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China Tightens Crypto Crackdown, Targets RWA Token Issuance

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China has stepped up its crackdown on virtual currencies, banning unauthorized offshore issuance of yuan-pegged stablecoins and pledging stricter oversight of tokens backed by onshore assets, according to a notice published by the People’s Bank of China. The move reinforces Beijing’s long-standing prohibition on cryptocurrencies while drawing a clearer regulatory line around real-world asset (RWA) tokenization.

Authorities said virtual currency-related activities remain illegal financial operations and warned domestic entities—and their overseas affiliates—against issuing tokens abroad without approval. Regulators also barred both domestic and foreign firms from issuing offshore stablecoins pegged to the yuan, underscoring that such instruments effectively replicate functions of fiat currency. Financial institutions were cautioned not to provide banking or clearing services to crypto-related businesses.

While reiterating a hard line on cryptocurrencies, the notice introduces a notable distinction for RWA tokenization. Offshore issuance of tokens backed by Chinese onshore assets will be subject to strict vetting by relevant authorities, a shift some industry observers view as the beginnings of a formal legal framework. Analysts say the policy signals recognition of RWA activity—long operating in a gray area—while maintaining the central bank’s monopoly over digital money via the digital yuan.

Officials cited renewed speculative activity as justification for tighter measures. Market participants now await detailed implementation rules to determine whether regulated RWA issuance can proceed and produce viable use cases under China’s oversight.

China-Led Digital Currency Platform Sees Rapid Growth in Cross-Border Use

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Transactions on a China-backed cross-border digital currency platform have surged past $55 billion, signaling growing momentum behind efforts to reduce reliance on dollar-based global payment systems, according to a new report.

Analysis by the Atlantic Council shows that the prototype platform, known as mBridge, has now processed more than 4,000 cross-border transactions. The project is being tested by central banks in China, Hong Kong, Thailand, the United Arab Emirates and Saudi Arabia.

The cumulative transaction value reached $55.5 billion, representing an increase of roughly 2,500 times since the platform’s early testing phase in 2022. The digital yuan accounted for an estimated 95% of total transaction volume, underlining China’s dominant role in the system.

The digital yuan, also known as e-CNY, remains the world’s largest live central bank digital currency experiment. Recent figures from the People’s Bank of China showed the e-CNY has processed more than 3.4 billion transactions worth around 16.7 trillion yuan ($2.4 trillion), an increase of over 800% compared with 2023.

Chinese state media reported last month that holders of the e-CNY will begin earning interest on balances held in digital wallets or bank accounts later this year, a move widely interpreted as an effort to encourage broader adoption.

“Taken together, these developments point to a gradual expansion of the yuan’s internationalization through digital infrastructure,” said Alisha Chhangani, a policy analyst at the Atlantic Council.

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THE RACE IS ON
The rapid progress of mBridge is being closely monitored by policymakers worldwide. The project was originally overseen by the Bank for International Settlements, but the Switzerland-based institution unexpectedly withdrew from the initiative in late 2024.

While not a direct competitor, the BIS has since shifted its focus to a separate cross-border payments project involving seven major central banks, including the Federal Reserve Bank of New York, the European Central Bank (via the Banque de France), the Bank of Japan, Swiss National Bank and Bank of England. That group said this week it is accelerating testing in collaboration with more than 40 large commercial banks.

Despite that, mBridge remains well ahead in terms of real-world usage. In November, the UAE Ministry of Finance and the Dubai Department of Finance completed the first government transaction using a wholesale digital dirham on the platform.

Chhangani said mBridge is likely to increasingly target trade settlements, particularly in energy and commodities, sectors where China already plays a central commercial role. Rather than directly displacing the U.S. dollar, she said, the platform is creating parallel settlement infrastructure that reduces dependence on existing dollar-based systems.

“Project mBridge is unlikely to challenge dollar dominance outright, but it may incrementally erode it,” she said.

The People’s Bank of China did not immediately respond to requests for comment outside business hours.

J.P. Morgan Revises Stablecoin Growth Forecast, Cuts Projections by Half

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J.P. Morgan has lowered its forecast for the stablecoin market, predicting growth to reach only $500 billion by 2028—half the size projected by some analysts. The investment bank called trillion-dollar estimates “far too optimistic,” citing limited mainstream adoption of dollar-pegged stablecoins beyond crypto trading.

While stablecoins have attracted fintechs and banks seeking faster payments and settlements, their actual use in everyday transactions remains minimal. J.P. Morgan estimates that stablecoin payments account for just 6% of demand, roughly $15 billion, with the majority of activity concentrated in crypto trading, decentralized finance, and collateral usage.

This cautious outlook contrasts sharply with earlier projections from Standard Chartered, which expected the market to grow to $2 trillion by 2028, and Bernstein, which forecasted a $4 trillion market over the next decade.

J.P. Morgan noted several challenges limiting stablecoin adoption outside crypto markets, including a lack of broad use cases, fragmented regulation, and the global focus on national digital currencies or improvements to existing payment systems.

In line with this trend, China’s central bank continues to promote the digital yuan (e-CNY) for international use, while Ant Group—Alibaba’s affiliate—plans to seek a license for stablecoin issuance in Hong Kong. However, J.P. Morgan emphasized that the success of platforms like Alipay and WeChat Pay, or the rise of the e-CNY, do not necessarily predict stablecoin expansion.

“The idea that stablecoins will replace traditional money for everyday use is still far from reality,” the bank said.