Chinese investors have found a new workaround to Beijing's strict capital controls: tokenized stocks purchased with stablecoins such as USDT. The practice, reported by the Financial Times, allows traders to mimic bets on hot US initial public offerings, including SpaceX.
The maneuver highlights the lengths wealthy Chinese are willing to go for exposure to western investments. Tokenized stocks are digital representations of shares traded on blockchains, enabling cross-border transfers without traditional banking channels. This shadow channel poses a challenge for regulators trying to enforce capital outflow restrictions.
While the exact scale of the activity is unclear, the use of stablecoins—cryptocurrencies pegged to fiat currency—facilitates near-instant settlement and avoids scrutiny from state-controlled banks. The scheme reportedly relies on offshore platforms that accept USDT in exchange for tokenized equities, creating a parallel market outside China's financial system.
Beijing has long sought to stem capital flight and maintain control over the yuan's exchange rate. These tokenized trades, though illegal, are difficult to trace and could accelerate as demand for US tech listings grows. Authorities may face pressure to tighten oversight of decentralized finance channels.
Critics warn that regulatory gaps pose risks for investors, including platform collapses and lack of legal recourse in a largely unregulated market.