Crypto in China

As of 2025, China maintains one of the world’s strictest regimes on private digital assets. Mainland authorities treat cryptocurrency as a virtual commodity rather than legal tender, prohibit cryptocurrency trading platforms and token financing, and enforce a nationwide ban on mining. At the same time, courts have increasingly described crypto as property for civil law purposes—creating a narrow path for private ownership claims while leaving commercial activity off-limits. Parallel to these restrictions, the state continues to scale the digital yuan (e‑CNY) and explore tightly controlled models for yuan‑linked stablecoins offshore, aiming for faster settlements and lower costs without compromising capital controls or financial risk prevention.

Mainland tax law does not provide a bespoke, positive regime for cryptocurrency trading because such trading is prohibited domestically. However, several principles matter in 2025:

• Property characterisation: Courts’ treatment of crypto as property in civil cases has fuelled debate over whether gains could be viewed as property transfer income for individual income tax (IIT) purposes when realised in compliant settings (e.g., foreign disposals not targeted at mainland residents). Authorities will still assess legality, source, and nexus to China.
• Enterprise tax: If a mainland enterprise were to generate crypto‑linked revenue (e.g., by providing forbidden services), such income risks confiscation and penalties, not routine enterprise income tax treatment.
• Withholding and VAT: Payment for goods/services in crypto is not recognised domestically; VAT invoices and withholding mechanics cannot be properly executed for crypto consideration.
• Cross‑border scenario planning: Foreign entities serving non‑mainland markets should segregate China traffic (geo‑blocking, no RMB settlement, no Chinese‑language marketing to the mainland) to avoid a mainland tax/permanent establishment exposure theory.

The e‑CNY is a central bank digital currency issued by the PBOC. It is state money, not a private cryptocurrency, and is built for controlled distribution through licensed banks and payment institutions.

• Policy goals: Payment efficiency, resilience, granular AML, programmable compliance, and support for RMB internationalisation.
• Architecture: A two‑tier model with commercial banks distributing e‑CNY wallets; support for tiered KYC, offline transactions, and fine‑tuned transaction limits.
• Interoperability: Ongoing pilots with transport, retail, government services and tax refunds; trials with cross‑border settlements focus on compliance gates rather than open blockchain interoperability.
• What it is not: The e‑CNY does not liberalise crypto trading, nor does it green‑light decentralised finance. It is an instrument of fiat currency policy and supervision.

For foreign businesses trading with Chinese partners, e‑CNY could, over time, enable faster, cheaper RMB settlement with better data transparency. Yet participation will require onboarding through authorised banks, adherence to data rules, and readiness for audit trails.

Mainland courts have built a consistent line on two fronts: (1) civil protection of property rights in crypto for victim recovery, and (2) public law invalidity for contracts that facilitate prohibited financial activity.

• Property status: Courts in major cities (including Shanghai) have recognised crypto holdings as a form of property that can be subject to preservation, recovery and division in civil cases.
• Invalidity doctrine: Agreements that use crypto as lawful consideration in the mainland, or that organise trading and token financing for mainland users, are often struck down as void for violating mandatory rules and financial order.
• Confiscation and disposal: Law enforcement sometimes seizes crypto in fraud and gambling cases. Without a unified disposal framework, authorities have engaged third parties to liquidate assets; this remains an area of legal uncertainty and policy refinement in 2025.
• Arbitration: The Beijing Arbitration Commission (BAC)

• PBOC and inter‑agency notices (2013 definition of Bitcoin as virtual commodity; 2017 ICO ban; 2021 multi‑agency crackdown on virtual currency business).
• CAC Regulation on Blockchain Information Services (filing, real‑name, content rules).
• PRC Cybersecurity Law, Data Security Law, Personal Information Protection Law.
• Encryption Law of the PRC (commercial and core cryptography framework).
• NDRC and provincial mining enforcement measures (2021 onward).
• Supreme People’s Court and Supreme People’s Procuratorate judicial interpretations on illegal fundraising, fraud and money laundering involving virtual assets.
• SAFE circulars and bank AML/KYC guidance on cross‑border transactions and suspicious activity.

RUE is an Estonia‑based legal and licensing firm serving founders, financial institutions and scale‑ups. We help you structure compliant operations that respect China’s rules while unlocking growth from jurisdictions that permit digital asset activity.

• Licensing strategy: EU/UK/EEA pathways for VASP/crypto licence, EMI/PI, forex and payment permissions—so you can serve global users without soliciting the mainland.
• Tax planning and compliance: Integrated advice on corporate tax, VAT, and reporting for digital asset flows; coordination with local counsel regarding cryptocurrency tax implications where China nexus may arise.
• Risk segmentation: Product and market design to segregate mainland China, including geo‑fencing, onboarding rules and affiliate controls.
• Policy documentation: AML/CFT programmes, high‑risk country procedures, advertiser checklists, and incident response playbooks tailored to China crypto regulation.
• Banking enablement: Introductions to regulated payment providers for fiat settlement, and guidance on evidence of purpose, invoices, and source‑of‑funds narratives.
• Cross‑border pilots: Advisory on stablecoin usage in permitted venues (including offshore RMB contexts) and e‑CNY readiness—focusing on speed and cost benefits without exposing the business to mainland breaches.

Outcome: safer market access, faster settlements where permitted, lower compliance friction, and a documented posture that regulators recognise. Speak with RUE to convert policy complexity into a competitive advantage.