Earthquake in the cryptocurrency sector: Hong Kong takes action on USDT, and stablecoins in the mainland are banned
The cryptocurrency sector is facing a dual regulatory storm, with Hong Kong making major adjustments to USDT, while the mainland adopts a 'zero tolerance' approach to stablecoins. This combination of regulatory measures not only changes the market landscape of stablecoins both domestically and internationally but also highlights China's differentiated regulatory strategy of 'strict control domestically and normative guidance offshore.' Let's discuss its impacts and the underlying logic.
Mainland: From restrictions to criminal prosecution, a resolute 'zero tolerance' attitude
On November 28, 2025, the central bank, along with 13 departments, clearly stated that stablecoins fall under the category of virtual currencies, and their related businesses are included in the illegal financial activity regulatory framework. This is the first time at the national level that stablecoins have been legally defined. The regulatory measures are very stringent, adopting a 'full-chain blockade' strategy. It is strictly prohibited to issue or trade stablecoins domestically, cutting off the financial connections between banks, payment institutions, and stablecoins, clearing overseas platforms' traffic channels within the mainland, and even holding individuals involved in illegal stablecoin activities criminally accountable.
From January to October 2025, significant achievements were made in mainland China's crackdown on illegal activities related to stablecoins, with 342 criminal cases resolved and 12,000 suspected transactions intercepted, involving funds totaling 4.6 billion yuan. This series of measures has completely plugged the loopholes for stablecoins used in money laundering and illegal cross-border fund transfers, while also paving the way for the promotion of the digital yuan. In 2025, the cross-border payment scale of the digital yuan has already surpassed 10 trillion yuan, showing rapid development momentum.
Hong Kong: Strictly regulating USDT to create a compliant ecosystem
Hong Kong has implemented significant reforms to USDT based on the stablecoin regulations that took effect in August. Since the issuer of USDT, Tether, did not meet licensing requirements, Hong Kong has fully restricted retail trading of USDT, allowing only professional investors to participate. As of December, no stablecoin institutions in Hong Kong have obtained licenses. The Hong Kong Monetary Authority has set high thresholds to filter compliant institutions, such as requiring non-bank institutions to have a paid-in capital of 25 million HKD and liquidity reserves to reach 100%.
The purpose of Hong Kong's regulation is to guide stablecoins to serve the real economy, with a focus on applications in cross-border trade, supply chain finance, and other fields. For instance, Caesar Travel has enabled overseas tourists to use stablecoins for real-time conversion to yuan, increasing settlement efficiency by 90%, with very significant results.
Market landscape: Domestic and international differentiation, changes in capital flow
The mainland's 'zero tolerance' policy has led to a sharp decline in the trading scale of domestic stablecoins. Previously, USDT held a 90% share in the domestic virtual currency OTC market, but this landscape has been completely disrupted. Capital is now flowing towards the digital yuan or compliant offshore financial instruments. Meanwhile, Hong Kong's strict regulation of USDT has attracted institutions like Sequoia Capital, and the market landscape is undergoing profound changes.
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