China may tighten regulation of the stablecoin market

The Chinese authorities are considering tightening regulation of cryptocurrencies, in particular the stablecoin market, after the collapse of the Terra ecosystem.

State edition of China Economic Daily reportedthat the country’s government may impose even tougher rules on cryptocurrencies and stablecoins due to the collapse of the Terra ecosystem.

Journalist Li Hualin detailed the collapse of UST and LUNA in his article, explaining the operation and weaknesses of algorithmic stablecoins. He called this incident a “black swan” and noted the importance of the timeliness of the measures taken by the Chinese authorities in relation to the crypto business.

“My country is effectively fighting trading platforms and speculation in the cryptocurrency market. As practice has shown, the imposed restrictions effectively blocked the consequences of the collapse of Terra, and China was able to avoid investment risks as much as possible,” the journalist says.

Li noted that after the collapse of the UST, many countries are looking to tighten regulation of stablecoins. To justify the further introduction of bans on the cryptocurrency market in China, he cited the forecast of an analyst from China Everbright Bank Zhou Maohua (Zhou Maohua).

“In the future, our country will accelerate the resolution of regulatory deficiencies and introduce targeted stablecoin risk prevention measures to further reduce the space for virtual currency speculation, illicit financial activities, and enhance people’s safety,” the analyst notes.

At the same time, the Chinese authorities are accelerating the introduction of the state digital currency. Recently, initiatives have been launched in certain regions of the country to support the economy using the digital yuan. A little earlier, the Chinese authorities launched testing of the digital currency of the Central Bank on high school campuses.