Mainland China’s regulatory policies on virtual currencies have always been very strict, and the authorities continue to maintain a hardline stance. According to notices issued by multiple departments, including the People's Bank of China (PBOC), business activities related to virtual currencies are considered illegal financial activities within China and are strictly prohibited without exception.
Evolution of Virtual Currency Regulatory Policies in Mainland China
- 2013: The “Notice on Preventing Risks Associated with Bitcoin” People's Bank of China (PBOC), issued by five government departments, first explicitly defined Bitcoin as “specific virtual commodities” that do not possess the same legal status as currency and cannot be used in circulation as currency. At the same time, financial institutions and payment institutions were prohibited from conducting Bitcoin-related business.
- 2017: The “Announcement on Preventing Risks Associated with Token Issuance Financing” (“Announcement No. 94”) clarified that token issuance financing (ICO) is, in essence, an unauthorized and illegal form of public fundraising. It comprehensively banned ICOs and the exchange of tokens for fiat currency on virtual currency exchanges, and prohibited the provision of services such as pricing and information intermediation.
- 2021: The “Notice on Rectifying Virtual Currency ‘Mining’ Activities” and the “Notice on Further Preventing and Addressing Risks Associated with Virtual Currency Trading and Speculation” (“September 24 Notice”) classified virtual currency “mining” as an industry to be phased out and further clarified that virtual currencies such as Bitcoin, Ether, and USDT do not have the status of legal tender; conducting virtual currency-related business activities within China constitutes illegal financial activity and is strictly prohibited in all cases. Overseas virtual currency exchanges providing services to residents within China via the internet are also subject to this ban.
- 2025 to Present: Continued High-Pressure Crackdown Departments including People's Bank of China (PBOC) have continued to hold meetings emphasizing the crackdown on virtual currency trading and speculation, and issued the “Notice on Further Preventing and Addressing Risks Related to Virtual Currencies and Other Matters,” reiterating that virtual currencies do not have the status of legal tender, that related business activities constitute illegal financial activities, and that such activities are strictly prohibited within China.
The Illegality of Virtual Currency Transactions Within China
Under current policies in mainland China, any organization or individual engaging in the following virtual currency-related activities within China is considered to be conducting illegal financial activities and will face legal risks:
- Exchange of Virtual Currencies for Fiat Currency: Token financing trading platforms are prohibited from engaging in the exchange of tokens for fiat currency.
- Virtual currency trading services: It is prohibited to provide pricing, information intermediary, and other services for virtual currencies, as well as to provide virtual currency trading services and establish RMB channels and funds pools within China.
- Virtual Currency Issuance and Financing: No organization or individual may illegally engage in token issuance and financing activities.
- Overseas Platforms Serving Domestic Residents: Overseas virtual currency exchanges providing services to residents within China via the internet are also considered illegal financial activities.
- “Mining” Activities: Virtual currency “mining” activities are classified as industries to be phased out; ongoing crackdowns will continue, and new mining operations are strictly prohibited.
- RWA Tokenization: Conducting real-world asset (RWA) tokenization activities within China, as well as providing related intermediary and information technology services, constitutes suspected illegal financial activity.
It is worth noting that while the mere holding of virtual currencies by individuals is not illegal in itself, buying or selling cryptocurrencies such as USDT through over-the-counter (OTC) transactions or using them for other transactions may involve illegal activities, particularly if the transaction volume is large or the purpose is suspicious (such as money laundering).
Digital Renminbi (E-CNY) — China’s Legal Tender Digital Currency
Unlike virtual currencies, the Digital Yuan (E-CNY) is a legal tender digital currency issued by the People's Bank of China (PBOC). It is a digital form of cash in circulation (M0), and its value is equivalent to that of paper banknotes and coins denominated in Renminbi. Pilot programs for the Digital Renminbi have already been launched in multiple regions and have yielded positive results, with applications spanning wholesale and retail, food and beverage, culture and tourism, education and healthcare, public services, and cross-border settlements. It is expected that by January 1, 2026, the digital yuan will transition from the digital cash era to the digital deposit currency era. Banking institutions will pay interest on the real-name digital yuan wallet balances of their customers, and deposit insurance will provide the same level of protection as for traditional deposits in accordance with the law.
Risk Warning
Given mainland China’s strict regulatory policies on virtual currency transactions, any participation in virtual currency trading or provision of related services carries significant legal risks. Virtual currencies, characterized by anonymity and cross-border nature, are easily exploited for criminal activities such as money laundering, fraud, illegal fundraising, pyramid schemes, and illegal cross-border fund transfers, posing a threat to financial order and social stability. Investors should fully recognize these risks and avoid participating in any form of virtual currency trading activity.
