China Tightens Stablecoin Regulation Amid Terra-Luna Crash

Today, May 31, in the Chinese government publication Economic Daily, a note appeared about the upcoming changes in the regulatory framework in the field of cryptocurrencies. The authorities plan to tighten regulation of stablecoins out of fear that the situation with Terra could repeat itself.

The article describes in detail the mechanism of the algorithmic stablecoin. Its author concludes that the depreciation of the UST was a “black swan event”, that is, unlikely, but quite logical.

Journalist Li Hualin describes the expediency of further tightening of the regulatory framework as follows:

“My country is actively fighting against speculation in virtual currency. This effectively blocked the spread of such schemes in China and allowed investors to avoid unnecessary risks.”

The author also refers to similar legislative initiatives in other countries. Recall that the collapse of Terra, in particular, led to a review of the regulatory status of stablecoins in the UK.

Li Hualin notes that the introduction of stricter rules will reduce the number of illegal transactions, remove speculators from the market and minimize risks for the retail segment.

And although the PRC actively blocks any attempts to commercialize cryptocurrencies, individuals are not, in fact, prohibited from owning them. However, further changes in the regulatory framework may lead to total blocking.

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