China Expands Crypto Crackdown to Target Tokenized Assets and Yuan-Pegged Stablecoins

Chinese financial regulators have significantly widened the scope of the country's cryptocurrency ban to include emerging financial technologies, explicitly targeting real-world asset tokenization platforms and offshore stablecoins pegged to the Chinese yuan. This policy reinforcement, detailed in joint statements from the People's Bank of China (PBOC), Ministry of Public Security, and State Administration of Foreign Exchange, represents Beijing's most aggressive move against digital assets since the 2021 blanket prohibition on cryptocurrency transactions.

The expanded enforcement specifically prohibits:

1. Tokenization of real-world assets including real estate, commodities, and securities
2. Creation or distribution of offshore stablecoins pegged to the yuan
3. Facilitation services for mainland Chinese citizens accessing these instruments

This escalation occurs amid broader capital control efforts, with authorities citing concerns over "financial security risks" and "illegal fundraising activities." The timing coincides with heightened regulatory scrutiny following December 2025 cyberattacks that exposed vulnerabilities in domestic platforms.

Market Context

China's crypto prohibition dates to 2017, but enforcement had previously focused primarily on exchange operations and mining activities. The inclusion of tokenized assets marks recognition of how blockchain technology enables fractional ownership of traditionally illiquid assets—a market projected to reach $16 trillion globally by 2030 according to Boston Consulting Group. Meanwhile, offshore yuan-pegged stablecoins have gained traction as vehicles for circumventing China's $50,000 annual foreign exchange cap, with Chainalysis estimating over $5.8 billion in such stablecoins circulating outside mainland jurisdiction.

Strategic Implications

1. Capital Flight Prevention: By targeting yuan-pegged stablecoins, authorities aim to close loopholes enabling capital flight, which reached $138 billion in 2025 according to Institute of International Finance data
2. Monetary Policy Control: Tokenized assets threaten the PBOC's ability to manage money supply and credit conditions through traditional banking channels
3. Offshore Enforcement: The policy explicitly covers extraterritorial services targeting Chinese citizens, signaling potential action against Hong Kong-based platforms

Global crypto markets reacted immediately, with yuan-pegged stablecoin issuers suspending services for mainland IP addresses. Major tokenization projects with Chinese asset exposure saw valuation drops of 12-18% within hours of the announcement. The regulatory stance contrasts sharply with Hong Kong's pro-innovation framework, potentially creating jurisdictional arbitrage opportunities.

Financial institutions monitoring the development note that while the ban halts near-term innovation, it may accelerate blockchain adoption in approved channels like the PBOC's digital yuan project, which processed $250 billion in transactions during Q4 2025. However, the prohibition creates significant hurdles for Chinese entities exploring institutional-grade tokenization—a sector where global investment reached $1.7 billion in 2025 according to Galaxy Digital research.

This regulatory escalation underscores Beijing's continued prioritization of financial stability over technological innovation in digital assets, setting clear boundaries for blockchain development within China's economic framework. The move will likely reshape offshore yuan liquidity pools and force global stablecoin issuers to reassess exposure to Chinese capital flows.

Sources: The Block, Reuters, PBOC Notice Archive