state-backed e-CNY while suppressing private stablecoins. Immediate market fallout included sharp declines in Hong Kong-listed crypto and fintech stocks — Yunfeng Financial Group fell over 10%, Bright Smart and OSL dropped roughly 7% and 5% respectively — and elevated trading volumes as investors rebalanced positions. The action follows Hong Kong’s May 2025 stablecoin legislation and has already prompted major firms to pause local stablecoin initiatives. For traders: expect higher regulatory risk premium for Asia-focused crypto assets, increased volatility in Hong Kong equities linked to digital assets, and a widening policy divergence between China’s controlled digital currency model and more open markets. Monitor PBoC guidance and Hong Kong policy responses for short-term triggers; longer term, watch adoption signals for the e-CNY and any further enforcement that could constrain regional stablecoin liquidity.
Bearish
The crackdown directly targets stablecoins — instruments central to cross-border transfers and liquidity in Asian crypto markets — and signals coordinated, multi-agency enforcement. Historically, Chinese regulatory clampdowns (2017, 2021) produced immediate sell-offs in crypto-related equities and higher volatility across spot and derivatives markets. This action increases regulatory risk for projects and firms operating in or targeting Greater China, reduces available stablecoin liquidity regionally, and raises compliance costs, producing downward pressure on token prices and related stocks in the short term. In the medium-to-long term, persistent suppression of private stablecoins coupled with promotion of the e-CNY may shift flows into state-backed instruments and reduce offshore stablecoin activity from China, fragmenting liquidity and sustaining a risk premium for Asia-exposed crypto assets. Traders should expect elevated volatility, tighter spreads for regional stablecoins, and greater sensitivity to regulatory announcements; risk management and decreased leverage are prudent until the enforcement stance is clarified.