Cryptocurrency Regulations in China

When it comes to cryptocurrency, China remains one of the most restrictive countries in the world. According to these rules, all activities involving crypto like trading, mining and conducting ICOs, are banned altogether as of 2025. Although cryptocurrencies such as Bitcoin or Ethereum can be kept in private hands, transacting, investing or conducting enterprise using such investments is completely prohibited.

Foreign investors, businesses and developers interested in the Chinese market need to understand China’s cryptocurrency regulations. While the country is closed off to adopting decentralized crypto, it’s a main actor in the development of blockchain and Central Bank Digital Currency (CBDC) implementation.

The main authorities enforcing the country’s regulatory approach are the PBOC, CSRC and the CAC. They keep a close eye on everyone’s and everybody’s compliance concerning crypto with national policy.

Historical Context

First of all, China was interested in cryptocurrencies with caution. The PBOC said in 2013 that Bitcoin wasn’t legal tender and banned the use of Bitcoin by financial institutions. It was the first such regulatory blow to a still budding Chinese crypto market.

The government further strengthened its stand on this issue in 2017 when it banned initial coin offerings (ICOs) because of the potential for fraud and possible threats to financial stability. There was then a mass domestic exchange shutdown. However, the government eventually imposed the strictest digital currency laws globally when it declared a full ban on cryptocurrency trading and mining by the end of 2021.

China’s evolving stance goals are obvious: it looks for financial stability, prevents capital flight, and needs to keep state control over the digital economic infrastructure. But now those motivations form an environment that encourages blockchain, and only blockchain, through the shareholder channel, if only it is under government authority.

Regulatory Framework

Key Regulatory Authorities

People’s Bank of China (PBOC) acts as the lead bans on both crypto-related financial services and financial risks.

The China Securities Regulatory Commission (CSRC) – which monitors securities – has classified the crypto assets under existing financial law.

Licensing and Registration

Crypto exchanges, registry wallets and token sales platforms are banned from operating in China. Legal means of registering a crypto business do not exist. Those entities that are caught engaging in crypto-related services are shut down, their assets seized, and the incident is prosecuted as a crime of the state.

AML & KYC Requirements 

Since crypto platforms are banned in China, they bypass AML/KYC. Despite such tight financial scrutiny laws, vendors were surprised how seriously authorities regard crypto as a threat and that it still requires mandatory reporting.

Taxation of Cryptocurrency

As all trading is banned in China, there is no official Chinese tax policy for cryptocurrencies. In addition, if these illegal crypto operations were discovered and produced income, existing tax evasion and financial misconduct laws could be applied.

Regulation of ICOs, STOs, and Token Sales

Token fundraising of all forms (including ICOs and STOs) is banned. Taking part in these schemes is illegal and covered by China’s anti-fraud and public fundraising laws.

China Crypto Policies

Usage of Cryptocurrency

Cryptocurrencies cannot be used for transactions, trading or any other public or business application in China. Although personal holding is not illegal, by law crypto cannot be involved in any transaction.

Crypto Mining

China has outlawed the mining of any cryptocurrency. In 2021, mining was banned as a means to reduce the risk associated with decentralized finance and energy consumption concerns.

Digital Yuan and Blockchain Projects

While China is still anti-crypto, it is leading the way with regard to digital currency innovation with the Digital Yuan (e-CNY). The e-CNY was developed and released by the PBOC as part of a national strategy to move to a cashless, centrally managed economy. Another facet of blockchain initiatives is broader and addresses logistics, healthcare and public data systems, supervised only by the government.

Penalties for Non-Compliance

Punishment for illegal crypto operations taken by individuals or entities could be up to severe penalties such as asset seizure, administrative sanctions, fines, and imprisonment. The use of foreign exchanges through VPNs is also illegal and is actively followed by the state authorities.

Country’s Approach to Crypto Innovation

While China encourages blockchain innovation, it happens only under strict regulatory oversight. Decentralized crypto is banned, but blockchain apps are well supported in supply chain, digital ID and health, and governance.

While it has no formal regulatory sandbox like other countries, the state is backing frameworks for the development of enterprise blockchain solutions. At the heart of China’s financial digitization push, The Digital Yuan’s expansion is in line with the government’s aspirations for full monetary control in a tech fuelled economy.

Notable Challenges and Issues

Enforcement is one of the greatest challenges for China. Bans on crypto activity are sweeping, but activity can still be found below ground. VPNs help individuals access foreign exchanges, and peer-to-peer transfers go on in circles of small numbers.

The other problem faced by blockchain developers is the ‘gray zone’. The rule is that blockchain is encouraged but crypto is banned, and companies are uncertain about what is legal and what is not. It deters innovation and causes a chilling effect on local and international investors.

State media largely defines the public perception of crypto, concerning them as risky and fraudulent. In spite of that, enthusiasm among tech-savvy citizens is still quite high, but it’s tough to come by considering the regulation involved.

Regulatory Trends and Outlook: The Key Trends

So far, China has not shown any easing of its anti-crypto stance in 2024 and early 2025. On the other hand, efforts are directed towards the spreading of the Digital Yuan and the rising acceptance of blockchain under centralized frameworks.

‘Unless there are closer regulatory standards on a global level, especially within the institutions such as Financial Action Task Force (FATF), China is likely to continue on its path.’ However, China’s blockchain investments can impact global adoption trends primarily in the emerging markets and the cross-border CBDC collaborations.

Crypto liberalization, of course, is not a thing that seems likely to happen, but China’s dominance in state-controlled digital finance keeps growing.

Conclusion

China has one of the world’s strictest crypto policies, including bans on trading, mining and token sales. However, the government is still heavily into blockchain engineering and its Digital Yuan undertaking. Finally, as you step into the world of enterprise blockchain and digital finance, understanding these regulations can be critical to investment and business that avoids these penalties and paves ways to explore the opportunities here.

Such changes are only natural, so staying up to date with China’s shifting play is vital. As the digital economy can change, so too can the rules of that economy.

FAQs: Cryptocurrency in China (2025)

1. Is Bitcoin legal in China?

Trading and using Bitcoin is illegal. Yet there is no explicit ban on holding it privately.

2. Can Chinese citizens own cryptocurrency?

Citizens may keep crypto privately, but they aren’t allowed to put it to any use in the form of a transaction or in business.

3. Are Chinese crypto exchanges permitted to function in China?

No, China bans all domestic and foreign crypto exchanges from operation.

4. Is crypto mining legal in China?

No, crypto mining has been illegal all over the country since 2021.

5. What is Digital Yuan or e-CNY?

e-CNy is China’s central bank digital currency, the Digital Yuan, issued by the PBOC, is expanding through public trials.

6. Is the business of Initial Coin Offerings (ICOs) legal in China?

ICOs or token-based fundraisers such as the STOs, are banned and illegal public funding.

7. Does China tax cryptocurrency earnings?

As crypto trading is prohibited, there is no official tax framework, but illegal crypto-derived income can be charged under tax evasion laws.

8. Are VPNs allowed to citizens and could they trade in their crypto in a foreign exchange?

Using a VPN server is illegal and prosecuted to use VPNs for logging in to foreign exchanges.

9. Is blockchain technology supported in China?

While enterprise and government use cases are able to leverage blockchain, they can only do so under frameworks that are under centralized, state-approved regulations.

10. Will China ever loosen its crypto laws?

Loosening the crypto laws in China is highly unlikely. They tried to shift focus away from decentralized assets and stick to government control, stability and expansion of the Digital Yuan.