Shanxi Province's anti-illegal fundraising office issued a public risk warning against illegal financial activities under the guise of investing in 'RWA' and 'stablecoins', urging citizens to report suspected cases.

Executive Summary

The Shanxi Provincial Office for Combating Illegal Financial Activities has issued a public risk warning regarding illicit financial operations leveraging Real World Assets (RWA) and stablecoins. The office advises the public to report any suspected illegal financial activities related to these digital asset categories to local authorities and urges victims to seek assistance from public security organs. This directive underscores an uncertain market sentiment driven by ongoing regulatory scrutiny within China.

The Event in Detail

The warning from Shanxi province highlights a broader regulatory concern across China regarding digital assets. Officials in Shenzhen have previously issued similar advisories, noting that certain entities exploit concepts such as stablecoins to promote purported investment projects involving "virtual currencies," "virtual assets," and "digital assets." These schemes engage in false public advertising to solicit funds, leading to illegal activities including fundraising, gambling, fraud, pyramid schemes, and money laundering. The perceived lower volatility of stablecoins, compared to other cryptocurrencies, may contribute to their increasing association with illicit financial flows, further complicating China's long-standing ban on cryptocurrency trading and mining.

Market Implications

This regulatory warning reinforces China's consistently cautious stance on cryptocurrency activities, potentially influencing the adoption and perception of RWA and stablecoins within the country. The prevailing environment could present a challenging regulatory landscape for legitimate RWA and stablecoin projects if other regions adopt similar stringent interpretations of "illegal activities."

China's regulatory policy, as of 2025, explicitly prohibits individuals and enterprises from private cryptocurrency trading, while vigorously promoting the digital yuan (e-CNY) as the sole legal digital currency. All forms of cryptocurrency buying, selling, exchanging, and related financial services are classified as illegal financial activities, with domestic financial institutions and payment platforms barred from providing trading support. While holding digital assets is not directly prohibited, assets linked to illegal transactions face risks of freezing or confiscation. The digital yuan's pilot program has expanded to 26 regions, with a cumulative transaction amount exceeding 7.3 trillion yuan, demonstrating its increasing integration into various financial sectors, including retail payments and cross-border trade, as evidenced by China Petroleum's first cross-border digital yuan settlement for crude oil.

Furthermore, mainland authorities have restricted state-linked enterprises and financial institutions in Hong Kong from engaging in stablecoin and cryptocurrency businesses, preventing them from participating in licensing processes and project developments. Hong Kong's Stablecoin Bill, effective August 2025, mandates stringent licensing requirements, including full backing of stablecoins with high-quality assets, strict Know Your Customer (KYC) rules, and segregation of client funds. These restrictions aim to uphold financial security and capital controls, even as Hong Kong endeavors to establish itself as a digital asset hub.

Broader Regulatory Landscape

Despite the broad prohibition, a "comprehensive prohibition + pilot opening" model exists, particularly within the Guangdong-Hong Kong-Macao Greater Bay Area. This pilot program allows mainland residents to purchase compliant cryptocurrency asset products through licensed financial institutions in Hong Kong and Macao, subject to strict cross-border wealth management regulations. This approach reflects China's strategy of balancing financial security with limited avenues for regulatory innovation within specific, controlled frameworks.