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China’s New Rules Reshape Web3 and Digital Asset Landscape
China’s recent regulatory crackdown underscores its unwavering commitment to maintaining strict control over digital currency, limiting the growth of private digital assets in favor of the state-backed digital yuan (e-CNY).
Sovereignty Over Innovation: The Hong Kong Web3 Challenge
As first reported by the Financial Times, Beijing’s measures form part of a dual strategy aimed at preventing private digital currencies from rivaling the e-CNY. Hong Kong, positioning itself as a regional Web3 hub with initiatives like stablecoin pilots and asset tokenization since August 2025, faces regulatory boundaries when mainland authorities suspend projects by major tech firms.
The central concern remains clear: monetary sovereignty. Private stablecoins, including those pegged to offshore yuan (CNH), risk diluting the e-CNY’s dominance, which is currently being tested among hundreds of millions of mainland users.
Broader Regulatory Clampdown Extends to Tokenization
Beyond stablecoins, the China Securities Regulatory Commission (CSRC) has instructed local brokerages to halt certain Real World Asset (RWA) tokenization efforts in Hong Kong. This indicates a comprehensive tightening of regulations affecting digital asset innovation.
Hard Assets and Fiat Control: China’s Dual Monetary Strategy
Analysts link this strict digital currency control to China’s broader geopolitical tactics. Alongside halting stablecoin projects, China has expanded export restrictions on rare earth minerals—critical resources for advanced manufacturing and U.S. defense technologies.
Experts like macroeconomist Luke Gromen argue that China’s leverage over rare earth supply challenges the technological base of the U.S. military-industrial complex, which underpins the dollar’s global hegemony. Domestically, China protects yuan stability through the e-CNY. Internationally, it gains geopolitical influence by controlling strategic mineral exports.
This dual approach sends a strong message to the Web3 community: geopolitical realities are reshaping demand for decentralized assets like Bitcoin and other hard-money alternatives.
New Rules for Web3 Companies in Asia
For global Web3 firms, China’s tightened stance presents significant obstacles. Innovation is embraced only when it aligns with national strategy—primarily supporting the e-CNY and China’s digital infrastructure.
Hong Kong-based companies will face increased oversight, likely restricting tokenizable assets and permissible payment frameworks. For blockchain projects aiming to tap into mainland markets, strict regulatory alignment and acceptance of China’s uncompromising monetary sovereignty will be essential.
