2025: A Crossroads for Global Crypto Regulation and China's Choice

If the global regulation of cryptocurrencies in the past few years was somewhat tentative and hesitant, the situation has drastically changed by 2025. A profound and systematic institutional restructuring is underway, its core logic shifting from preventing market overheating and protecting retail investors to safeguarding national financial sovereignty and defending against systemic risks. In this quiet but far-reaching transformation, China's "dual-track" strategy is providing a crucial and distinctive observational sample for the future landscape of global digital finance.

I. A Shift in Global Consensus: When the Focus of Regulation Shifts from "Market" to "Sovereignty"

A significant signal comes from the Bank for International Settlements (BIS). Its March 2025 annual report clearly states that for more than three-quarters of the G20 countries, the primary regulatory task is no longer the traditional "investor protection," but rather "financial sovereign security." This is far more than a simple change in wording; it signifies a fundamental shift in how governments view crypto assets—it's no longer just an emerging asset class requiring regulation, but a strategic domain concerning currency issuance rights, capital flow controls, and even geopolitical influence.

Driven by several unavoidable real-world pressures: How can cross-border crypto payments circumvent traditional capital controls? Will private stablecoins like USDT effectively replace sovereign currencies in specific regions? Could digital assets become new tools for sanctions or political maneuvering? These questions keep regulators on edge.

Looking at the practices in Europe and the US clearly illustrates this shift:

• The EU's "rule co-optation": While the MiCA Act came into effect in 2024, its true impact only became apparent in 2025. According to data from the European Securities and Markets Authority (ESMA), nearly two-thirds of trading platforms within the EU have been forced to undergo deep compliance reforms, while about a quarter have chosen to exit the market due to their inability to meet standards. This is not merely a matter of compliance costs, but a meticulously designed "ecosystem purification." For example, MiCA's stringent regulations on stablecoin reserve assets objectively erect a "regulatory wall," aiming to weaken the dominance of non-Eurozone stablecoins (especially USD stablecoins) in the European market—a blatant struggle for monetary sovereignty.
• The US's "Foggle of Rules": Unlike the EU's clear legislative path, the US presents a peculiar landscape of "regulation through enforcement." Frequent lawsuits by the SEC and CFTC have become the primary tools for defining "what is a security and what is a commodity." However, the continued deadlock in Congress on core legislation has resulted in a lack of a national framework, forcing crypto companies to scramble between state and federal agencies across the US. This high degree of uncertainty has actually triggered a wave of companies leaving the country, heading to regions with clearer regulations.

While most countries around the world are still struggling with how to regulate the private crypto world, China has chosen a completely different path: no longer grappling with the old dilemma of "blocking" versus "guiding," but systematically building an autonomous ecosystem centered on its sovereign digital currency—the digital yuan (e-CNY). This is the core of the "dual-track, functionally layered" strategy.

II. China's "Dual-Track Strategy": Systematically Building a Bridge Role with Hong Kong

The internal track represents the accelerated construction of a closed-loop ecosystem. Data from the Digital Currency Research Institute of the People's Bank of China shows that in the first half of 2025, the transaction volume of the digital yuan exploded to 4.5 trillion yuan, a year-on-year increase of over 300%. More noteworthy is that over 30% of transactions are linked to digital warrants of physical assets. This means that the digital yuan is rapidly transcending the scope of a simple payment tool, penetrating into complex scenarios such as supply chain finance and carbon asset trading, achieving automatic and reliable transfer of funds and assets through smart contracts. Essentially, this is building a compliant, endogenous system that is "physically isolated" from overseas crypto markets but "functionally aligned" and even more efficient.

The key hub of the external track is Hong Kong. Under the "One Country, Two Systems" framework, Hong Kong's crypto asset licensing system and the mainland's regulatory logic have formed a clever synergy. Data from the Hong Kong Securities and Futures Commission is very telling: over 80% of licensed virtual asset service providers have already begun or are actively planning cross-border businesses related to the digital yuan, such as the issuance of bonds settled in the digital yuan. This clearly demonstrates that Hong Kong's role is far more than just a "crypto free port"; it is a strategic frontier providing compliant international interfaces and conducting manageable stress tests for the sovereign digital currency ecosystem. The green bond settled in digital yuan in 2025 was a successful trial.

This strategic determination is vividly reflected in the allocation of resources for technological research and development. According to research from Tsinghua University, in 2024-2025, approximately 65% ​​of China's blockchain-related patent applications will be concentrated in sovereign areas such as the underlying technology of central bank digital currencies and privacy computing, while innovations targeting public chains and DeFi will account for only about 15%. The national will guides the flow of innovation resources with a very clear objective: everything serves to consolidate and expand the ecological advantages of sovereign digital currencies, while strictly managing the cross-border flow of public chain nodes and data through regulations to ensure that technological development does not deviate from the track of sovereign regulation.

III. New Survival Rules for Practitioners: Compliance Transforms from a "Cost" to a "Core Asset"

For global crypto practitioners—whether project teams, institutions, or high-net-worth investors—the rules of the game have been completely changed.

1. For developers, "compliance is the lifeline" has become a stark reality. The EU's MiCA and Hong Kong's VASP system are creating a powerful "compliance magnet" globally. A PwC report indicates that projects failing to obtain licenses in major markets saw their institutional funding inflows plummet by an average of over 70% in 2025. The consequences are so severe that compliance architecture must shift from a burden of "post-hoc remediation" to being "part of the product design." Now, smart projects have legal and compliance teams involved even before writing the first line of code.
2. For investors, the decision-making framework is being restructured. Goldman Sachs' 2025 institutional investor survey reveals a key shift: over 55% of institutions list "sovereign risk and regulatory stability of the project's operating location" as their primary investment consideration, surpassing team background and short-term return potential for the first time in history. This means that understanding geopolitics and the regulatory philosophies of different jurisdictions (such as understanding China's "dual-track strategy") has gone from an elective to a mandatory course. Investors are beginning to proactively manage "regulatory risk" in the same way they manage currency exchange rate risk, diversifying their asset holdings based on policy trends.

IV. Outlook for 2026: Collaborative Operations, Regulatory Competition and Cooperation, and the Rise of Compliance Technology

Looking ahead to next year, the "normalized collaborative operations" of global regulation will become more pronounced—data sharing and joint actions among tax, financial regulatory, judicial, and cybersecurity departments will become standard practice. The FATF's "travel rules" will be implemented in more countries, and the transparency of cross-border transactions is irreversible.

However, at the same time, the "competition and cooperation" landscape of global regulations will become more complex. The US and Europe may form two major regulatory poles, while emerging hubs such as the UAE and Singapore will attract businesses with flexible and efficient services, creating differentiated competition. For any crypto company aiming for global operations, the biggest challenge will be dealing with multiple, sometimes even conflicting, regulatory requirements. Building a flexible, pluggable "modular compliance system" will become standard practice for top companies.

This also gives rise to a new technological hotspot: Compliance Technology (RegTech). For example, how can technologies like zero-knowledge proofs be used to meet regulatory reporting requirements without compromising user business privacy? This will be the next major battleground for innovation.

Conclusion

2025 marks the official end of the "western pioneering" era for the crypto industry. A global, systemic era of "rule co-optation" has begun. In this process, China's "dual-track" strategic choice, both internal and external, has not only defined a clear development path for itself but also provided the world with a distinctly different paradigm for digital finance development, centered on national sovereign digital fiat currencies.

The winners of the future will no longer be those who run the fastest, but those who best understand and adapt to this complex new set of rules and deeply integrate compliance capabilities into their DNA. In the face of turbulent times, only those who clearly define their course and strengthen their hull can sail steadily and far.

(This analysis is based on continuous policy tracking and case studies in over 20 core jurisdictions worldwide.)

To address this complex transformation, we have systematically reviewed the regulatory dynamics and practical thresholds of major markets, resulting in the "2025-2026 Global Crypto Asset Compliance Strategy Panorama Report" and a specific implementation plan for China's "dual-track" market. The report focuses on practical issues such as license application pathways, cross-border operational structure design, tax planning, and RegTech applications, aiming to provide concrete decision support for organizations and entrepreneurs seeking long-term development.