China’s latest move to shut the door on stablecoins and tokenised real world assets is not a rejection of blockchain technology itself. It is a continuation of a long running strategy to keep absolute control over money, capital flows, and financial behaviour.
While the policy language frames the decision as risk management and financial stability, the underlying motivation is much simpler. Decentralised finance introduces choice, and choice is incompatible with a system that relies on top down monetary authority.
This ban fits neatly into China’s broader financial governance model, where innovation is allowed only when it strengthens the state’s grip rather than weakening it.
Why Beijing Sees Stablecoins and RWAs as a Threat
At its core, stablecoins solve a problem that China does not want solved. They allow individuals and companies to move value quickly, cheaply, and across borders without permission.
For a country that enforces capital controls as a core economic policy, this is not a technical inconvenience but a structural threat.
Bitcoin already created discomfort by enabling peer to peer value transfer without intermediaries, but stablecoins go further by removing volatility from the equation.
A yuan pegged or dollar pegged token gives users something functionally close to cash, but programmable and globally portable.
In practical terms, this undermines the ability of the state to monitor and restrict how money moves in and out of the country.
Tokenised real world assets add another layer of concern. RWAs allow ownership of assets such as bonds, commodities, or property to be represented digitally and traded globally.
Once assets become tokenised, enforcing jurisdictional boundaries becomes harder. A token does not recognise borders in the same way a traditional financial instrument does.
For Chinese authorities, this creates multiple risks at once. Capital flight becomes easier to execute and harder to detect.
Domestic savings can be redirected into offshore markets without passing through approved channels. Monetary policy becomes less effective when parallel systems emerge outside central bank oversight.
This is why the response has been regulatory rather than technological. China has never rejected blockchain outright.
On the contrary, it actively promotes blockchain in supply chains, data management, and government systems. What it rejects is any financial application that weakens centralised control.
The People’s Bank of China has consistently argued that privately issued digital money fragments monetary sovereignty.
From Beijing’s perspective, allowing stablecoins or RWAs to exist alongside state controlled systems would dilute the authority of the yuan and reduce the effectiveness of policy tools such as liquidity management and credit allocation.
Central Bank Digital Currency as the Acceptable Alternative
While banning decentralised financial instruments, China is simultaneously accelerating its own digital currency strategy. The digital yuan is not a contradiction to this policy. It is the end goal.
A central bank digital currency gives the state everything stablecoins offer, but without sacrificing control. Transactions are programmable. Compliance is built in. Visibility is total. Monetary policy can be enforced at a granular level, down to individual wallets if needed.
By blocking private stablecoins and tokenised assets, China clears the path for the digital yuan to become the only legally recognised digital money within its system. This is not about technological superiority.
It is about narrative control and institutional trust. The state wants citizens and businesses to associate digital finance with official infrastructure, not open networks.
From a strategic standpoint, this approach also allows China to experiment with advanced monetary tools.
Smart contracts tied to digital wallets can enforce spending conditions, automate tax collection, or distribute stimulus in a targeted way. None of this is possible if alternative financial rails are allowed to coexist freely.
The same logic applies to RWAs. Tokenisation under a decentralised framework creates markets that regulators cannot fully contain.
Tokenisation under a state approved framework becomes another extension of existing financial infrastructure. The difference is not the technology, but who controls it.
This explains why blockchain projects aligned with government objectives continue to receive support, while anything resembling decentralised finance is systematically restricted. The message is clear. Innovation is welcome, autonomy is not.
Conclusion
China’s ban on stablecoins and real world asset tokenisation is not a retreat from digital finance. It is a declaration of boundaries. The state is signalling that financial innovation must reinforce sovereignty, not challenge it.
Stablecoins and RWAs threaten capital controls, weaken monetary authority, and reduce the effectiveness of central planning. That makes them unacceptable, regardless of their efficiency or utility.
At the same time, the push for a central bank digital currency shows that China understands the future of money is digital. It simply insists that this future remains centrally governed.
For global markets, this reinforces a growing divide. One path prioritises openness and permissionless systems.
The other prioritises control and state oversight. China has made its choice, and it is unlikely to change course.
Contributor: Lydicius