Transcript of the December Politburo Meeting on the Economy; Wang Yongli Explains Why China Is Cracking Down on Stablecoins
Domestic Demand Remains the Top Priority
The Politburo held its December meeting today. This meeting typically sets the stage for the Central Economic Work Conference, suggesting that the conference will be convened very soon.
After reading the transcript, here are some of my personal highlights:
Macroeconomic policy emphasizes “strengthening counter-cyclical and cross-cyclical adjustments.”
Both this year and last, there has been a focus on “implementing more proactive fiscal policies and appropriately accommodative monetary policies” and “carrying out more forceful and effective macroeconomic policies.”
However, a key distinction lies in the wording: last year’s call to “enhance extraordinary counter-cyclical adjustments” has been replaced this year with “leverage the integrated effects of existing and incremental policies, and strengthen counter-cyclical and cross-cyclical adjustments.” This suggests that the central bank may be adopting a more cautious stance toward interest rate and reserve requirement ratio cuts.The meeting emphasized the need to “prioritize domestic demand and build a strong domestic market,” indicating that this will be the top priority for 2026.
The meeting outlined eight key principles, which are often listed in order of priority. That’s why I think the domestic demand will still be at the center stage:
Prioritize domestic demand and build a strong domestic market.
Drive innovation and accelerate the cultivation of new growth drivers.
Deepen reforms to enhance the momentum and vitality of high-quality development.
Expand opening-up and promote win-win cooperation across multiple fields.
Advance coordinated development, fostering urban-rural integration and regional synergy.
Uphold the “dual-carbon” goals to drive a comprehensive green transition.
Put people’s livelihoods first and strive to deliver more practical benefits to the public.
Safeguard against risks and actively yet prudently address key area vulnerabilities.
The meeting reiterated the need to “better balance domestic economic work and international economic and trade struggles.”
This formulation first appeared in the Politburo meeting in late April this year, coinciding with Trump’s announcement of tariff measures against China. Although a temporary agreement has been reached between China and the U.S., it only delays tensions for one year, meaning uncertainties may persist. Thus, in 2026, it remains necessary to “better balance domestic economic work and international economic and trade struggles.”The meeting stressed the importance of adopting a correct view of political performance, tailoring economic measures to local conditions, and achieving high-quality, sustainable development.
This point was not mentioned in last year’s meeting, and I believe it reflects an effort to prevent local governments from launching short-term projects for political achievements. Sort of countering “involution.”
The meeting highlighted the need to “resolve issues related to overdue payments to enterprises and migrant workers’ wages,” which was not mentioned in the previous year.
Notably, there was no mention of the stock or property markets.
Last year’s communication emphasized the need to “stabilize the property and stock markets,” whereas this year’s did not. It will be worth observing whether this is addressed in the upcoming Central Economic Work Conference.
Beyond the Politburo meeting, on November 28, the People’s Bank of China held a coordination mechanism meeting on cracking down on virtual currency trading speculation. The meeting emphasized
Virtual currencies do not possess the same legal status as fiat currency, are not legal tender, should not and cannot be circulated and used as money in the market, and all business activities related to virtual currencies constitute illegal financial activities. Stablecoins are a form of virtual currency and currently cannot effectively meet requirements such as customer identification and anti-money laundering, posing risks of being used for illegal activities, including money laundering, fundraising fraud, and unauthorized cross-border fund transfers.
虚拟货币不具有与法定货币等同的法律地位，不具有法偿性，不应且不能作为货币在市场上流通使用，虚拟货币相关业务活动属于非法金融活动。稳定币是虚拟货币的一种形式，目前无法有效满足客户身份识别、反洗钱等方面的要求，存在被用于洗钱、集资诈骗、违规跨境转移资金等非法活动的风险。
This continues the regulatory logic in the 2021 notice issued by ten departments, “Further Preventing and Disposing of Risks from Virtual Currency Trading Speculation,” which already clarified that virtual currencies such as Bitcoin, Ethereum, and Tether (USDT) “are not legal tender” and that related business activities must be banned.
Overall, this move by the central bank continues and reinforces China’s strict regulatory framework toward virtual currencies, though I have not seen much discussion on the underlying reasons. On December 5, Wang Yongli, former Vice President of the Bank of China and SWIFT’s first Mainland China Director, published an article on his WeChat public account that, in my view, provides a clear explanation of the central bank’s perspective. Thus, I decided to share a translation of his analysis.
In short, Wang Yongli argues that China halted stablecoins primarily due to the overwhelming dominance of U.S. dollar stablecoins. They already account for over 99% of the global crypto-asset trading market in both value and volume, supported by the dollar’s central role in international finance and America’s relatively accommodating regulatory environment. This has created an entrenched system that is difficult to challenge.
If China were to blindly follow the U.S. in developing a yuan stablecoin internationally, it would lack competitiveness and market space. Domestically, the anonymous, cross-border, and high-frequency nature of crypto-assets could undermine China’s foreign exchange controls, tax administration, and financial stability. There is also a risk that a yuan stablecoin could become subordinate to the dollar-based system, threatening monetary sovereignty and national security.
Furthermore, U.S. efforts to legislate stablecoins are primarily aimed at reinforcing the dollar’s global dominance rather than addressing systemic risks. The proposed U.S. legislation itself faces inherent challenges, including volatility in reserve asset values, potential arbitrage opportunities, and practical difficulties in enforcement.
Therefore, China has chosen to curb stablecoin and other virtual currency activities. Instead, its strategy is to capitalize on its existing lead in the digital yuan (e-CNY), pursuing an independent and sovereign path for its national digital currency development.
Below is the transcript of today’s Politburo meeting I made with the help of AI
The Political Bureau of the Communist Party of China (CPC) Central Committee on Monday held a meeting to analyze and study the economic work of 2026 and review a set of regulations on the CPC’s leadership over law-based governance in all respects. The meeting was chaired by Xi Jinping, general secretary of the CPC Central Committee.
The meeting noted that this year has been of significant importance in the process of Chinese modernization. The Party Central Committee, with Comrade Xi Jinping at its core, has united and led the entire Party and Chinese people of all ethnic groups to rise to challenges and strive forward, coordinating both domestic and international situations and implementing more proactive macro policies. Major economic and social development goals will be successfully achieved. China’s economy has maintained overall stability with steady progress, new quality productive forces have developed steadily, reform and opening-up have taken new steps, positive progress has been made in defusing risks in key areas, people’s livelihood has been better safeguarded, and overall social stability has been maintained. Over the past five years, we have effectively responded to various shocks and challenges. China’s hard power in economy, science and technology, and national defense, as well as soft power in culture, institutions, and diplomacy, has notably improved. The 14th Five-Year Plan is approaching successful completion, achieving a good start in the new journey toward the Second Centenary Goal.
The meeting emphasized that next year’s economic work must be guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, thoroughly implement the spirit of the 20th Party Congress and all plenary sessions of the 20th Central Committee, fully and accurately implement the new development philosophy, accelerate the construction of a new development pattern, and focus on promoting high-quality development. We must adhere to the general principle of seeking progress while maintaining stability, better coordinate domestic economic work with international trade struggles, better coordinate development and security, implement more proactive macro policies, enhance the forward-looking, targeted, and coordinated nature of policies, continuously expand domestic demand and optimize supply, improve increments and revitalize existing stocks, develop new quality productive forces according to local conditions, advance the construction of a unified national market in depth, continue to prevent and defuse risks in key areas, focus on stabilizing employment, enterprises, markets, and expectations, promote effective qualitative improvement and reasonable quantitative growth of the economy, maintain social harmony and stability, and achieve a good start for the 15th Five-Year Plan.
The meeting pointed out that next year’s economic work should adhere to seeking progress while maintaining stability and improving quality and efficiency, continue to implement a more proactive fiscal policy and moderately accommodative monetary policy, leverage the integrated effects of existing and incremental policies, intensify counter-cyclical and cross-cyclical adjustments, and effectively improve macroeconomic governance efficiency. We must persist in prioritizing domestic demand and building a strong domestic market; persist in innovation-driven development and accelerate the cultivation of new growth drivers; persist in deepening reforms and enhance the momentum and vitality of high-quality development; persist in opening-up and promote win-win cooperation across multiple fields; persist in coordinated development and advance urban-rural integration and regional synergy; persist in “dual carbon” leadership and drive comprehensive green transformation; persist in putting people’s wellbeing first and deliver more tangible benefits to the people; persist in safeguarding bottom lines and prudently defuse risks in key areas.
The meeting emphasized strengthening Party leadership, especially the centralized and unified leadership of the Party Central Committee. We must establish and practice a correct view of political achievements, tailor economic work to local conditions, and achieve high-quality, sustainable development. We must formulate sound national and local 15th Five-Year Plans and special plans. We must ensure the supply of important consumer goods for people’s livelihood at year-end and the beginning of the new year, care for the production and lives of people in difficulty, resolve issues of unpaid corporate debts and migrant workers’ wages, and safeguard the bottom line of people’s wellbeing. With a constant sense of responsibility, we must ensure work safety and resolutely prevent and contain major and extraordinarily serious accidents.
The meeting noted that formulating the “Regulations on the Leadership of the Communist Party of China in Comprehensively Advancing Law-Based Governance” is of great significance for further improving the scientific, institutionalized, and standardized level of the Party’s leadership in comprehensively advancing law-based governance, building a more complete socialist rule of law system with Chinese characteristics, and building a higher-level socialist rule of law country.
The meeting emphasized that we must uphold and strengthen Party leadership, implement the Party’s leadership in legislation, guarantee law enforcement, support the judiciary, and take the lead in observing the law, and improve the level of law-based governance and law-based administration. We must fully implement Xi Jinping Thought on the Rule of Law, firmly grasp the correct political direction of comprehensively advancing law-based governance, strengthen confidence in the rule of law, and unswervingly follow the path of socialist rule of law with Chinese characteristics. We must encourage leading officials at all levels to enhance their respect for the rule of law and reverence for the law, coordinate scientific legislation, strict law enforcement, impartial administration of justice, and universal law observance, comprehensively advance the rule of law in all aspects of the country’s work, and provide strong legal guarantees for comprehensively advancing national rejuvenation and building a strong country through Chinese modernization.
Below is the full translation of Wang’s article:
Since May 2025, the United States and Hong Kong have raced to advance stablecoin legislation, triggering a global upsurge in regulatory efforts for stablecoins and crypto-assets (also referred to as “cryptocurrencies” or “virtual currencies”). This frenzy has attracted a multitude of institutions and capital eager to issue stablecoins or invest in crypto-assets. It has also sparked heated debate within China on whether it should vigorously promote stablecoin legislation and the development of a RMB-denominated stablecoin (including offshore). Furthermore, following the US legislative move to prohibit the Federal Reserve from issuing a digital dollar, whether China should continue advancing its digital yuan (e-CNY) has also become a contentious topic.
For China, this involves a choice of direction and pathway for national monetary development. Against the backdrop of the global proliferation of USD stablecoins, increasingly sharp and complex international relations, and intensifying global currency competition, the question of how the Renminbi can innovate, safeguard national security, and achieve the strategic goals of establishing a strong currency and a financially powerful nation has profound implications. It necessitates a calm analysis, accurate assessment, and timely decision-making. China can neither remain indifferent nor indecisive, nor can it blindly follow trends and risk making a fundamental, catastrophic error in strategic direction.
Subsequently, the People’s Bank of China (PBOC) announced that it would optimize the positioning of the digital yuan within the monetary hierarchy (adjusting its earlier classification as M0—a point the author has consistently advocated for, see Wang Yongli’s public account article from January 6, 2021, “The Digital Yuan Should Not Be Positioned as M0”). It also plans to further refine the management system for the digital yuan (establishing a Digital Yuan International Operations Center in Shanghai responsible for cross-border cooperation and use, and a Digital Yuan Operations Management Center in Beijing responsible for system construction, operation, and maintenance) to promote and accelerate its development.
On November 28th, the PBOC and 12 other departments jointly held a coordination meeting for the mechanism combating virtual currency trading speculation. The meeting noted that, influenced by multiple factors, speculative trading in virtual currencies has recently resurged, related illegal and criminal activities have occurred, and risk prevention faces new situations and challenges. It emphasized that all units must deepen coordination, continue to uphold prohibitive policies against virtual currencies, and persistently crack down on illegal financial activities related to them. It explicitly stated that stablecoins are a form of virtual currency, and their issuance, trading, and related business activities are likewise illegal and subject to crackdowns. This disappointed those who believed China would promote a RMB stablecoin and correspondingly relax the ban on virtual currency (crypto-asset) trading.
Thus, China’s policy orientation of accelerating digital yuan development while resolutely curbing virtual currencies, including stablecoins, has been made entirely clear. Of course, this policy orientation remains subject to intense debate both domestically and internationally, and consensus is far from unified.
So, how should one view this major policy stance of China?
Here, we first address why China resolutely halted stablecoins. A separate article will discuss how to accelerate the innovative development of the digital yuan.
I. Limited Space and Opportunity for Non-USD Stablecoins
Since Tether launched the USD-pegged stablecoin USDT in 2014, USD stablecoins have been in operation for over a decade, forming a comprehensive international operational system that has essentially captured the entire crypto-asset trading market. They account for over 99% of both the market capitalization and trading volume of all fiat-backed stablecoins globally.
This situation arose, on one hand, because the US dollar is the international reserve currency with the strongest liquidity and most comprehensive supporting ecosystem, making USD-pegged stablecoins the easiest to be accepted globally. On the other hand, it is also the result of the United States’ long-standing permissive policy towards Bitcoin and other crypto-assets and USD stablecoins, rather than leading the international community to strengthen necessary regulation for the fundamental interests of all. Even this year’s US push for stablecoin and crypto-asset legislation is largely motivated by the belief that USD stablecoins will increase global demand for dollar assets like US Treasuries, lower financing costs for the US government and society, and enhance the dollar’s international dominance. It is a choice made to bolster US support for and control over USD stablecoins against potential domestic impacts, prioritizing the maximization of national interests with little consideration for mitigating the international risks of stablecoins.
Given the US’s vigorous promotion of USD stablecoins, for other countries or regions to launch non-USD fiat-backed stablecoins, aside from potentially having some market space and opportunity within their own sovereign jurisdiction or on their issuing institution’s e-commerce platforms, it is already extremely difficult to compete with USD stablecoins at the international level. The development space and practical significance are minimal. Lacking a robust ecosystem, application scenarios, distinct advantages relative to USD stablecoins, or the ability to attract traders and trading volume, the return on investment for issuing non-USD fiat stablecoins is unlikely to meet expectations. Under the trend of tightening legislative regulation globally, they would struggle to survive.
II. The US Stablecoin Legislation Still Faces Numerous Issues and Challenges
Following the success of President Trump’s second election campaign, his strong advocacy for Bitcoin and other crypto-assets fueled a new international wave of crypto trading speculation, driving rapid growth in USD stablecoin trading and a swift expansion of stablecoin market capitalization. While this increased demand for US dollars and Treasuries, enhancing the dollar’s international status, and brought substantial profits to the Trump family and his associates in the crypto circle, it also posed new shocks to the monitoring of global dollar circulation and the stability of the US traditional financial system. Simultaneously, crypto-asset transactions facilitated by USD stablecoins have become a new, harder-to-prevent mechanism for the US to extract global wealth, posing a serious threat to the monetary sovereignty and wealth security of other nations.
Consequently, the US accelerated legislation for USD stablecoins. However, this legislation primarily adheres to an “America First” principle, pursuing the maximization of US and even specific group interests at the expense of other nations’ interests and the common good of the world.
After the USD stablecoin legislation takes effect, institutions not approved and licensed by US regulators will find it difficult to issue and operate USD stablecoins in the US (which is why Tether announced it would apply for a US-focused USDT license). Stablecoin issuers subject to US regulation must meet KYC, AML, CFT, and other regulatory requirements, screen customers against government watchlists, report suspicious activities, and have systems capable of freezing or intercepting specific stablecoins upon law enforcement orders. Issuing stablecoins requires holding no less than 100% of reserves in regulator-approved dollar assets (including cash, short-term Treasuries, Treasury-backed repo agreements, etc.), with US customer funds held in US banks and not transferable overseas. Paying interest or yields on stablecoins is prohibited, and over-issuance and self-dealing are strictly controlled. Reserve assets must be custodied with independent, regulator-approved institutions and audited at least monthly with published reports. This will significantly enhance the value stability of stablecoins relative to the dollar, strengthen their payment functionality and compliance, while weakening their investment attributes and potential for illicit use. It will substantially increase regulatory costs for stablecoins, correspondingly reducing the high profits possible in an unregulated state.
The US stablecoin legislation officially took effect on July 18th, but it still faces numerous challenges: although it specifies the range of reserve assets (bank deposits, short-term Treasuries, Treasury-backed repos, etc.), since these mainly include assets like Treasuries with fluctuating market prices, even if reserves are sufficient at issuance, a subsequent drop in Treasury prices could lead to reserve shortfalls; if different issuers do not have identical reserve asset structures and there is no central bank backstop, it means their USD stablecoins are not equivalent, creating arbitrage opportunities and posing challenges for regulation and market stability; even if stablecoins are not over-issued initially, allowing DeFi to engage in stablecoin lending could similarly lead to the creation and over-issuance of stablecoins, unless it is purely a matching service without proprietary trading; getting stablecoin issuers outside traditional finance to meet regulatory requirements is not easy, and regulation itself remains a significant challenge.
More importantly, the earliest and most fundamental demand for stablecoins stems from the need for pricing and settlement in the borderless, decentralized, 24/7 trading of crypto-assets on blockchains. Precisely because Bitcoin and other crypto-assets fail to meet the fundamental requirement of a currency to serve as a stable measure of value and a medium of exchange—namely, that the money supply must adjust in line with changes in the total value of tradable wealth requiring monetary pricing and settlement to maintain stable purchasing power—and exhibit extreme price volatility relative to fiat currencies (thus posing significant risks if used as collateral or strategic reserves), they cannot function as true circulating currency. This gave rise to fiat-backed stablecoins pegged 1:1 to fiat currency (hence, Bitcoin et al. can only be considered crypto-assets; calling them “cryptocurrencies” or “virtual currencies” is inaccurate; translating the English “Token” as “coin” or “token” is also inappropriate—it should be directly transliterated as “tongzheng” [通证] and clearly defined as an asset, not a currency). The emergence and development of fiat-backed stablecoins have introduced fiat currency and more real-world assets (RWA) onto blockchains, powerfully supporting on-chain crypto-asset trading and development, serving as a bridge connecting the on-chain crypto world with the off-chain real world. This, in turn, strengthens the integration and influence of the crypto world over the real world, potentially vastly expanding the scope, speed, scale, and volatility of global wealth financialization and financial transactions, accelerating the transfer and concentration of global wealth towards a few nations or groups. Under these circumstances, failing to strengthen global coordinated regulation over the issuance and trading of stablecoins and crypto-assets is extremely risky and poses a significant danger. Precisely because of this, the development surge of stablecoins and crypto-assets vigorously promoted by the US Trump administration has already generated a massive bubble and latent risks, which is unsustainable. The international community must be highly vigilant!
III. Stablecoin Legislation May Severely Backfire on Stablecoins
An outcome beyond the anticipated effects of stablecoin legislation is this: after fiat-backed stablecoins are brought under legislative oversight, it will inevitably lead to the regulation of crypto-asset trading that uses these stablecoins for pricing and settlement, including chain-native assets like Bitcoin and tokenized RWAs. This will have an extremely profound impact on stablecoins.
Before crypto-assets gained legislative oversight and compliance protection, licensed financial institutions like banks found it difficult to directly participate in crypto-asset trading, clearing, custody, and related activities, ceding the opportunity to private organizations outside traditional finance. Due to the lack of regulation and associated costs, existing stablecoin issuers and crypto-asset trading platforms became highly profitable ventures, exerting increasing pressure on banks and the traditional financial system, forcing governments and monetary authorities like the US to accelerate stablecoin legislation. However, once crypto-assets are legislatively regulated and compliance-protected, banks and other financial institutions will undoubtedly fully participate. Among them, payment institutions like banks can directly promote the on-chain operation of fiat deposits (deposit tokenization), which could completely replace stablecoins as a new bridge and hub connecting the crypto and real worlds. Existing exchanges for standardized financial products like stocks, bonds, money market funds, and ETFs can also promote more on-chain trading of these products as RWAs. Having sufficiently regulated entities like banks serve as the main conduits for on-ramping and connecting the two worlds is more conducive to implementing current regulatory requirements for stablecoins, applying the principle of “same activity, same regulation” to all institutions, and reducing the impact and risk of crypto-asset development on the existing monetary and financial system. This trend has already emerged first in the US and is rapidly intensifying, becoming unstoppable.
Consequently, stablecoin legislation may severely backfire on or even overthrow stablecoins (see Wang Yongli’s public account article from September 3, 2025, “Stablecoin Legislation May Severely Backfire on Stablecoins”).
Under these circumstances, for other countries to imitate the US in vigorously promoting stablecoin legislation and development is, in fact, not a rational choice.
IV. China Should Not Follow the US Stablecoin Path
China already possesses a globally leading advantage in mobile payments and the digital yuan. Promoting a RMB stablecoin offers no domestic advantage and would have little development space or influence internationally. It is even more inadvisable to follow the USD stablecoin path and vigorously push for the development of both onshore and offshore RMB stablecoins.
More importantly, Bitcoin and other crypto-assets and stablecoins can utilize borderless blockchains and trading platforms to achieve global, 24/7 non-stop trading and settlement. While efficiency is greatly enhanced, their highly anonymous, high-frequency, and efficient global flows, coupled with a lack of coordinated international supervision and difficulty meeting KYC, AML, CFT, and other regulatory requirements, present clear risks and real cases of their use in money laundering, fraudulent fundraising, illegal cross-border fund transfers, and other illicit activities. Given that USD stablecoins already dominate the crypto-asset trading market, and the US wields greater control or influence over major global blockchain systems, crypto-asset trading platforms, and crypto-to-dollar conversions (as evidenced by the US’s ability to trace, freeze, and confiscate crypto-asset accounts of certain entities and individuals, and to penalize or even arrest operators of some platforms), for China to follow the US path in developing a RMB stablecoin would not only struggle to challenge the international status of USD stablecoins but could even turn the RMB stablecoin into a vassal of the USD stablecoin system. This would impact national tax administration, foreign exchange management, and cross-border capital flows, posing a serious threat to RMB sovereignty and the stability of the monetary and financial system. Facing increasingly acute and complex international situations, China must prioritize national security, maintain high vigilance and strict control over crypto-asset trading speculation, including stablecoins, rather than simply pursuing efficiency gains and cost reductions. It needs to accelerate the improvement of relevant regulatory policies and legal foundations, focus on key links like information and fund flows, strengthen information sharing among departments, further enhance monitoring and tracking capabilities, and severely crack down on crypto-asset-related illegal and criminal activities.
Of course, while resolutely halting stablecoins and cracking down on virtual currency trading speculation, China must also earnestly accelerate the innovative development and widespread domestic and international application of the digital yuan, establish an internationally leading advantage for the digital yuan, forge a Chinese path in digital currency development, and actively explore the establishment of a fair, reasonable, and secure new international monetary and financial system.
Based on careful consideration of the multiple factors above, it is not difficult to understand why China has chosen to resolutely curb virtual currencies, including stablecoins, while firmly advancing and accelerating the development of the digital yuan.
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