In the early days of the cryptocurrency market, China was one of the most active regions for global trading activity. However, starting in 2017, a series of stringent regulatory policies were introduced, ultimately leading to the collective exit of almost all crypto exchanges serving Chinese users by the end of 2021. This transition did not happen "overnight"; rather, it was a multi-year, phased process of regulatory tightening.
Phase I: The "September 4 Notice" of 2017 and the Closure of Domestic Services
On September 4, 2017, the People's Bank of China (PBOC) and six other ministries jointly issued the "Notice on Preventing Risks of Token Issuance and Financing" (commonly referred to in the industry as the "September 4 Notice"). This notice explicitly categorized Initial Coin Offerings (ICOs) as "unauthorized and illegal public financing activities" and demanded the immediate cessation of all types of token issuance and financing activities. Regarding trading platforms, the notice mandated that "no so-called token financing trading platform shall engage in exchange businesses between fiat currencies and tokens or 'virtual currencies', buy or sell tokens or 'virtual currencies' as a central counterparty, or provide pricing, information intermediary, or other services for tokens or 'virtual currencies'."
Following the release of this notice, major domestic trading platforms at the time, such as HTX and OKEx (now OKX), successively announced the suspension of RMB trading pair services and migrated their operational entities and servers overseas to circumvent domestic regulatory risks. This marked the end of the "domestic platform" era for China's crypto trading market and initiated the phase of "going global" for operations.
Phase II: The "September 24 Notice" of 2021 and Comprehensive Clearance
Despite platforms "going offshore," a large number of Chinese users were still able to access and trade via overseas websites. To further curb risks, on September 24, 2021, the PBOC, the Ministry of Public Security, and ten other departments once again jointly issued the "Notice on Further Preventing and Disposing of Risks in Virtual Currency Trading and Speculation" (the "September 24 Notice"). The wording of this notice was much harsher and its scope broader.
The core determinations of the notice include:
- Business activities related to virtual currencies are classified as illegal financial activities.
- Overseas virtual currency exchanges providing services to residents within China via the internet are likewise classified as illegal financial activities.
- Participating in virtual currency investment and trading activities carries legal risks.
This notice thoroughly blocked the compliance pathways through which users could participate in trading via overseas platforms. Subsequently, almost all mainstream trading platforms—including Binance, HTX (formerly Huobi), OKX, and Gate.io—densely issued announcements declaring that by December 31, 2021, they would orderly phase out existing users whose KYC identity was verified as mainland China, including suspending new user registration, closing deposit functions, and setting a deadline for users to complete asset withdrawals.
Key Considerations Behind Regulation
China's regulatory authorities have repeatedly articulated their stance in notices and public statements. Taken as a whole, the primary considerations focus on several key areas:
- Preventing financial risk: Authorities argued that the violent price volatility and rampant speculative hype of virtual currencies easily trigger systemic financial risks and could undermine the stability of the existing financial system.
- Combating illegal and criminal activities: They pointed out that virtual currency trading facilitates crimes such as money laundering, illegal fundraising, fraud, pyramid schemes, and gambling, thereby increasing regulatory and tracking difficulties.
- Safeguarding monetary sovereignty and financial management order: Emphasis was placed on the legal tender status of the RMB. Any other "virtual currency" lacks the legal status equivalent to fiat currency, and its trading activities disrupt normal financial management order.
- Protecting consumer rights and interests: Given the high-risk nature of the market and the numerous fraudulent incidents, regulatory measures are also aimed at protecting inexperienced investors from property losses.
Exchanges' Responses and Changes in Market Landscape
Faced with regulatory pressure, the response strategies of major exchanges were highly consistent: fully embracing international compliance and shifting their business focus to other overseas jurisdictions that permit or have clear regulations for such activities, such as Dubai, Singapore, the European Union, and Australia. Simultaneously, they completely severed business lines targeting mainland China users and deregistered their domestic operational entities.
This series of events profoundly reshaped the landscape of the global cryptocurrency market. China transitioned from a market with once-leading trading volume into a role focused primarily on mining (which later also became subject to policy impacts) and the developer ecosystem. Meanwhile, the epicenter of trading activity shifted to North America, Europe, Southeast Asia, and other regions.
For global users, major cryptocurrency trading platforms no longer provide registration and trading services to residents of mainland China. Users should first confirm whether the laws and regulations of their respective jurisdictions permit such activities before engaging in any crypto asset trading.
