Stablecoins are not recognized as "prohibited items" in the criminal law sense.

Zhao Binghao, the director of the FinTech and Rule of Law Research Institute at China University of Political Science and Law, pointed out that the central bank has clearly classified stablecoins as virtual currencies, and this definition does not mean that stablecoins are considered "prohibited items" in the criminal law sense.

Recently, the People's Bank of China held a coordination meeting to combat virtual currency trading speculation, clearly stating for the first time that stablecoins are a form of virtual currency. The meeting pointed out that stablecoins cannot effectively meet the requirements for customer identity verification, anti-money laundering, and other aspects, and there is a risk of being used for illegal activities such as money laundering, fundraising fraud, and illegal cross-border fund transfers.

Zhao Binghao, the director of the Financial Technology and Law Research Institute at China University of Political Science and Law, interprets this by stating that the central bank's definition does not classify stablecoins themselves as "prohibited items" in the legal sense, but rather includes the operational, intermediary, and clearing activities related to stablecoins within the scope of regulation.

The central bank's qualitative assessment of stablecoins continues China's consistent strict regulatory policy towards virtual currencies. The meeting reiterated that virtual currencies do not have the same legal status as fiat currencies, do not possess legal tender status, and should not and cannot circulate as currency in the market. Director Zhao Binghao clarified the legal boundaries of this regulatory characterization: the focus is on rectifying various business activities surrounding stablecoins, rather than prohibiting stablecoins themselves.

Stablecoins can achieve instant settlement similar to the US dollar on-chain, bypassing traditional banking systems and foreign exchange controls. If used on a large scale, they may weaken the pricing and settlement position of the local currency. Against the backdrop of tightening domestic regulations, technologies and liquidity related to stablecoins are likely to migrate more towards offshore and regional financial centers. Domestic institutions deploying stablecoins overseas will find their "imagination space will be infinitely reduced," and will be more limited to practical application scenarios such as cross-border payments and supply chain finance.

With the central bank's explicit inclusion of stablecoins in the regulatory framework for virtual currencies, it has become an industry consensus that the development space for stablecoins domestically will continue to shrink.