The characterization on the 28th shattered all the illusions about stablecoins that had existed in the industry for the past few years.
On the surface, it is a regulatory policy, but in reality, it is a statement about monetary power.
The US uses the GENIUS Act to treat stablecoins as an extension of the digital dollar. Domestically, this same characterization is used to classify stablecoins as illegal.
Both sides are very clear about what they are doing.
01. "Stablecoins are a form of virtual currency."
This isn't the first time virtual currencies have been mentioned, but it's the first time that the official stance has explicitly equated stablecoins with Bitcoin and Ethereum.
In the past few years, many projects have pinned their bets on the assumption that "stablecoins are not cryptocurrencies." They thought that as long as they had dollar reserves and no volatility, they could tell a story to regulators.
This assumption has now completely collapsed. Having reserves doesn't change the nature of cryptocurrency; neither does having no volatility.
What does this mean? It means that cross-border payments, supply chain finance, and on-chain settlement are all subject to red lines within China.
Is this bad news? For many teams, it certainly is. But at least now we don't have to guess anymore.
02. Why is China reversing the trend when the world is embracing stablecoins?
If you fast forward to the second half of this year, you'll see a truly magical scene.
In July, US President Trump signed the GENIUS Act. The goal of this act is straightforward: to formally bring stablecoins such as USDT and USDC into the US financial regulatory system.
At the same time, what was Hong Kong doing? Launching a stablecoin licensing system.
What is the EU doing? It has issued the world's first compliance license to the USDC.
Major banks in Japan and Europe are betting on their own local currency stablecoins.
Then in November, the People's Bank of China held a meeting and directly announced that stablecoins are equivalent to virtual currencies and are all illegal.
The whole world is embracing it, but we're choosing to go backwards.
why is that?
The decision-makers saw a problem: when all countries are vying for stablecoin licenses, it means that this is no longer just a simple payment tool, but a new battleground for monetary hegemony.
The authorities do not want foreign currency hegemony to take root here.
Was this choice right or wrong? We won't comment. But as industry professionals, we must accept this reality.
03. The Truth About Stablecoins: A Game About the Dollar
Let's look at some data first.
As of the end of November, the total market capitalization of global stablecoins was approximately $300 billion. Of which:
- USDT: 184 billion, accounting for 60%
- USDC: 75 billion, accounting for 25%
All other stablecoins combined: less than 15%
Two American companies control more than 80% of the global stablecoin market.
Let's look at some deeper data.
USDT's reserves include more than $100 billion in U.S. Treasury bonds.
The USDC's reserves include more than $20 billion in U.S. Treasury bonds.
what does that mean?
This means that every time a stablecoin is issued, it is financing the U.S. Treasury.
We think we're using a "decentralized digital dollar," but in reality, we're contributing to the U.S. national debt.
Looking back at 2020, the global stablecoin market capitalization was only $6 billion. By the end of 2021, that figure had surged to $150 billion, and it has now surpassed $300 billion.
How did this explosive growth come about?
This is not a spontaneous market response, but rather the result of a shift in US policy. Starting in 2021, the US logic changed: rather than preventing digital currencies, it would be better to turn them into a digital form of the US dollar.
Therefore, the core of the GENIUS Act of July this year is not to regulate stablecoins, but to confirm that stablecoins are part of the US dollar.
Now you understand why it's said that things can't be said domestically, right?
This is not a technical issue; it is a geopolitical issue.
04. The shadow of 2015 still hangs over the heads of decision-makers.
The central bank's press release repeatedly emphasized: money laundering, fraud, and illegal cross-border fund transfers.
But if these are the only issues, why not leave a loophole for "legal individual ownership," just like with Bitcoin?
The real concern is much deeper: the life or death of the foreign exchange management system.
Imagine this scenario.
If USDT were legally circulated in China, anyone could open their wallet, exchange RMB for USDT, and then transfer it overseas on-chain.
It doesn't go through banks or the State Administration of Foreign Exchange, and leaves no record.
What does this mean? It means that the entire foreign exchange management system has been rendered ineffective.
Do you remember what happened in 2015? Under the pressure of RMB devaluation, nearly $1 trillion in foreign exchange reserves were lost in one year.
What methods were used for capital flight back then? Underground banks, false trade reports, and overseas insurance policies. Complex, slow, and costly.
With USDT, none of this is necessary. A mobile wallet solves everything.
The next crisis will be 10 times more destructive than the one in 2015.
This is what the decision-makers are really trying to prevent.
So why is China vigorously promoting the digital yuan on the one hand, while simultaneously cracking down on stablecoins?
Because every transaction of the digital yuan is controllable and traceable, but USDT is a black box.
This is the watershed between the two routes.
05. Why is Hong Kong allowed to do this?
Hong Kong launched its stablecoin licensing system on August 1, which many people see as a window of opportunity.
Don't be too happy yet.
The core of Hong Kong's stablecoin license boils down to two words: offshore.
What does "offshore" mean? It means not touching mainland users, not touching RMB, and not allowing domestic funds to have any interaction with stablecoins.
Someone asked: I register in Hong Kong, host the server in the US, and only do technical outsourcing. Is that okay?
Can't.
The characterization on November 28th has already blocked this path. Who are your users? Where does your traffic come from? Where does your funding go?
If any link in the project is connected to the domestic area, the project is considered high-risk.
Who gets the Hong Kong licenses? They get them from big banks like Standard Chartered and HSBC. They handle offshore USD settlements, serving multinational corporations overseas.
Currently, 80 companies have applied. The Hong Kong Monetary Authority (HKMA) has stated that the first batch of applications will be announced in early 2026, and only a single-digit number will be approved.
So don't put all your eggs in one basket in Hong Kong.
06. Two Paths for Entrepreneurs
The situation is now very clear.
Route 1: Go to sea completely
If you want to continue working on stablecoins, be prepared that the entire business chain is located overseas.
It's not enough to just register an overseas entity. It means your users are overseas, your funds are overseas, and your team should ideally be overseas as well.
Don't think you can circumvent the risks by saying "I'm just making a wallet" or "I'm just making an SDK." Stablecoins are now equivalent to cryptocurrencies. If you're doing technical work for cryptocurrencies, you're responsible for the risks yourself.
Route Two: Shift to Digital Yuan
The digital yuan ecosystem offers numerous opportunities. Payments, wallets, merchant services, application scenarios, and cross-border settlements are all areas explicitly supported by the government.
As for Hong Kong? You can keep an eye on it, but don't get your hopes up. That's for banks to play with, not for entrepreneurs to exploit loopholes.
To put it bluntly, this assessment is telling you: this path is not viable in China.
Go global when you need to, transform your business when you need to. Don't waste time in the gray areas.
In the long run, this is a protracted battle over monetary sovereignty, so everyone should be prepared.
