Stablecoin Warning Triggers Reflection: The Current Development Status of Blockchain and Virtual Money in China

Recently, financial regulatory departments in many places in our country have successively issued risk warnings, calling on the public to be vigilant against illegal financial activities under the banner of "stablecoin." Although the concept of stablecoin has been around for a long time, it has only recently attracted widespread attention. This attention stems from the passage of the "Genius Act" in the United States, as well as news about certain large e-commerce platforms planning to issue stablecoins in Hong Kong.

As a result, some self-media outlets have begun to frequently produce content related to stablecoins and other virtual money. Against the backdrop of limited traditional investment channels, these emerging phenomena are often more attractive. However, there has always been controversy in the virtual money sector, and many projects that were previously banned are starting to stir again, raising the alert of regulatory authorities.

In-depth analysis reveals that the attitude of regulatory authorities in mainland China towards Virtual Money is not solely based on the consideration of combating illegal activities, but more importantly, because mainland China currently does not have a conducive environment for the survival of Virtual Money. In short, China supports the development of Blockchain technology, but does not support the development of Virtual Money.

Attitudes of Financial Regulatory Authorities in Various Regions

Financial management departments in many regions have issued risk warnings, including in first-tier cities and economically developed areas. The wording and focus of these warnings vary slightly, reflecting different attitudes and perceptions towards Virtual Money in different places.

The statement from a first-tier city is relatively neutral, pointing out the widespread attention of the market towards "digital currencies represented by stablecoins", while reminding the public to be vigilant against illegal organizations using this to conduct illegal fundraising and fraud.

The suggestions from another economically developed province were more cautious, positioning concepts like stablecoins as "related concepts," implying that they may not comply with current financial policies.

Other places have also issued similar notices, focusing on illegal fundraising activities conducted under the name of stablecoins. This national wave of warnings inevitably reminds one of the previous major policy adjustments regarding Virtual Money.

The Distinction Between "Chain Circle" and "Coin Circle"

As early as 2013, our central bank and other departments issued warnings about the risks of Bitcoin. Since then, the domestic crypto field has gradually split into two camps: the "blockchain circle" and the "coin circle."

The "chain circle" mainly focuses on the development of blockchain technology, especially consortium chains and public chains. This circle is primarily composed of technical personnel and has a certain level of professional threshold.

The "coin circle" encompasses various businesses related to virtual money, including investment, trading, issuance, and more. In contrast, the "coin circle" has a lower entry barrier, attracting more ordinary investors.

In September 2021, China clearly defined "the coin circle" business as illegal financial activities and imposed strict crackdowns. This decision effectively ended the debate between "the chain circle" and "the coin circle": China supports the development of Blockchain technology but strictly prohibits activities related to Virtual Money. It is worth noting that, although there is no explicit ban on individual investments in Virtual Money, such investment activities are not legally protected, and regulatory authorities have cut off the main channels for Virtual Money investments.

Current Status of Virtual Money in China

Understanding China's social governance model makes it easy to comprehend the policy orientation of "want Blockchain, not Virtual Money." Although from a technical perspective, Blockchain and Virtual Money are inseparable, especially the development of public chains relying on token incentives. However, the real policy environment dictates that China's Blockchain development must proceed under the condition of no Virtual Money.

For practitioners truly engaged in web3 development, adapting to this reality or seeking overseas development has become an unavoidable choice. This policy environment also means that China's Blockchain development may face unique challenges and opportunities.