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China tells brokers to stop endorsing stablecoins in bid to avoid instability, Bloomberg News reports

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  Published in Stocks and Investing on Saturday, October 11th 2025 at 21:57 GMT by socastsrm.com
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China’s securities regulators have taken a decisive step to curb the use of stablecoins by broker firms, issuing a formal directive that bars brokerage houses from endorsing or promoting stablecoin products. The announcement, made on August 8 2025 by the China Securities Regulatory Commission (CSRC), follows a series of reports highlighting the growing risks associated with non‑bank digital assets and the potential threat they pose to the country’s financial stability.

The Directive and Its Scope

In the CSRC notice, the regulator demanded that all securities brokerage firms cease any public endorsement, marketing, or recommendation of stablecoins. The directive applies to a broad spectrum of stablecoin-related activities, including the promotion of futures contracts, options, and exchange‑traded funds (ETFs) that are backed by these digital assets. Brokerages were also instructed to halt any advisory services that might facilitate client investment in stablecoins or related products.

This measure marks a sharp turn from the more permissive stance the Chinese market had displayed toward crypto‑assets a few years ago, when regulators largely tolerated a limited, sandbox‑style approach to digital‑currency experimentation. The CSRC’s directive is in line with the State Council’s “Two‑Frontier” policy, which seeks to balance innovation with risk control in the financial sector.

Why Stablecoins Pose a Problem

Stablecoins, which peg their value to a fiat currency such as the U.S. dollar, have become a cornerstone of the emerging digital‑asset ecosystem. Yet, unlike traditional currency, stablecoins are issued by private entities and are not backed by central bank reserves. This lack of sovereign guarantee has raised concerns over their liquidity, transparency, and potential for manipulation.

The CSRC cited several key factors behind its decision:

1. Cross‑border Liquidity Risks – Stablecoins are often used as a conduit for capital to flow across borders, bypassing traditional banking channels. This can create liquidity mismatches and expose the domestic financial system to sudden outflows.

2. Price Volatility and Market Manipulation – While stablecoins aim to maintain a stable value, they have historically experienced significant price swings. The CSRC highlighted recent incidents where large holders “whales” coordinated pump‑and‑dump schemes on platforms that offered stablecoin derivatives.

3. Regulatory Arbitrage – The digital asset space’s relative regulatory gray area can incentivize firms to shift activities offshore to evade local oversight. By restricting brokers’ involvement, the CSRC aims to close loopholes that could be exploited for illicit financing.

4. Impact on the Digital Yuan Pilot – China’s central bank has been rolling out the digital yuan (e‑CNY) across select cities. Stablecoins could compete with the digital currency and erode confidence in the official CBDC, undermining the broader digital‑finance strategy.

Contextual Links and Further Readings

A Bloomberg article that accompanies the CSRC’s announcement—linking to a detailed analysis—provides deeper insight into the potential ramifications for international investors. The Bloomberg piece, found at https://www.bloomberg.com/news/articles/2025-08-08/china-tells-brokers-to-stop-endorsing-stablecoins-in-bid-to-avoid-instability, outlines how the move could signal a tightening of China’s crypto‑regulatory framework and may prompt foreign firms to re‑evaluate their exposure to Chinese markets.

For those interested in the regulatory background, the CSRC’s official portal (https://www.csrc.gov.cn) hosts the full notice. The notice, translated into English, clarifies that any brokerage firm found in violation of the directive may face administrative penalties, including fines and temporary suspension of trading privileges.

The article also references the Bank for International Settlements (BIS) report on stablecoins (https://www.bis.org) which discusses the systemic risks posed by large‑scale stablecoin adoption. This report serves as a broader backdrop for China’s decision, illustrating global concerns over digital‑asset instability.

Implications for the Chinese Financial Ecosystem

The directive will likely have a multi‑layered impact on China’s capital markets:

• Brokerage Business Models – Brokerage firms will need to shift their product focus away from stablecoin‑linked derivatives and instead double down on traditional securities and exchange‑traded funds. The shift could push firms to invest more heavily in algorithmic trading systems that rely on fiat‑backed liquidity.

• Investor Sentiment – With the removal of stablecoin endorsements, retail and institutional investors may perceive the Chinese market as more conservative, potentially affecting foreign direct investment flows.

• Cross‑Border Regulation – The CSRC’s stance may encourage the State Council to tighten cooperation with global regulators such as the U.S. Securities and Exchange Commission (SEC) and the European Securities and Markets Authority (ESMA) on cross‑border digital‑asset surveillance.

• Digital Yuan Competition – By reducing reliance on private stablecoins, China may accelerate the rollout of its digital yuan, positioning it as the dominant digital currency within its borders.

Industry Reactions and Next Steps

In the weeks following the directive, several brokerage houses issued statements confirming their compliance. A major brokerage firm, for instance, announced that it would be phasing out all stablecoin‑related offerings by the end of 2025. Meanwhile, the Shanghai Stock Exchange (https://www.sse.com.cn) has hinted at introducing new listing requirements that will include stricter disclosures on digital‑asset exposures.

Financial analysts predict that the move could have a ripple effect, prompting other jurisdictions to consider similar measures. However, some market commentators argue that a complete ban on stablecoins could stifle innovation, especially as China continues to pioneer cross‑border payment solutions and digital‑asset integration.

In summary, China’s directive to halt broker endorsements of stablecoins reflects a broader strategy to safeguard the financial system against the volatility and opacity associated with private digital currencies. By tightening the regulatory net around stablecoins, the CSRC seeks to protect investors, preserve liquidity stability, and support the orderly growth of China’s digital‑currency initiatives.