New Developments in China's Cryptocurrency Regulation: Stablecoins and RWA Highlighted for the First Time, the US Dollar Digital System Could Become the Biggest Variable

March 10 News: China reiterated its comprehensive ban on cryptocurrency activities in a joint notice released on February 6, explicitly prohibiting unauthorized RMB-pegged stablecoins and classifying most real-world asset tokenization (RWA) activities as illegal. However, this policy did not trigger significant market fluctuations. Auros Chief Business Officer Jason Atkins stated that the muted market response indicates investors have already digested China’s long-standing tough stance against decentralized crypto systems.

Notably, this notice directly mentions the RWA tokenization sector for the first time. Some observers see this as a sign of regulatory escalation, but Atkins believes it is more a proactive risk prevention measure. Chinese regulators clearly want to avoid a repeat of the 2021 Bitcoin mining industry rapid expansion followed by emergency crackdowns. As global RWA tokenization continues to grow, Beijing is attempting to regulate before systemic capital flow risks emerge.

Meanwhile, a detail in the policy document also drew attention: stablecoins are being distinguished from the “virtual currency” definition for the first time and described as tools capable of “partially performing the functions of fiat currency.” Some market participants speculate this could leave room for future licensing of stablecoins in Hong Kong. However, Atkins pointed out that even if such pathways exist, implementation will take time, and regulators are more focused on improving payment and settlement infrastructure efficiency rather than encouraging crypto innovation.

He also highlighted a broader macro trend. With the U.S. pushing stablecoin legislation and the widespread use of USD stablecoins in digital transactions, the global digital asset trading system is gradually becoming dollar-denominated. Under this structure, every purchase of USD stablecoins indirectly increases demand for U.S. Treasuries.

Historical data shows that China held over $1.3 trillion in U.S. Treasuries in 2013, making it the largest foreign holder at the time. However, China has been steadily reducing its holdings in recent years, now down to about $680 billion. Atkins believes that in an environment of rapid stablecoin adoption, demand for dollar assets may grow naturally through digital trading networks, and this trend is difficult for any single country to fully block.

Additionally, he emphasized a often-overlooked key factor: liquidity. Whether in stablecoin payment networks or RWA markets, without market makers continuously providing quotes, maintaining price stability, and reducing slippage, regulatory frameworks alone cannot support an efficient market system.

Under the interplay of regulatory policies, the digitalization of the dollar, and liquidity structures, China’s new stance on crypto regulation could influence not only the domestic market but also reshape the global digital asset landscape over the longer term.