How China’s Web3 Is Shifting from Token Finance to Data and State Credit
On November 28, 2025, the People’s Bank of China convened a meeting to discuss combating virtual-currency trading and speculation. Participants included the Ministry of Public Security, the Cyberspace Administration of China, the Central Financial Commission, the Supreme People’s Court, the Supreme People’s Procuratorate, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Justice, the People’s Bank of China, the State Administration for Market Regulation, the National Financial Regulatory Administration, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange.
The meeting made clear, based on the requirements set out in the 2021 joint notice issued by ten government agencies, that stablecoins are considered a form of virtual currency. At present, they cannot adequately meet requirements for customer identification, anti–money-laundering compliance, or related regulatory standards. They also carry significant risks of being used for money laundering, fraudulent fundraising, and illegal cross-border capital transfers. As such, they do not possess the same legal status as legal tender, they have no power of legal settlement, and they must not circulate as currency in the market. This designation effectively places a final, decisive mark on China’s twelve-year history of virtual-currency regulation.
It can be said that, after this point, an almost irreversible reality is taking shape: China and the United States have now fully diverged onto two fundamentally different official paths in the Web3 era.
Put simply, American Web3 remains deeply embedded in the traditional Wall Street model of aggressive financialization. Its core is not the ideal of “decentralization” but the token itself. Retail users, speculative capital, financial products, and asset-securitization structures are woven back together into a single financial machine through token-based incentive mechanisms. In this process, the one-to-one peg between major stablecoins and the U.S. dollar is not a mere technical detail, it is a strategic architecture.
As stablecoins expand their reach in countries with unstable domestic currencies, they simultaneously manufacture a new layer of global demand for the U.S. dollar, thereby preserving dollar hegemony in digital form while alleviating the structural pressures of U.S. Treasury bonds debt. Of course, the strategic paths taken by stablecoin issuers are not entirely uniform. Some, such as Circle, have chosen to actively embrace regulation. Others continue to insist on decentralization at the level of organizational structure and philosophy. Still others remain firmly positioned at the forefront of anti-regulatory resistance.
Yet regardless of these divergent approaches, one overarching trend is becoming increasingly clear: in the United States, stablecoins are no longer merely “crypto tools” but have in practice been incorporated into the extended architecture of the U.S.-dollar-centered financial order.
From a longer-term perspective, this also means that the crypto world’s so-called “embrace of regulation” is steadily being transformed into a mechanism of legitimacy exchange. It not only entails the formal recognition of crypto assets as legitimate financial instruments and the absorption of trading systems into compliance frameworks, but it also opens the possibility for the industry to undergo a form of institutional cleansing and reputational laundering of its longstanding role as an intermediary within gray and black markets.
But this likely “co-opted legitimacy” inevitably comes at a cost. The first to be crushed under this stampede of regulatory and financial consolidation are neither Bitcoin nor Ethereum but rather those non-mainstream crypto assets and marginal projects that lack institutional moats, lack a compelling financial narrative, and which cannot be effectively absorbed into mainstream regulatory regimes or national monetary systems. This form of structural compression is not an accidental side effect, it is an almost inevitable outcome of the deepening convergence between regulation and financialization.
If the core of American Web3 is token-driven financial expansion, then the true core of Chinese Web3 can be summed up in a single word: data. In China’s official discourse, Web3 is not understood as an “open-ended experiment in crypto finance” but is explicitly anchored as a foundational technological instrument for industrial digitalization. Through blockchain, data from the B-end (enterprise) and G-end (government) are enabled to circulate under conditions that are trustworthy, traceable, and governable, thereby serving the real economy rather than forming a self-contained speculative loop detached from it.
The establishment of this final trajectory was not the result of incidental technological choice, but was instead pushed into place by two larger structural forces. First, China’s AI industry has already advanced to a point of no return. Second, the deep integration of AI with China’s vast manufacturing system is now being framed as the next major growth engine for alleviating economic slowdown. Within this framework, what policymakers see is not a “decentralized utopia” but a pathway that appears viable, though not without risks: AI + full-spectrum commercial applications + digital-currency-based payment and settlement = a faster, cheaper, and more controllable mechanism of economic reassurance.
It is precisely in this sense that China has chosen to carry out what might be called a “soul replacement” of Web3: by actively removing the coin, the “value core” of blockchain is shifted away from price speculation and toward the institutionalized production of trust.
In China’s official understanding, this form of “governable trust” is not an abstract ideal but is concretely anchored in three core types of infrastructure:
- Data ownership: Using blockchain to define the ownership, circulation, and authenticity of data as a new productive factor;
- Supply-chain Finance: No longer relying on cryptocurrency-based financing, but instead making the accounts receivable and payable of small- and medium-sized enterprises trustworthy and governable on-chain;
- Digital identity (DID): Using verifiable code-based systems to prove “who you are,” a pathway that, within China’s institutional environment, is in fact highly feasible in practice.
It is within this broader structure that stablecoins have become the true target of China’s latest regulatory campaign. What the state seeks to eliminate has never been “individual holding,” but rather illegal payment and settlement channels that bypass the fiat-currency system—because in China’s institutional logic, monetary sovereignty is a non-negotiable red line that no commercial entity is permitted to challenge.
On this point, regulators are under no illusion: mainstream stablecoins remain fundamentally anchored to the U.S. dollar, not to any other currency. Thus, China’s proposed alternative is not a “more compliant commercial stablecoin” but an entire system of programmable, traceable, and fully governable sovereign digital money: the digital renminbi (e-CNY).
For this reason, in the foreseeable future, what China calls “DeFi” will not follow the American model of stablecoins and decentralized liquidity mining, but it is far more likely to take on a highly nationalized form: digital renminbi (e-CNY), smart contracts, and industrial blockchain infrastructure.
From this perspective, one could say that China’s official conception of Web3 is essentially a depersonalized, de-speculated, “inter-institutional value Internet.” Within this framework, whether blockchain and coins are “inseparable” is no longer the central concern. Even though, in purely technical terms, burning gas, protecting network security, and sustaining computation typically require a base coin as an incentive mechanism, the vision of an inter-institutional value Internet intentionally shifts the coin’s function away from a C-end speculative instrument and toward a B-end trust-cost mechanism—a role that, in China’s view, can be largely assumed by the digital renminbi.
In other words, within China’s official logic, if the primary function of a coin is not to generate speculative assets for the masses but to reduce trust friction, settlement costs, and reconciliation overhead between institutions, then there is no inherent need for it to exist as a privately issued token.
Of course, this “removal of the coin” does not make the underlying technical problems disappear. Even with a digital renminbi, eliminating the coin does not magically solve the challenge of reliably mapping real-world assets onto the chain. The oracle problem remains unresolved. But it appears that China’s preferred solution is not a decentralized oracle at all but an engineered, institution-based alternative: using Internet of Things (IoT) sensors to fix physical data inputs, licensed institutions to provide trusted endorsements, and legal accountability to transform the cost of malicious behavior from token-level penalties into real-world consequences.
The dispute over oracles is, at its core, the deepest form of the “trust conflict” in Web3. The United States relies on tokens + game theory + decentralized nodes to answer the question of “who is telling the truth,” with trust enforced through market punishment. China, by contrast, relies on IoT sensors + licensed institutions + legal liability to decide “who must tell the truth,” with trust enforced through institutional compulsion. This is precisely why China is prepared to contemplate a “coin-less blockchain”: when credibility is no longer produced through token-based incentives but instead guaranteed through institutional endorsement and legal coercion, blockchain is transformed from a speculative machine into an inter-institutional trust infrastructure.
This amounts to a fundamentally Chinese-style redefinition of Web3. Blockchain is no longer understood as an anti-institutional financial revolution but is instead reconstituted as a foundational technology serving inter-agency coordination, industrial integration, and state governance. The ideological foundation underlying this transformation remains what I have called the state–family narrative, now concretized in the crypto domain as a specific judgment: individuals lack the capacity to independently assess systemic financial risk, and individuals cannot reliably become qualified “oracles” through token incentives alone; therefore, the state must intervene as a “parental” authority in decision-making, both to prevent individuals from being defrauded and to prevent them from defrauding others.
Helena He Xiao
Helena He Xiao is a visiting lecturer in land law at the University of Southampton. She recently completed her law PhD at the University of Bristol, where her research focused on domestic violence and the legal protection of women’s rights in China. Xiao has contributed to several research projects funded by the National Social Science Fund and the Ministry of Justice in China, centering on women’s rights and domestic violence. She is a qualified lawyer both in China and in England and Wales. Xiao previously served as a visiting scholar at Emory University and taught criminal law for two years at the University of Bristol.
