Overview of Cryptocurrency Regulation in Mainland China
Mainland China's regulatory policies concerning cryptocurrency trading platforms have shown a trend of gradual tightening over the past decade, culminating in a comprehensive ban. This series of policies aims to prevent financial risks, combat illegal activities, and pave the way for the promotion of the digital yuan. In contrast, Hong Kong is actively exploring a compliant regulatory framework for virtual assets.
Historical Evolution of Regulatory Policies
- First Restrictions in 2013: In 2013, the People's Bank of China and four other ministries and commissions jointly issued a notice for the first time, defining Bitcoin as a "virtual commodity" and prohibiting financial institutions from providing Bitcoin trading services. Despite this, ordinary citizens could still participate in trading at their own risk. Following this ban, Bitcoin's price fell from approximately $1,150 to $500.
- Comprehensive Rectification in 2017: In 2017, the Chinese government further tightened policies, comprehensively banning domestic cryptocurrency exchanges and Initial Coin Offerings (ICOs), citing the prevention of financial risks and fraud. Affected by this, Bitcoin's price dropped from over $4,500 to below $3,000. Major China-originated exchanges such as HTX, OKX (formerly OKEx/OKCoin), and Binance subsequently shifted their business focus overseas to serve global users.
- Complete Cleanup in 2021: In September 2021, the People's Bank of China and nine other departments jointly issued the "Notice on Further Preventing and Disposing of Risks Related to Virtual Currency Trading and Speculation," clarifying that all virtual currency-related business activities are illegal financial activities. The notice also specifically stated that overseas virtual currency exchanges providing services to Chinese residents via the internet are also illegal activities. Following the release of this policy, Bitcoin's price plummeted in a short period, at one point falling to $41,089.46.
- Continued Crackdown on Mining: In addition to trading, the Chinese government has continuously cracked down on virtual currency "mining" activities, completely shutting down existing projects and strictly prohibiting new ones, to reduce carbon footprint and maintain energy stability.
- Latest Reiteration in 2026: In February 2026, the People's Bank of China and seven other departments once again issued a notice, reiterating the prohibitive policies on virtual currencies and clarifying the essential nature of stablecoins and Real World Asset (RWA) tokenization-related businesses.
Legal Status and Risks of Cryptocurrencies
Although virtual currencies are prohibited from circulating as currency in Mainland China, legal analysis suggests that as a virtual commodity, they possess property attributes and value, and personal ownership of cryptocurrencies itself is not explicitly prohibited by law. However, participating in any form of virtual currency trading activities, including buying and selling through Over-The-Counter (OTC) transactions, may face legal and financial risks. Due to their anonymity, OTC transactions objectively provide channels for criminal activities such as money laundering and illegal operations, with related cases occurring frequently. Before trading, investors can check the latest prices and project information on professional market platforms like Svmuu, but must pay attention to Mainland China's regulatory provisions.
Policy Differences Between Mainland China and Hong Kong
In stark contrast to Mainland China's strict ban, Hong Kong is actively exploring virtual asset regulation. Hong Kong established a Virtual Asset Service Provider (VASP) licensing regime in 2023, allowing licensed virtual currency platforms to provide trading and custody services to professional investors, and exploring stablecoins pegged to the Renminbi (CNY/CNH). This differentiated policy has made Hong Kong an important player in the global virtual asset landscape.
Considerations Behind the Regulation
The Chinese government and regulatory bodies, including the People's Bank of China, the Cyberspace Administration of China, the Supreme People's Court, and other departments, believe that virtual currencies disrupt economic and financial order, give rise to illegal and criminal activities such as gambling, illegal fundraising, fraud, pyramid schemes, and money laundering, and may threaten financial stability and the national currency (RMB). Therefore, regulation aims to reduce carbon footprint, maintain financial stability, combat illegal activities, and clear obstacles for the promotion of the digital yuan.
Development of the Digital Yuan
While prohibiting private cryptocurrencies, the People's Bank of China is vigorously promoting the research and development and application of the digital yuan (CBDC), aiming to enhance the functions of payment and settlement platforms and support commercial banks in integrating it into all-scenario businesses, to achieve payment innovation and financial regulatory goals in the digital economy era.
