Is Crypto Legal in China? Understanding the 2024 Regulations & Risks

China’s stance on cryptocurrency remains one of the world’s strictest, with sweeping bans on trading, mining, and initial coin offerings (ICOs). While blockchain technology is actively promoted, private cryptocurrencies like Bitcoin face severe restrictions. This article breaks down the legal landscape, penalties, exceptions, and future outlook for crypto in China.

China’s Cryptocurrency Ban: The Current Legal Landscape

As of 2024, China maintains a near-total prohibition on cryptocurrency activities. The People’s Bank of China (PBOC) declared all crypto transactions illegal in September 2021, reinforcing earlier bans. Key restrictions include:

• Trading bans: Exchanges operating domestically are prohibited.
• ICO prohibition: Raising funds via new tokens is illegal.
• Banking blocks: Financial institutions cannot process crypto transactions.
• Mining crackdown: Cryptocurrency mining is banned nationwide.

Despite this, owning cryptocurrency isn’t explicitly criminalized—though converting it to fiat currency violates regulations.

A Timeline of China’s Crypto Crackdowns

China’s regulatory journey evolved from cautious interest to outright hostility:

• 2013: PBOC bans financial institutions from Bitcoin transactions.
• 2017: ICOs and domestic exchanges outlawed; mining still permitted.
• 2019: Mining targeted as “undesirable” industry.
• 2021: Full-scale mining ban across provinces; all crypto transactions declared illegal.
• 2023-Present: Persistent enforcement against VPN-based trading and underground mining.

What Exactly is Prohibited? Understanding the Restrictions

China’s crypto laws target commercial activities rather than passive ownership:

• Illegal: Operating exchanges, mining farms, advertising crypto services, or facilitating trades.
• Gray areas: Peer-to-peer (P2P) transactions via VPNs—though risky and monitored.
• Permitted: Holding cold wallets, blockchain development (non-crypto applications), and academic research.

The government focuses on preventing capital flight, fraud, and financial instability.

The Digital Yuan: China’s Official Digital Currency

While banning private cryptos, China aggressively promotes its central bank digital currency (CBDC), the e-CNY:

• Piloted in 26 cities with 13.6 billion yuan ($2B) in transactions by 2023.
• Designed for retail payments, not investment—unlike decentralized cryptocurrencies.
• Integrates with surveillance systems, allowing transaction tracking.

This state-controlled alternative underscores China’s preference for sovereign digital assets.

Risks and Penalties for Violating China’s Crypto Laws

Engaging in prohibited activities carries severe consequences:

• Fines: Up to 5x illicit gains for individuals; heavier penalties for businesses.
• Account freezing: Bank accounts linked to crypto trades may be seized.
• Criminal charges: Fraud, money laundering, or “disrupting financial order” charges can lead to imprisonment.
• Mining penalties: Confiscation of equipment and retroactive electricity fees.

Enforcement intensified in 2023, with authorities targeting VPN users and underground mining ops.

The Future of Cryptocurrency in China

Experts predict continued strictness, but note contradictions:

• Blockchain remains a national priority, with $2B+ invested in 2023.
• Hong Kong’s pro-crypto policies may serve as a testing ground for mainland strategies.
• No signs of reversing bans unless global CBDC standards emerge.

Most analysts believe private cryptocurrencies won’t gain legal status unless China’s capital controls relax—an unlikely shift.

Frequently Asked Questions (FAQ)

Is owning cryptocurrency illegal in China?

No, possession itself isn’t criminalized. However, converting crypto to fiat currency or using it for payments violates regulations.

Can I trade cryptocurrency in China?

Legally, no. All trading platforms are banned. Some use offshore exchanges via VPNs, but this risks penalties.

What is the punishment for crypto trading in China?

Fines up to 5x the transaction value, asset confiscation, and potential imprisonment for repeat offenders or large-scale operations.

Is Bitcoin mining allowed in China?

No. A nationwide ban since 2021 forced miners to relocate. Authorities regularly raid underground farms.

What about the digital yuan?

China’s e-CNY is legal and state-controlled. It functions like digital cash, not an investment asset like Bitcoin.