China Cryptocurrency Regulation

Is Cryptocurrency Legal in China?

• Cryptocurrencies: Not legal tender
• Cryptocurrency exchanges: Illegal

The People’s Bank of China (PBOC) banned financial institutions from handling Bitcoin transactions in 2013 and went further by banning ICOs and domestic cryptocurrency exchanges in 2017. In justifying the ban, PBOC described ICO financing (that raises virtual currencies like Bitcoin or Ethereum via the irregular sale and circulation of tokens) as public financing without approval which is illegal under Chinese law. Unsurprisingly, China cryptocurrency regulation means that they do not consider cryptocurrencies to be legal tender and the country has a global reputation for strict currency control regulations on the majority of foreign currencies, including cryptocurrencies. Under a 2020 amendment to China’s Civil Code, the government ruled that state-approved cryptocurrencies had the status of property for the purposes of determining inheritances.

China Cryptocurrency Regulations – Exchanges

Although domestic cryptocurrency exchanges are under a blanket ban in China, workarounds are possible using foreign platforms and websites (the majority of which are not regulated by China). Despite the near-comprehensive prohibition put on by China cryptocurrency regulation to crypto trading and related services, the law in China currently still permits crypto mining activities: while a ban on mining had been considered, in 2019 the government reconfirmed that it would remain legal but would be increasingly subject to global geopolitical sanctions and export control implications.

Future China Cryptocurrency Regulations

There’s no indication that China cryptocurrency regulations intend to lift or loosen their ban on cryptocurrencies anytime soon but recent developments suggest that the government intends to position the country as a leader in the crypto space. Those developments include statements by Chinese government officials endorsing blockchain technology, the extensive trial and testing of the central bank’s digital currency (the digital yuan), a joint venture with SWIFT (the international payment and cross-border payment gateway), and the continued status of crypto mining within China. While a timeline is still undefined, China’s central bank has been working on introducing an official digital currency since 2012, with efforts accelerating after Facebook’s announcement of its plans to introduce its own currency, Diem (formerly Libra). To this end, in late 2020, the Chinese government drafted a law that conferred legal status on PBOC’s digital Yuan: the legislation is expected to result in the demise of the fiat currency, and the introduction of bespoke currency controls covering exchanges and currency fungibility. 

According to a report published by the Institute of International Finance, the Chinese government has also expressed support for the implementation of a global regulatory framework for cryptocurrencies.