Two years after the implementation of a substantial cryptocurrency ban, Chinese authorities are now taking steps to address the use of cryptocurrencies such as Tether in foreign exchange trading.
The Supreme People’s Procuratorate (SPP), the top national legal prosecution agency in mainland China, has cautioned the public against utilizing USDT as a medium for trading the Chinese Yuan with other fiat currencies. In collaboration with the State Administration of Foreign Exchange (SAFE), the SPP has released a joint statement, urging local officials to enforce more rigorous measures against the stablecoin in cross-border foreign exchange transactions.
The SPP and SAFE, in their statement, asserted the illegality of employing USDT as an intermediary for transactions between local and foreign currencies. The authorities emphasized the need for enhanced coordination among their local branches to effectively “punish fraudulent foreign exchange purchases, illegal foreign exchange transactions, and other foreign exchange-related illegal and criminal activities” in compliance with the law.
Meanwhile, Hong Kong has put forward a proposal to endorse and oversee “fiat-referenced stablecoins” (FRS), mandating issuers to secure a designated local license. A collaborative consultation paper released by the Financial Services and the Treasury Bureau alongside the Hong Kong Monetary Authority (HKMA) provides a clear definition of fiat-referenced stablecoins. The document stipulates that any companies “actively promoting the issuance of FRS to the public of Hong Kong” must obtain licensing from the HKMA.
The requirements for acquiring an HKMA license will encompass the complete backing of all circulating stablecoins with reserves, ensuring they are “at least equal to the par value.” Additionally, the criteria involve the segregation and secure storage of reserve assets, as well as the provision of transparent disclosure and regular reporting. The document explicitly mentions that algorithmic stablecoins will not be eligible for licensing.
