Bloomberg: The Recovery Is Just an Illusion—China’s Crypto Regulation Enters a Deep Winter

Digital Setback

Last year, an increasing number of cryptocurrency commentators speculated that China might be turning a corner on digital assets.

Since People’s Bank of China (PBOC) Governor Pan Gongsheng outlined a vision in which the renminbi (RMB) could challenge the U.S. dollar’s dominance, the word “recovery” has been repeatedly invoked.

Yet on February 7, the music stopped.

Amid the latest cryptocurrency crash, China tightened restrictions on cryptocurrencies and tokenization of real-world assets (RWAs), banning domestic entities from issuing digital tokens overseas and prohibiting unapproved offshore issuance of RMB-pegged stablecoins—citing risks to monetary sovereignty.

Angela Ang, Head of APAC Policy & Strategic Partnerships at blockchain intelligence firm TRM Labs, stated: “China’s consideration of stablecoins has, at best, been tentative—and over recent months, that stance has grown increasingly cold.”

Ang noted that the PBOC’s statement “clearly ends any near-term hope of launching offshore RMB-pegged stablecoins—not in Hong Kong, and likely not anywhere else either.”

This marks a major setback for Hong Kong’s long-standing efforts to establish itself as a digital asset hub. As recently as June last year, Christopher Hui, Hong Kong’s Financial Secretary, declined to rule out the possibility of pegging the city’s stablecoins to the RMB, subject to regulatory requirements. But it is now safe to assume he will close that door himself.

Source: Artemis Analytics

As Ang pointed out, all this was foreshadowed. As early as August last year, China instructed local brokers and other institutions to stop publishing research reports and hosting seminars promoting stablecoins—aiming to dampen market enthusiasm.

Patrick Tan, General Counsel at blockchain intelligence firm ChainArgos, said last week’s announcement “eliminates the lingering uncertainty in the market regarding privately issued RMB-pegged stablecoins.” He added: “Issuers now clearly understand where the red lines lie.”

Firms applying for licenses must now compromise and pivot toward HKD-pegged stablecoins instead.

Bloomberg previously reported that up to 50 companies planned to apply for stablecoin licenses in Hong Kong last year. According to a Financial Times report from October, these included tech giants Ant Group and JD.com—both of which suspended their stablecoin initiatives following intervention from Beijing.

Neither Ant Group nor JD.com responded to requests for comment.

As of Tuesday, Hong Kong has granted licenses to 11 cryptocurrency exchanges and authorized 62 firms to offer digital asset trading services to clients. The list includes mainland-backed institutions such as CMB International Securities Ltd., Guotai Junan Securities (Hong Kong), and TFI Securities and Futures Ltd.

Yet concerns persist that all these efforts may ultimately falter without access to the RMB.

Tan remarked: “The issue has never been Hong Kong’s regulatory framework—it’s whether China will tolerate RMB-denominated instruments circulating outside its control. Capital controls and stablecoin freedom are fundamentally incompatible.”

Source: Coinglass

The open interest in Bitcoin perpetual futures has failed to rebound from its October decline—highlighting the lack of confidence underpinning the recent rally. According to Coinglass data, current open interest stands roughly 50% below its October peak.

Key Data: $3.3 Billion

According to data compiled by Bloomberg Intelligence, investors have withdrawn approximately $3.3 billion from U.S. spot Ethereum ETFs since the October crash—with over $500 million pulled out year-to-date. The data shows that Ethereum ETF assets under management have fallen below $13 billion—the lowest level since July last year.

Industry Perspective

“Markets are consolidating around what’s truly working. Even crypto-native venture capital firms sitting on large amounts of dry powder are aggressively pivoting toward fintech, stablecoin applications, and prediction markets. Everything else is struggling to gain traction or attention.”

— Santiago Roel Santos, Founder and CEO of crypto private equity firm Inversion

Crypto-native VCs are shifting focus toward higher-performing areas—such as stablecoin infrastructure and on-chain prediction markets—and expanding into adjacent sectors.