China’s central bank has just drawn the contours of its digital-finance strategy for the next five years. The sequencing is unmistakable: clear the ground first, then rebuild the system. The rhythm has been unusually coherent.
On October 27 at the Financial Street Forum in Beijing, People’s Bank of China Governor Pan Gongsheng delivered the first decisive cut – an unambiguous “market clean-up.” Days later, at Hong Kong FinTech Week and the International Financial Leaders Investment Summit (November 3–4), PBOC Vice Governor Lu Lei supplied the institutional architecture. Read together, the message is not regulatory tightening. It is a structural reset.
Pan’s remarks in Beijing were unusually direct. The PBOC, he said, will continue working with law-enforcement bodies to “crack down on domestic virtual-currency operations and speculation,” while “closely monitoring the development of overseas stablecoins and dynamically assessing their potential impact on financial stability.”
This was not about shutting doors. It was about drawing the baseline. More importantly, it signaled something deeper: Under China’s policy logic, stablecoins are not part of the long-term design.
The reason is straightforward.
Stablecoins were created as a stopgap – private instruments designed to provide a “stable unit of account” in a market dominated by highly volatile crypto assets. Most rely on reserves in dollars, commercial paper or short-term treasuries.
But the structural risks are inherent: opaque backing, unverifiable redemption capacity, cross-border anti-money-laundering (AML) and know-your-customer (KYC) compliance blind spots and governance asymmetry.
Stablecoins were never the end state. They were a workaround – a bridge used only when sovereign digital currencies did not exist.
Given the current situation, it is very likely that China hopes to launch a digital currency ahead of the United States, without adopting or relying on a stablecoin mechanism. The reasoning is straightforward: dollar stablecoins are already strong, and the US can effectively control them.
The stablecoins US Dollar Coin (USDC) and Tether (USDT) have essentially become the United States’ shadow digital dollars. If China were to copy the stablecoin model and issue a Chinese yuan (CNY) stablecoin, it might end up wasting time, unable to compete with dollar stablecoins or capture meaningful market share – and could even further strengthen the momentum of dollar stablecoins.
The United States, for its part, is not in a hurry to roll out a digital dollar precisely because dollar stablecoins have already become a highly useful instrument. From China’s perspective, moving directly to a full-fledged digital yuan may offer a more advantageous development path.
China does not need that bridge. When a country moves directly from physical money to a central-bank digital currency – and has the ability to build the full stack of payments, settlement, identity, compliance and cross-border coordination – the detour through private stablecoins becomes redundant.
China is not suppressing stablecoins; it simply has no need for them. No private token is required to substitute for state money. No systemic trial-and-error is needed to discover which models fail. In a sovereign-led stack, stablecoins fade naturally into the margins.
The real pivot came from Lu Lei’s speech in Hong Kong. He described a “dual-platform, dual-engine” system: the one anchored in the digital yuan and the other in trusted on-chain assets. The former covers payments, settlement, financial inclusion and account infrastructure; the latter supports asset tokenization, trading, real-world-asset integration and the on-chain migration of production factors.
The two do not compete; they complement. This is the first time the PBOC has used institutional language – not technical jargon – to articulate its Web3 vision. The implication is clear: China’s future Web3 will not be a patchwork of spontaneous experiments. It will be national infrastructure.
Pan’s Beijing speech added the institutional scaffolding for the digital yuan. The PBOC will “further optimize the digital-renminbi management framework, clarify its position in the monetary hierarchy and support more commercial banks becoming operating institutions.”
Equally important is the completion of the “dual-centre CBDC layout”: Shanghai now hosts the Digital Yuan International Operations Center, focused on cross-border cooperation and application scenarios; Beijing houses the Digital Yuan Operations Management Center, responsible for system development, operation and maintenance. As Pan put it, “Shanghai leads internationalization; Beijing anchors the foundational system.” It is a statement not only of function but of sovereignty.
Photo: Jeffrey Sze
On cross-border finance, Lu was even more explicit. The multi-central-bank mBridge platform, he argued, is not a technology showcase but a shift in rules, enabling “direct, instant and final” settlement between jurisdictions without routing through legacy centralized networks. For the first time, regional settlement could move from path dependence to institutional autonomy. Asia’s financial plumbing may well pivot from this point onward.
Seen through this lens, the so-called “rectification” acquires its proper context. It is not contraction but reconstruction; not hindering innovation but clearing space for institutionalised innovation. When the payment layer, asset layer and cross-border layer are all being upgraded simultaneously, the system needs a clean foundation, not ambiguous corners. The sequencing – risk first, platforms second, architecture last – is precisely how China traditionally builds financial governance.
Taken together, these signals converge into a single conclusion: China’s digital-finance architecture is taking shape. The shift is from stock management to incremental construction, from passive adaptation to proactive design, from fragmented exploration to system-level integration.
For industry, the question is no longer “What is allowed?” but “How can we build in a compliant way that plugs into national-level infrastructure?” The next wave of opportunity is not in regulatory grey zones or arbitrage. It is in the new structural positions being carved out – payments, identity, settlement, real world asset (RWA) tokenization, supply-chain finance and cross-border interoperability.
For individuals, the short-term experience is adjustment. The long-term gain is a digital-financial environment that is safer, more transparent and more structurally stable. New asset forms, new applications and new financial behaviors will grow naturally out of this architecture.
The conclusion, therefore, is disarmingly simple: This is not retreat. It is a change of lanes. Not a closure, but a reordering.
And the road ahead for Web3 will be brighter, wider, and far more regulated.
Jeffrey Sze is the chairman of Habsburg Asia and the general partner of Archduke United LPF and Asia Empower LPF, specializing in high-end art transactions and real world asset tokenization operations. In 2017, he secured a cryptocurrency exchange license in Switzerland.
