Why Is Cryptocurrency Illegal in China?
China’s crackdown on cryptocurrency stems from concerns over financial stability, capital flight, and its push for a state-controlled digital currency. In 2021, the People’s Bank of China (PBOC) declared all cryptocurrency transactions illegal, citing risks like money laundering and fraud. The government also aims to promote its own digital yuan (e-CNY), which it can monitor and regulate.
A Timeline of China’s Crypto Crackdown
- 2013: PBOC bans financial institutions from handling Bitcoin transactions.
- 2017: ICOs (Initial Coin Offerings) and crypto exchanges outlawed.
- 2021: Full ban on mining and trading; 26 agencies collaborate to enforce restrictions.
What Activities Are Prohibited?
China’s ban targets:
- Cryptocurrency mining (once 65% of global Bitcoin mining).
- Operating exchanges or facilitating trades.
- Using crypto for payments or fundraising.
Can Chinese Citizens Still Own Crypto?
While trading and mining are illegal, owning cryptocurrency isn’t explicitly banned. Many use offshore platforms or peer-to-peer networks, though this carries legal risks.
Risks of Defying China’s Crypto Ban
- Fines or criminal charges for trading/mining.
- Loss of funds due to scams or lack of legal recourse.
- Difficulty accessing foreign exchanges due to internet restrictions.
China’s Digital Yuan vs. Cryptocurrency
The digital yuan (e-CNY) is a centralized CBDC designed to replace physical cash. Unlike decentralized cryptocurrencies, it allows full government oversight and control over transactions.
FAQ: Cryptocurrency in China
Q: Can I mine Bitcoin in China?
A: No—mining is illegal and actively penalized.
Q: Are VPNs safe for accessing crypto exchanges?
A: Using VPNs violates China’s internet laws and risks fines or prosecution.
Q: Will China ever legalize crypto?
A> Unlikely, as the government prioritizes control over its financial system and the digital yuan.
The Future of Crypto in China
Experts predict sustained enforcement of the ban, with tighter regulations on VPNs and decentralized technologies. However, underground activity may persist through privacy-focused coins or decentralized platforms.