Crypto Overview in China

Regulatory data is for informational purposes only and may not reflect the most current legal developments. Always consult qualified professionals before making decisions.

Legal Classification and Regulatory Framework

Cryptocurrency Status

China maintains one of the most restrictive cryptocurrency regulatory environments in the world. The People’s Republic of China (PRC) has implemented a comprehensive ban on virtually all cryptocurrency-related activities within its borders. Under Chinese law, cryptocurrencies such as Bitcoin and Ethereum are not recognised as legal tender and cannot be used as a medium of exchange for goods and services.

The regulatory trajectory moved in clear stages. In December 2013, the PBOC and four other ministries issued the “Notice on Precautions Against the Risks of Bitcoins,” classifying Bitcoin as a virtual commodity and barring financial institutions from providing Bitcoin-related services. In September 2017, the PBOC and six other agencies banned Initial Coin Offerings and shut down all domestic exchanges. The final step came on September 24, 2021, when ten agencies jointly issued the Notice on Further Preventing and Handling the Risks of Virtual Currency Trading and Speculation (Yin Fa [2021] No. 237). That notice declared all crypto-related business activities illegal, extended liability to overseas exchanges serving mainland residents via the internet, rendered related civil contracts invalid, and imposed criminal liability for serious breaches.

Chinese courts have since confirmed a narrow legal distinction: individual private ownership of cryptocurrency is treated as personal virtual property under civil law, as affirmed by the Shanghai Second Intermediate People’s Court and the Beijing Number One Intermediate People’s Court in November 2024. Holding cryptocurrency privately is not prosecuted. All trading, mining, exchange operations, ICOs, and related business activities remain prohibited.

Tax Treatment

Given the comprehensive ban on cryptocurrency business activities, there is no formal tax framework governing crypto transactions in mainland China. The Individual Income Tax Law applies to all persons resident in China, but because crypto trading and mining are prohibited, the government has not established specific tax guidelines for these activities. Gains from prohibited transactions attract legal liability rather than a tax assessment.

Residents holding assets acquired before the bans, or through offshore structures, face significant legal complexity. SAFE monitors cross-border capital flows and treats cryptocurrency activity as a potential capital control circumvention mechanism. The China Anti-Money Laundering Monitoring and Analysis Centre (CAMLMAC), operating under the PBOC, tracks suspicious financial flows for AML purposes.

Regulatory Oversight

China’s prohibition framework is enforced through coordinated action by multiple agencies.

The People’s Bank of China (PBOC) leads as the central bank. It has issued the foundational notices at each regulatory milestone (2013, 2017, 2021), directs financial institutions to cease all crypto-related services, and oversees the development and rollout of the e-CNY digital yuan.

The China Securities Regulatory Commission (CSRC) focuses on preventing illegal public offerings through digital tokens, enforcing the ICO ban, and monitoring securities markets for crypto-adjacent instruments.

The National Development and Reform Commission (NDRC) drove the phaseout of Bitcoin mining by classifying it as an industry to be eliminated in its June 2021 industrial restructuring catalogue update, effectively ending large-scale mining operations on the mainland.

The State Administration of Foreign Exchange (SAFE) monitors cross-border capital flows and targets overseas cryptocurrency exchanges that attempt to serve Chinese residents, working to prevent capital flight through digital assets.

The Ministry of Public Security (MPS) investigates and prosecutes criminal activities associated with cryptocurrencies, including money laundering, illegal fundraising, and financial fraud enabled by digital assets.

The Supreme People’s Court and Supreme People’s Procuratorate provide judicial interpretation and prosecutorial authority, having confirmed that crypto-related investment contracts are invalid and that criminal responsibility applies to serious violations.

Business Environment

Banking Relationships

Traditional banks in mainland China are strictly prohibited from engaging in any cryptocurrency-related activities. Financial institutions cannot open accounts for cryptocurrency businesses, process transactions involving digital assets, or provide any form of banking services to individuals or companies engaged in cryptocurrency trading or operations.

Banks must monitor and report suspicious activities potentially linked to cryptocurrency transactions, including scrutiny of customer transactions for connections to overseas exchanges. Any attempt to establish banking relationships for cryptocurrency purposes faces immediate regulatory intervention.

Innovation Support

While China prohibits private cryptocurrencies, the government has invested heavily in blockchain technology and its own central bank digital currency. The e-CNY represents China’s state-controlled alternative to decentralised cryptocurrencies. Unlike public blockchains, it is centralised, traceable, and integrated into the existing financial system.

China has also supported significant investment in permissioned, enterprise blockchain infrastructure in areas such as supply chain management, digital identity verification, cross-border trade finance, and government services digitisation. These efforts remain within the regulatory framework and do not involve public cryptocurrencies or decentralised finance applications.

Crypto License in China

There is no licensing pathway for cryptocurrency exchanges, wallet providers, or any other virtual asset service providers in mainland China. Because all crypto-related business activities are prohibited under the September 2021 ten-agency notice, no regulatory authority issues or processes licence applications in this area. Entities seeking to operate in the digital asset space must look outside the mainland entirely.

Current Status on Mainland China

The mainland Chinese regulatory position is unambiguous: operating a cryptocurrency exchange, providing wallet custody, issuing digital tokens, facilitating peer-to-peer transactions for profit, and running mining operations are all illegal. The September 2021 notice extended this to overseas platforms, making it illegal for foreign exchanges to knowingly serve mainland residents via the internet, with liability imposed on domestic staff and service providers who assist them. Enforcement spans the PBOC, CSRC, MPS, SAFE, CAC, and SAMR. Penalties range from administrative sanctions to criminal prosecution, and courts have ruled crypto-related civil contracts invalid.

The only authorised digital currency activity on the mainland is participation in the state-issued e-CNY system, operated under PBOC oversight.

e-CNY and the PBOC Digital Currency System

The digital yuan (e-CNY) is the People’s Bank of China’s central bank digital currency, centralised, traceable, and integrated into the existing financial system. As of early 2026, the programme covers 29 pilot cities. By November 2025 the PBOC reported approximately 3.48 billion cumulative transactions totalling around 16.7 trillion yuan. From January 1, 2026, e-CNY balances became interest-bearing deposits and 12 additional banks joined the programme, moving the instrument beyond a purely cash-like form toward broader adoption.

At the international level, China participates in Project mBridge, a cross-border CBDC settlement platform developed with the monetary authorities of Hong Kong, Thailand, the UAE, and Saudi Arabia. A Shanghai international operation centre for e-CNY cross-border transactions was announced at the 2025 Lujiazui Forum. Businesses participating in the e-CNY ecosystem must be authorised under the PBOC programme; no independent digital currency issuance is permitted.

Hong Kong as a Separate Regulatory Jurisdiction

Hong Kong operates as a Special Administrative Region with its own legal system, independent courts, and a separate financial regulatory structure. It is critical not to conflate Hong Kong’s regulatory environment with that of mainland China: the mainland ban does not extend to Hong Kong, and Hong Kong’s licensing frameworks do not apply to the mainland.

Since June 2023, Hong Kong has operated a mandatory licensing regime for Virtual Asset Service Providers (VASPs) administered by the Securities and Futures Commission (SFC). Licensed exchanges must meet strict capital, AML, custody, and investor protection requirements. Retail investors may trade on SFC-licensed platforms. The regime has attracted a number of platforms seeking regulatory clarity in Asia.

On August 1, 2025, Hong Kong’s Stablecoin Ordinance (Cap. 656) came into effect, establishing a licensing regime for fiat-referenced stablecoin issuers administered by the Hong Kong Monetary Authority (HKMA). Issuers must maintain minimum paid-up capital of HK$25 million, meet liquid capital requirements, and hold reserve assets in line with HKMA rules. The first batch of licences is expected to be granted in early 2026.

Macau, likewise, is a separate Special Administrative Region. Its regulatory situation differs from both the mainland and Hong Kong. Anyone assessing regional digital asset strategy must treat each jurisdiction independently.

Market Characteristics

Adoption Patterns

Before the comprehensive bans, China was one of the world’s largest cryptocurrency markets, with significant participation in Bitcoin mining and trading. At its peak, China accounted for a substantial majority of global Bitcoin mining hashrate. Enforcement actions since 2021 have dramatically reduced visible cryptocurrency activity within the country.

Despite the bans, some cryptocurrency activity persists through informal channels. Some residents access overseas exchanges using VPNs and engage in over-the-counter trading using stablecoins. These activities carry significant legal risks and operate entirely outside regulatory protection.

The government’s crackdown drove a migration of mining operations and crypto businesses to other jurisdictions, particularly the United States, Kazakhstan, and Russia, reshaping the global distribution of mining hashrate. Chinese entrepreneurs and investors active in the space generally operate through entities registered outside the mainland.

Regulatory Evolution

China’s cryptocurrency regulations have tightened in clear steps: the 2013 notice restricting financial institutions, the 2017 ICO ban and exchange closures, the May 2021 State Council committee call for a mining and trading crackdown, the June 2021 NDRC mining phaseout order, and the September 2021 ten-agency notice declaring all crypto-related business activities illegal. The direction of mainland policy has been consistent and the current framework shows no signs of softening.

The November 2024 court rulings confirming that private cryptocurrency ownership constitutes legal personal property are a meaningful civil-law clarification, but they do not alter the commercial prohibition. Trading, mining, exchange operations, and related business activities remain illegal regardless of the property classification.

Meanwhile, Hong Kong’s continuing development of its VASP regime and the August 2025 Stablecoin Ordinance reflect a deliberate strategy by the central government to test regulated digital asset frameworks in a contained, internationally facing jurisdiction, while keeping the mainland under strict controls. Whether this separation strategy will shift over time remains to be seen.