China's Strict Regulatory Journey for Virtual Currencies
Since 2013, the Chinese government has continuously tightened its regulatory policies on virtual currencies such as Bitcoin. The People's Bank of China and other departments have defined virtual currencies as "virtual commodities" rather than legal tender, prohibiting financial institutions from providing related services. This stance has been consistently strengthened in subsequent years.
In 2017, China completely banned Initial Coin Offerings (ICOs) and shut down domestic cryptocurrency exchanges. In 2021, regulation further escalated, severely restricting Bitcoin mining and cryptocurrency trading, leading to a significant drop in Bitcoin's hash rate and prompting many miners to relocate their operations overseas. In September of the same year, the People's Bank of China and nine other departments jointly issued a notice, explicitly stating that virtual currency-related business activities are illegal financial activities and are strictly prohibited, emphasizing that overseas exchanges providing services to domestic residents are also illegal. From November to December 2025, the People's Bank of China convened another meeting, reiterating its sustained crackdown on virtual currency trading and speculation, and for the first time explicitly defining stablecoins as a form of virtual currency, stressing that they cannot be pegged to the RMB for issuance outside China.
Potential Impact of Bitcoin on China's Economic Security
The Chinese government believes that virtual currencies like Bitcoin pose multiple threats to national economic security:
- Capital Outflow Risk: Bitcoin is seen as a channel to circumvent foreign exchange controls and facilitate capital outflow. For example, during the 2019 US-China trade war and RMB depreciation, Chinese investors flocked to cryptocurrencies, exacerbating capital outflow pressures. Chainalysis reported in 2020 that over $50 billion in digital currency was transferred from Chinese addresses to foreign ones. In October 2023, China's foreign exchange outflow reached $75 billion, after which Bitcoin's price surged over 100% in four months.
- Financial Risks and Criminal Activities: The Chinese government emphasizes that virtual currencies are highly speculative, volatile in price, easily disrupt economic and financial order, and breed illegal and criminal activities such as gambling, illegal fundraising, fraud, pyramid schemes, money laundering, and illegal cross-border fund transfers, severely endangering the safety of people's property and national economic security.
- Monetary Sovereignty Challenge: Bitcoin's decentralized nature contrasts with China's strategy of developing a central bank digital currency (Digital RMB, e-CNY). China is accelerating the development of the Digital RMB to modernize its payment system and maintain state control over monetary policy, thereby safeguarding monetary sovereignty.
The Complex Reality of Mining Activities
Despite strict prohibitions, the actual situation of Bitcoin mining activities in China remains controversial. Before the 2021 ban, China accounted for over 60% to 70% of the global Bitcoin mining hash rate. After the ban, the mining hash rate once dropped significantly but rebounded to 19.1% of the global hash rate by December 2021. Analyst Daniel Batten noted in 2026 that Bitcoin mining activities in China were not officially banned but temporarily suspended, and domestic activities have largely resumed, accounting for about 15% of the global hash rate, primarily utilizing renewable energy, which helps achieve carbon neutrality goals. However, official actions to crack down on mining continued in June 2021.
Diverse Perspectives and International Views
Opinions vary on Bitcoin's impact on China's economic security:
- Chinese Government: Firmly believes that Bitcoin does not have legal tender status, should not be circulated or used, and its risks far outweigh potential benefits.
- Chinese Investors: Despite the ban, some investors still trade Bitcoin through over-the-counter transactions, overseas accounts, or Hong Kong exchanges, viewing it as a safe-haven asset or alternative investment amid a sluggish stock market, real estate woes, and RMB depreciation. They express concerns about rising domestic debt levels and tightening capital controls.
- International Observers: US venture capitalist Peter Thiel stated in April 2021 that China might use Bitcoin as a "financial weapon" against the United States to threaten the dollar's status as the global reserve currency. Analysis firms like Chainalysis also believe that RMB depreciation and the trade war led to capital outflow from China, with digital currencies playing a key role.
Conclusion
Overall, the Chinese government views Bitcoin as a threat to its economic and financial stability and has implemented some of the world's strictest regulatory measures. These measures aim to curb capital outflow, combat illegal financial activities, and safeguard monetary sovereignty. Despite the clear official stance, Bitcoin still holds a certain appeal for circumventing capital controls and as an alternative investment, and its mining activities in China continue to present a complex and ongoing situation.
