While Chinese authorities continue prosecuting stablecoin use, Hong Kong is working on legalizing it.
More than two years after enforcing a significant crypto ban, Chinese authorities are moving to crack down on using cryptocurrencies like Tether (USDT) in foreign exchange trading. China’s Supreme People’s Procuratorate (SPP) — the highest national agency responsible for legal prosecution in mainland China — has warned the public against using USDT as an intermediary to trade the Chinese yuan with other fiat currencies. The agency issued a joint statement with the State Administration of Foreign Exchange (SAFE), urging local officials to implement stricter measures against the stablecoin in cross-border foreign exchange transactions.
In the statement, the SPP and the SAFE declared that using USDT as a medium of exchange between local and foreign currencies is illegal. The authorities said their local branches should improve coordination to “punish fraudulent foreign exchange purchases, illegal foreign exchange transactions and other foreign exchange-related illegal and criminal activities” in accordance with the law.
Meanwhile, Hong Kong has proposed accepting and regulating “fiat-referenced stablecoins” (FRS), with issuers required to obtain a specific local license. A joint consultation paper from the Financial Services and the Treasury Bureau and the Hong Kong Monetary Authority (HKMA) spells out the definition of fiat-referenced stablecoins and requires any companies that “actively market their issuance of FRS to the public of Hong Kong” to be licensed by the HKMA.
