China's "Crypto Winter" is becoming increasingly severe

Written by: Suvashree Ghosh, Bloomberg

Translated by: Saoirse, Foresight News

Editor’s Note: Recently, the global crypto market has remained sluggish, and China has once again tightened regulations on cryptocurrencies and stablecoins, explicitly banning the issuance of RMB-pegged stablecoins abroad without approval, directly impacting the progress of Hong Kong’s digital asset center development. This article focuses on the market response and industry impact following policy implementation, revealing the core contradictions between capital controls and crypto innovation. Amid industry reshuffling and accelerated capital withdrawal, the crypto sector is returning to pragmatic development. The regulatory boundaries and future directions are worth ongoing attention.

November 26, 2025, a cryptocurrency exchange storefront in Hong Kong. Photo: Lam Yik/Bloomberg

Setbacks in the Digital Realm

Last year, an increasing number of crypto industry commentators believed that China’s stance on digital assets might shift.

Since PBOC Governor Pan Gongsheng proposed that the RMB could challenge the dollar’s dominance, there have been ongoing reports of a “policy warming.”

But on February 7, all those expectations came to a halt.

During the latest crypto market crash, China tightened regulations on cryptocurrencies and the tokenization of real assets, banning domestic institutions from issuing digital tokens overseas and prohibiting the issuance of RMB-pegged stablecoins abroad without approval. The government stated this was to prevent risks to monetary sovereignty.

Angela Ang, Head of Asia-Pacific Policy and Strategic Partnerships at blockchain intelligence firm TRM Labs, said: “China’s attitude toward stablecoins is at best tentative, and in recent months, it has become increasingly冷淡.”

She added that the central bank’s announcement “completely dashed any hopes of launching offshore RMB stablecoins in the short term — Hong Kong is definitely out, and likely other regions as well.”

This is a significant setback for Hong Kong’s long-standing goal of becoming a digital asset hub.

Last June, Hong Kong’s Financial Secretary Christopher Hui indicated that, based on regulatory requirements, the possibility of linking Hong Kong stablecoins to the RMB was not ruled out. Now, it is widely believed that he will close that door entirely.

During Trump’s presidency, the supply of USD stablecoins surged

Source: Artemis Analytics

As Angela Ang noted, signs of this regulatory tightening had already been evident.

As early as August last year, China had instructed local brokerages and related institutions to cease publishing stablecoin research reports and hosting promotional seminars to curb overheated market sentiment.

Patrick Tan, Chief Legal Counsel at blockchain intelligence firm ChainArgos, said: “Last week’s policy announcement ‘eliminated the uncertainty surrounding private issuance of RMB stablecoins. Issuers now know exactly where the red line is.’”

Institutions applying for licenses can only focus on issuing stablecoins pegged to the Hong Kong dollar.

Bloomberg previously reported that last year, up to 50 companies in Hong Kong planned to apply for stablecoin licenses, including tech giants Ant Group and JD.com. However, according to a Financial Times report in October, after Beijing’s intervention, these companies were forced to suspend their stablecoin plans.

Neither Ant Group nor JD.com responded to requests for comment.

As of this Tuesday, Hong Kong has issued licenses to 11 crypto exchanges and approved 62 companies to conduct digital asset trading, including Zhongguo Securities, Guotai Junan Securities (Hong Kong), and Tianfu Futures, among others with Chinese backgrounds.

However, industry insiders worry that without access to the RMB, the entire strategic layout may become futile.

“The issue has never been about Hong Kong’s regulatory framework but whether China will tolerate the circulation of RMB-denominated tools outside its control,” said Patrick Tan. “Capital controls and the liberalization of stablecoins are fundamentally mutually exclusive.”

Market Data Continues to Weaken

Perpetual Bitcoin futures open interest steadily declining

Source: Coinglass

Since October last year, Bitcoin perpetual futures open interest has been declining and has yet to rebound, indicating a lack of confidence in this rebound. Data from Coinglass shows it has fallen about 50% from its October high.

Capital outflows: $3.3 billion

Bloomberg Intelligence data shows that since the market crash in early October, investors have withdrawn approximately $3.3 billion from US Ethereum ETFs, with over $500 million withdrawn this year alone. The assets under management for Ethereum ETFs have fallen below $13 billion, the lowest since July last year.

Industry Perspectives

“The market is consolidating around truly effective areas. Even well-funded native crypto venture capital firms are shifting heavily toward fintech, stablecoin infrastructure, and prediction markets, making it difficult for other sectors to gain attention.”

— Santiago Roel Santos, Founder and CEO of crypto private equity firm Inversion

Crypto industry VC funds are shifting focus to higher-performing areas such as stablecoin infrastructure and on-chain prediction markets, and expanding into related adjacent fields.