Cryptocurrencies in China: Regulation, Taxes, and Legality 2026

China is a special case when it comes to cryptocurrencies. The mainland has some of the toughest regulations in the world, while the Special Administrative Region of Hong Kong is building its own licensed market. Both worlds have their own laws, their own authorities, and opposing goals. This guide separates them clearly. You will find out whether Bitcoin is legal, how strictly the state intervenes, how profits are treated, and whether the country should be classified as crypto-friendly or restrictive.

The short answer first: almost every form of crypto business is prohibited on the Chinese mainland. In Hong Kong, on the other hand, cryptocurrencies can be traded legally via authorized platforms.

Are cryptocurrencies legal in China?

The answer can only be given separately for each jurisdiction. Mainland China and Hong Kong belong to the same state, but follow different legal systems. What is a punishable financial transaction on the mainland can be a licensed service in Hong Kong.

Mainland: almost complete ban

On the mainland, the state treats almost every crypto activity as an illegal financial transaction. Trading is prohibited, both the exchange of coins for local currency and the exchange between different coins. The operation of exchanges is prohibited, as is the issuance of new tokens via an ICO. Mining was also banned in 2021, after the country had previously provided a large part of the world’s computing power for years.

An important distinction concerns mere possession. Simply holding Bitcoin is not explicitly punishable. However, a digital coin is legally considered a virtual commodity without status as legal tender. Those who hold coins enjoy no legal protection. Contracts involving cryptocurrencies are generally not enforceable in court.

Newer areas also fall under the strict line. Staking and DeFi services are included in the prohibited trade. Regarding NFTs, authorities warned against speculation and explicitly did not classify them as an investment product. At the end of 2025, the central bank, together with several authorities, reaffirmed the ban and explicitly included stablecoins.

Hong Kong: regulated market with licensing requirement

The situation is different in Hong Kong. The city pursues an approach that allows innovation but ties it to clear requirements. Since 2023, centralized trading platforms must apply for a license if they operate in Hong Kong or specifically target investors there. Trading via approved providers is therefore legal.

Bitcoin and Ether are not considered legal tender in Hong Kong either, but can be bought and sold via licensed platforms. Since August 1, 2025, a separate licensing regime for stablecoins has also been in effect. It has now been in force for almost a year and forms the fixed standard for anyone who wants to issue a fiat-backed stablecoin in Hong Kong.

Crypto regulation and authorities in China

Responsibilities differ greatly depending on the jurisdiction. On the mainland, several authorities work together to curb the market. In Hong Kong, two main regulators share the work.

On the mainland, the central bank, People’s Bank of China (PBoC), sets the direction. It is flanked by the cyberspace regulator CAC, the securities regulator CSRC, and the foreign exchange authority SAFE. Security authorities also ensure enforcement. This bundling explains why the ban is so consistently effective.

In Hong Kong, supervision of trading platforms lies with the Securities and Futures Commission. The details of the licensing regime are documented by the Securities and Futures Commission on its website. The monetary authority, on the other hand, is responsible for the issuance of stablecoins. The details are listed by the Hong Kong Monetary Authority. Both are supplemented by the Financial Services and the Treasury Bureau (FSTB), which drives legislation.

Crypto taxes in China

There is no uniform crypto tax in China. On the mainland, this is simply because trading is prohibited. Where no legal activity exists, there is also no clear tax framework for private individuals. Hong Kong, in turn, has no general tax on capital gains.

Important for Hong Kong: Anyone who trades cryptocurrencies commercially may be subject to profit tax. For long-term private investments, there is usually no tax. The classification depends on the individual case.

How can you buy cryptocurrencies in China?

On the mainland, there is no legal way to buy cryptocurrencies. Nevertheless, interest is high. Many users switch to platforms abroad, use VPN connections, or trade directly between private individuals via P2P channels. Over-the-counter (OTC) trading via intermediaries also plays a role. Stablecoins like USDT often serve as a bridge. However, all of this takes place outside the law and without any investor protection.

This raises a valid question: if banks block crypto trading, how is the money part of a P2P transaction even paid? The answer lies in camouflage. The actual crypto transaction runs on-chain and is invisible to the bank. Only the fiat transfer to the counterparty is visible, and this is exactly what is disguised. In practice, amounts are split into inconspicuous small sums and declared via WeChat Pay or Alipay as a private payment, for example for a service or an invoice among acquaintances. For larger sums, buyers and sellers meet in person for the cash handover. Both ways serve solely to bypass the banks’ pattern recognition, which automatically reports suspicious cash flows. This is not safe: if the pattern is recognized, account blocks are likely.

A common detour leads through Hong Kong. There, investors can trade legally via licensed platforms. Access is, however, strictly regulated. Providers require a full identity check, and part of the offer is primarily aimed at professional investors. Our crypto exchange comparison provides an overview of reputable trading venues in general.

Crypto and banks in China

On the mainland, banks and payment service providers are not allowed to offer crypto services. They are not allowed to maintain accounts for trading or process transactions. Institutions are increasingly using algorithms to recognize payment flows that look like crypto trading and can block accounts. This explains why the gray market described above resorts to disguised small amounts and cash. In addition, there are strict capital controls. The transfer of funds abroad via cryptocurrencies is considered an illegal capital outflow.

In Hong Kong, the relationship is more relaxed. Banks are increasingly working with licensed crypto companies. Anyone who issues stablecoins needs their own license from the monetary authority and thus an orderly banking connection.

Can companies in China hold Bitcoin?

On the mainland, there is also no legal way for companies to hold or trade Bitcoin as part of the company treasury. Such activities fall under the ban on illegal financial transactions. Accounting or treasury strategies with cryptocurrencies are therefore practically impossible.

It’s different in Hong Kong. There, companies can hold cryptocurrencies and reflect them in their accounting. Some state-affiliated corporations even launch crypto funds in Hong Kong. Observers see this as a cautious test of how far the state can approach the topic via the Special Administrative Region without touching the mainland ban.

Important crypto companies from China and Hong Kong

China has had a strong technical impact on the industry. Manufacturers like Bitmain and Canaan are among the world’s most important providers of mining hardware. Several large international exchanges were originally founded by Chinese teams but moved their headquarters abroad after the legal situation tightened.

In Hong Kong, licensed platforms such as HashKey and OSL have established themselves. They form the backbone of the regulated market and represent the attempt to build an orderly crypto hub in Asia.

Paying with digital money: the e-CNY

While cryptocurrencies are banned, China is pushing ahead with its own state digital currency. The digital yuan, or e-CNY for short, is a currency issued by the central bank. Unlike Bitcoin, it is centrally controlled and therefore not a cryptocurrency in the true sense.

The e-CNY has been under development for years and is being tested in more and more areas, such as local transport or state payments. For the state, it is the only permissible form of digital money. Paying with decentralized coins is not possible on the mainland.

History of crypto regulation in China

The Chinese line has tightened in waves over more than a decade. The most important stages at a glance.

Conclusion

China cannot be classified in one word. The mainland is one of the most restrictive jurisdictions in the world. Trading, mining, and the operation of exchanges are prohibited; possession exists in a defenseless gray area. Anyone who trades here on their own carries the full legal risk.

Hong Kong, on the other hand, is one of the most advanced crypto locations in Asia. Licensed platforms, approved Ethereum and Bitcoin ETFs, and a separate stablecoin regulatory framework create an orderly environment. For investors, the city is the only legal access within China. Whether the mainland will follow suit in the long term is open. For now, Hong Kong serves more as a controlled testing ground, while the line on the mainland remains firm.

Other countries at a glance

The legal situation differs significantly from country to country. Compare our articles on crypto regulation in Russia, Argentina, and Liechtenstein.

Risk warning

This article does not constitute legal, tax, or investment advice. The legal situation in China can change, and enforcement is strict, especially on the mainland. Anyone who trades cryptocurrencies carries a high risk, up to total loss. If in doubt, clarify your personal situation with a qualified professional.

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