Quick Answer
No, cryptocurrency transactions are illegal in China.
- All crypto-related business is considered illegal financial activity.
- It is a virtual commodity, not legal tender; transactions are unprotected.
Legal Status of Crypto in China
The legal status of cryptocurrency in China is complex; while all related business activities are illegal, private ownership exists in a legal gray area. Chinese authorities, led by the People’s Bank of China, have banned crypto transactions, exchanges, and ICOs, classifying them as illegal financial activities to curb speculation and illicit fund flows. Consequently, while it is not explicitly illegal to hold crypto as a virtual commodity, the state offers no legal protection for such assets, and any related contracts are considered void.
Current Regulations
China's regulatory framework, primarily established by a 2017 announcement from the People’s Bank of China and other agencies, strictly prohibits Initial Coin Offerings (ICOs) and the operation of cryptocurrency exchanges. While cryptocurrencies are legally considered a virtual commodity rather than legal tender, financial institutions and payment providers are forbidden from offering any related services, including account opening, trading, or settlement. These measures are designed to mitigate financial risks and combat illegal activities like money laundering, which authorities believe are facilitated by the anonymous nature of digital tokens.
Regulatory Authorities
A coalition of government bodies and financial regulators enforces China's strict cryptocurrency policies, with a joint notice outlining the responsibilities of each.
- People’s Bank of China (PBOC): As the central bank, it leads the regulatory effort, issuing notices that classify crypto activities as illegal and directing financial institutions to block related transactions. It also coordinates the multi-agency response to manage systemic financial risks posed by virtual currencies.
- Cyberspace Administration of China (CAC): This agency polices the country's internet, taking responsibility for shutting down websites, apps, and social media accounts that promote or facilitate crypto trading. It also oversees regulations for blockchain information services to control the underlying technology.
- Ministry of Public Security (MPS): This is the national police force tasked with investigating and cracking down on criminal activities associated with cryptocurrencies. Its focus includes money laundering, illegal fundraising, and other financial crimes enabled by digital assets.
- China Banking and Insurance Regulatory Commission (CBIRC): This body supervises all banks and insurance companies, ensuring they do not offer any services for crypto-related activities. It strictly prohibits institutions from providing accounts, clearing, settlement, or insurance for any virtual currency business.
- China Securities Regulatory Commission (CSRC): As the nation's securities watchdog, the CSRC focuses on preventing illegal public offerings through digital tokens. It plays a crucial role in enforcing the ban on Initial Coin Offerings (ICOs) and other forms of token-based fundraising.
- State Administration of Foreign Exchange (SAFE): This authority monitors and regulates all cross-border financial flows, specifically targeting overseas crypto exchanges that provide services to Chinese residents. It works to prevent the use of cryptocurrencies for capital flight and to enforce the ban on foreign crypto platforms.
- Supreme People’s Court (SPC): As China's highest judicial body, the SPC provides legal interpretations that render crypto-related investment contracts invalid and unenforceable. It ensures that civil disputes involving crypto losses are dismissed, reinforcing the high-risk nature of such investments.
- Supreme People’s Procuratorate (SPP): This is the top national prosecutorial agency responsible for pursuing criminal charges against individuals and organizations involved in illegal crypto activities. It works closely with public security to prosecute cases of fraud, money laundering, and illegal business operations.
Historical Context
China's regulatory approach to cryptocurrency began cautiously. In 2013, authorities defined Bitcoin as a virtual commodity, not legal tender, and restricted financial institutions from handling it. A major policy shift occurred in September 2017 when regulators banned Initial Coin Offerings (ICOs) and domestic crypto exchanges, a move that dismantled the public trading market and forced major players to move abroad. Subsequent years saw continued enforcement, with agencies issuing warnings against illegal fundraising in 2018. While suppressing private cryptocurrencies, China pivoted to embracing state-controlled blockchain, developing its own digital yuan.
Compliance Requirements for Businesses in China
- Anti-Money Laundering (AML) Checks: China’s regulations identify virtual currencies as a major channel for money laundering. Consequently, the Ministry of Public Security is tasked with cracking down on these crimes. Financial institutions and non-bank payment providers must monitor funds for any links to virtual currency trading. A comprehensive monitoring system, combining online tracking and offline inspections, was established to identify and report illicit transactions to the relevant authorities.
- Know Your Customer (KYC) Requirements: Since all cryptocurrency transactions are illegal, traditional KYC requirements do not apply. The regulatory focus is on prevention and prohibition rather than due diligence for transactions. However, financial institutions are still required to monitor customer funds, which implies a need to know their customers well enough to identify and block any activity related to virtual currencies, as outlined in the official notice.
- Mandatory Procedures: A 2021 regulatory document outlines several absolute prohibitions. All crypto-related business activities are illegal, including exchange services, derivatives trading, and ICOs. Financial institutions are forbidden from providing any services, from account opening to settlement. Internet companies must block and report crypto-related content, and overseas exchanges are banned from serving Chinese residents. Authorities have established a coordinated working mechanism to monitor all related activities and enforce these rules.
Why this matters for Cross-Border Payments
China's strict ban on cryptocurrency creates significant hurdles for international businesses, as digital assets cannot be used for cross-border payments into or out of the country. This forces companies to rely exclusively on traditional banking channels, which can be slower and more expensive, complicating trade and investment with Chinese partners. Key pain points include the inability to leverage crypto for fast, low-cost remittances, exposure to currency conversion fees, and the risk of payment delays due to stringent capital controls.
How Lightspark Enables Compliant Crypto-Native Payments
Lightspark offers a global payments infrastructure, the “Money Grid,” to bypass the slow, costly traditional banking channels previously mentioned. Its products, Lightspark Connect and Grid Switch, enable instant, 24/7 cross-border payments. Connect provides direct Bitcoin Lightning Network access for crypto-native firms, while Grid Switch lets regulated institutions use domestic real-time payment systems, leveraging Bitcoin for settlement without direct exposure. This model eases pain points by offering a faster, cheaper alternative for global money movement.
The platform is built to facilitate use by regulated institutions. While not handling compliance directly, its infrastructure includes features like audit-ready reporting and compliant-ready protocols. Grid Switch, in particular, allows banks to operate within their existing regulatory frameworks by using familiar payment rails, helping them meet their own stringent AML and KYC obligations while accessing modern payment technology.
To learn more about Lightspark's global payment solutions, visit the company website.
Notice: This article is provided for informational purposes only and does not constitute legal advice.
FAQs
What are the penalties for trading crypto in China?
Engaging in cryptocurrency trading can lead to severe consequences, including administrative penalties and potential criminal charges for activities deemed illegal fundraising or financial fraud. Any financial gains from such activities are considered illicit proceeds and are subject to confiscation by the authorities.
Can foreigners use cryptocurrency in China?
No, foreigners residing in or visiting China are subject to the same comprehensive ban on cryptocurrency activities as Chinese citizens. All crypto-related transactions are considered illegal financial activities, regardless of the individual's nationality.
Is cryptocurrency mining legal in China?
Cryptocurrency mining is illegal in China, following a nationwide crackdown to address concerns over excessive energy consumption and financial speculation. Authorities have systematically shut down mining operations and prohibited any new or existing facilities from operating.
Sources
- Chen, Conghui, and Lanlan Liu. “How Effective Is China's Cryptocurrency Trading Ban?” Finance Research Letters, vol. 46, part B, May 2022. ScienceDirect, doi.org/10.1016/j.frl.2021.102429.
- “China and Cryptocurrency.” Freeman Law, 2022, freemanlaw.com/cryptocurrency/china/.
- “China’s Cryptocurrency and Blockchain Regulatory Environment.” Ecovis Focus China, www.ecovis.com/focus-china/chinas-cryptocurrency/.
- Dean, John. “China Bans All Cryptocurrency Transactions: What Impact Will This Have on the SEC’s Regulation of Cryptocurrency in the United States?” North Carolina Journal of Law & Technology, journals.law.unc.edu/ncjolt/blogs/china-bans-all-cryptocurrency-transactions-what-impact-will-this-have-on-the-secs-regulation-of-cryptocurrency-in-the-united-states/.
- People's Bank of China, et al. “Notice on Further Preventing and Resolving the Risks of Virtual Currency Trading and Speculation.” People's Bank of China, 15 Sept. 2021, www.pbc.gov.cn/en/3688253/3689012/4353814/index.html.
- Shanghai and Hong Kong Newsroom. “China Debates How to Handle Criminal Crypto Cache.” Reuters, 17 Apr. 2025, www.reuters.com/world/china/china-debates-how-handle-criminal-crypto-cache-2025-04-15/.
- Zhang, Laney. “China: Central Bank Issues New Regulatory Document on Cryptocurrency Trading.” Global Legal Monitor, Law Library of Congress, 13 Oct. 2021, www.loc.gov/item/global-legal-monitor/2021-10-13/china-central-bank-issues-new-regulatory-document-on-cryptocurrency-trading/.
