BEIJING, China: China's central bank has warned of renewed activity in virtual currencies and pledged to step up enforcement against illegal crypto-related transactions, including the use of stablecoins, as regulators attempt to contain financial risks.

The People's Bank of China (PBOC) said crypto speculation has picked up recently due to a combination of market and external factors, creating "new challenges" for supervision, according to a statement released after a regulatory coordination meeting.

"Virtual currencies do not hold the same legal status as fiat currency and cannot be used as legal tender in the market," the PBOC said, reiterating that business activities tied to virtual currencies are considered "illegal financial activities."

Regulators singled out stablecoins as an area of growing concern, saying they fail to meet requirements for customer identification and anti-money laundering controls. The central bank warned such tokens could be used for illicit activities, including fraud, money laundering, and unauthorized cross-border fund transfers.

The PBOC said it would "intensify efforts to combat related illegal financial activities" in order "to maintain economic and financial stability."

In October, PBOC Governor Pan Gongsheng said authorities would continue cracking down on domestic virtual currency operations and speculation while closely tracking developments in overseas stablecoins.

China banned cryptocurrency trading in 2021 and has barred stablecoin issuance and related services. Hong Kong, which has a separate regulatory regime, has yet to issue any stablecoin licences.

Despite the restrictions, bitcoin mining has been quietly re-emerging in China, as small-scale and corporate miners tap inexpensive electricity and expand operations in fast-growing data centre hubs, according to miners and industry data.