Crypto in China

China maintains the world's most comprehensive cryptocurrency prohibition, established through sequential regulatory actions. The People's Bank of China (PBOC) issued the 'Notice on Preventing Bitcoin Risks' on December 5, 2013, declaring Bitcoin a virtual commodity rather than legal tender. The regulatory framework tightened significantly in 2017 when the PBOC, Cyberspace Administration of China, and Ministry of Industry and Information Technology jointly banned initial coin offerings (ICOs) and domestic cryptocurrency exchanges on September 4, 2017. The State Council's Financial Stability and Development Committee escalated enforcement on May 21, 2021, directing a crackdown on Bitcoin mining and trading. This culminated in the National Development and Reform Commission (NDRC) and ten other ministries issuing the 'Notice on Rectifying Virtual Currency Mining Activities' on September 24, 2021, which classified crypto mining as an obsolete industry and mandated its elimination. The PBOC enforces these bans through its Financial Consumer Rights Protection Bureau and coordinates with the Ministry of Public Security on criminal investigations related to crypto transactions.

China imposes no specific cryptocurrency tax framework because all domestic trading and mining activities are illegal. The State Administration of Taxation (SAT) has issued no guidance on crypto asset taxation since the 2021 bans. Before the prohibition, some local tax authorities treated cryptocurrency trading gains as 'incidental income' subject to a 20% personal income tax rate under China's Individual Income Tax Law, but enforcement was inconsistent. Currently, any prosecution of crypto-related activity focuses on criminal violations of banking, securities, or foreign exchange regulations rather than tax evasion. The 2017 ICO ban specifically referenced the Securities Law of the People's Republic of China, allowing authorities to prosecute token sales as illegal fundraising. For China's central bank digital currency, the Digital Yuan (e-CNY), standard VAT and income tax rules apply as it functions as sovereign currency.

Official domestic cryptocurrency adoption is zero, but Chainalysis estimated in its 2023 Geography of Cryptocurrency Report that Chinese users conducted $86.4 billion in raw transaction volume from July 2022 to June 2023, all through offshore exchanges and VPNs. The PBOC's Digital Currency Research Institute reported that e-CNY transactions reached 1.8 trillion yuan ($250 billion) by June 2023, with 120 million wallets opened across 26 pilot cities. Institutional adoption is limited to blockchain technology development without tokenization; the Beijing Blockchain Innovation Development Action Plan (2020-2022) allocated state funding to enterprise blockchain projects. Hong Kong, as a Special Administrative Region, operates under separate rules, with 80 licensed crypto exchanges and funds serving mainland investors indirectly. The Chinese government promotes blockchain-as-a-service (BaaS) platforms, with Ant Group's AntChain and Tencent's TrustSQL leading enterprise adoption.