Cryptocurrency Regulation World Map - Mainland China

We should probably say there is no cryptocurrency regulation whatsoever in China (excluding two SARs, Hong Kong and Macau, where financial regulations are different and independent), because the digital assets are completely outlawed within its border.

Crypto Legality

China, the second-largest economy in the world, had previously led the world in crypto mining, and it is the place of birth for companies like Bitmain, then the government's actions against cryptocurrencies led to significant selloffs before prices steadied. The impact of crypto mining on the environment and people utilizing digital currencies for fraud and money laundering are two issues that the Chinese government expressed particular concern about. The nation is currently promoting its own virtual currency, the digital yuan, and working to increase consumer access to it.

When China outright outlawed cryptocurrency last year, it generated considerable media attention. First, the nation forbade banking institutions from doing any cryptocurrency transactions in May. Then, it prohibited all domestic crypto mining in June, and in September, it completely outlawed cryptocurrencies.

Related stories by Fazzaco:

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China's Crackdown on Crypto Mining Leads to Sales Suspension of Bitmain​

Contrary to popular belief, the People's Bank of China (PBOC), China's central bank, really forbade financial institutions from processing Bitcoin transactions as early as 2013 and went even farther in 2017 by outlawing initial coin offerings (ICOs) and domestic cryptocurrency exchanges. ICO funding, which raises virtual currencies like Bitcoin or Ethereum via the unauthorized sale and circulation of tokens, was described by the PBOC as public financing without approval, prohibited by Chinese law.

China has strong currency control restrictions on the majority of foreign currencies, including cryptocurrencies, so it should come as no surprise that the country does not view cryptocurrencies as legal cash. State-approved cryptocurrencies were given the status of property for the purposes of determining inheritances via a 2020 change to China's Civil Code.

Are exchanges even possible to exist in China?

Despite China's blanket ban on domestic crypto exchanges, there are ways to get around it by using foreign platforms and websites (the majority of which are not regulated by China). While a total ban on mining had been considered, the government reaffirmed in 2019 that it would remain legal but would be increasingly subject to international geopolitical sanctions and export control implications.

Future lookout

There is no sign that China's cryptocurrency regulations will soon lift or loosen current restrictions, but recent events imply that the government wants to establish China as a global leader in the cryptocurrency industry. A joint venture with SWIFT, the international payment and cross-border payment gateway; statements by Chinese government officials endorsing blockchain technology; the extensive trial and testing of the central bank's digital currency (the digital yuan); and the ongoing status of crypto mining in China are some of these developments. 

China's central bank has been preparing to launch an official digital currency since 2012, with efforts stepping up after Facebook (now known as Meta) revealed its ambitions to launch its own currency, Diem, but a timetable is still unknown. In order to achieve this, the Chinese government produced a bill in late 2020 that gave the PBOC's digital Yuan legal standing. The legislation is anticipated to lead to the end of the fiat currency and the implementation of specialized currency restrictions that encompass exchanges and currency fungibility.