Shanghai holds talks on stablecoin policy amid crypto ban

In a sign of changing winds in China’s strict crypto stance, Shanghai’s top state-owned assets regulator has held high-level talks about stablecoins and digital currencies, an unusual move in a country where crypto trading is officially banned. According to Reuters, the Shanghai State-owned Assets Supervision and Administration Commission convened around 60 to 70 local government officials this week to discuss policy responses to the rapidly evolving world of blockchain-based payments.

“We need to have greater sensitivity to emerging technologies and enhanced research into digital currencies,” He Qing, the regulator’s director, told the gathering, as quoted in an official post on the agency’s WeChat account. While China has cracked down on crypto trading and mining since 2021 over financial stability concerns, the Shanghai meeting suggests at least parts of the government are examining ways to manage, adapt to, or even compete with global stablecoin developments.

Why Shanghai’s interest matters?

Shanghai is China’s main international financial hub and has often served as a testing ground for regulatory pilot programmes. Moves there can signal broader policy shifts. Reuters notes that calls have been growing among Chinese firms and experts to develop a yuan-pegged stablecoin to counter the rise of US dollar-linked cryptocurrencies.

Companies like JD.com and fintech giant Ant Group have reportedly urged China’s central bank to greenlight yuan-based stablecoins. According to Reuters, these firms plan to apply for stablecoin licenses in Hong Kong, where dedicated stablecoin legislation is set to take effect on August 1. “Given China’s strong fintech ecosystem, it has the potential to be a key player in shaping the future of blockchain-based payments,” Nick Ruck, director at LVRG Research, told Reuters.

Global context

Stablecoins, cryptocurrencies typically pegged to fiat currencies like the dollar, have seen explosive growth worldwide, offering cheaper and faster transactions than traditional systems. According to Reuters, ARK Investment Management estimates the global transaction value of stablecoins hit $15.6 trillion last year, surpassing even Visa in volume. In the United States, where regulations are clearer, giants such as Amazon and Walmart are reportedly exploring stablecoin launches.

Asia is also moving forward. South Korea’s government has pledged to allow won-based stablecoins while building the necessary regulatory framework, although its central bank has warned of a need for gradual adoption.

Policy hurdles in China

Despite the Shanghai meeting’s open tone, big barriers remain. Reuters reports that at the meeting, a policy expert from Guotai Haitong Securities gave officials a detailed overview of stablecoins, their history, and global regulatory approaches, while also laying out opportunities and policy challenges.

Separately, Yang Tao, deputy director at the National Institution for Finance and Development, suggested China should test yuan-based stablecoins in both the Shanghai Pilot Free Trade Zone and Hong Kong simultaneously.

But analysts note that China’s strict capital controls are likely to be a major hurdle for any stablecoin initiative. China’s central bank governor Pan Gongsheng last month warned that the boom in digital currencies and stablecoins poses “huge challenges” for financial regulation, according to Reuters.

Crypto ban still in place

Mainland China banned cryptocurrency trading and mining in 2021 to limit risks to its financial system and curb capital flight. That ban remains in force. While discussions on stablecoins have heated up recently, the official outlook for other cryptocurrencies is far less clear.

Meanwhile, outside of China’s borders, crypto markets continue to boom. Bitcoin recently soared to a new record high above $118,000 on Friday, Reuters reported. Shanghai’s cautious but notable discussion of stablecoin policy suggests that while China’s crypto ban stands firm, authorities are now paying closer attention to the global shifts in digital finance and may be preparing for how to respond.