As of October 2026, mainland China maintains strict restrictions on cryptocurrency business activities. Joint Notice Yin Fa [2026] No. 42, effective from 6 February 2026, replaced the 2021 notice and addresses virtual currencies, offshore issuance and real-world asset tokenisation. Cryptocurrency is not legal tender, and recognition of property interests does not authorise prohibited activities. China continues to develop e-CNY. Separately, the February 2026 rules prohibit domestic and foreign entities and individuals from issuing RMB-pegged stablecoins offshore without approval from the relevant Chinese authorities. Offshore incorporation alone does not remove this restriction.
This guide consolidates the current legal position, judicial practice, tax touchpoints, and compliance expectations for foreign founders, investors, payment firms and Web3 builders who interface with China from abroad. It also explains how to align cross‑border operations with China’s policy priorities while using licensable tools and venues outside the mainland.
Snapshot: Is cryptocurrency legal in China in 2026?
Private crypto is not recognised as legal tender in mainland China and most organised commercial activities are prohibited. The prevailing framework is built around financial risk prevention, investor protection, and capital control.
Limited recognition of crypto as virtual assets/property in judicial rulings for civil disputes (e.g., fraud, unjust enrichment, divorce/property division). This does not authorise trading, brokerage, exchange services or token issuance.
Token financing trading platforms (ICO/IEO/IFO), cryptocurrency trading platforms, brokerage/market‑making, derivatives, payments/settlement in crypto, advertising and promotion targeting mainland users, and cryptocurrency mining.
Banks and payment institutions must block crypto‑linked flows, conduct enhanced KYC/AML, and report suspicious transactions—especially on cross‑border channels and online gaming or forex gateways that may mask crypto exposure.
People’s Bank of China (PBOC), National Administration of Financial Regulation (NAFR), China Securities Regulatory Commission (CSRC), Cyberspace Administration of China (CAC), Ministry of Public Security (MPS), State Administration of Foreign Exchange (SAFE), and procuratorates.
The digital yuan is expanding for retail and selective B2B uses under central‑bank control. It is distinct from private cryptocurrencies and from public blockchain networks.
In 2026, offshore issuance of RMB-pegged stablecoins requires approval from the relevant Chinese authorities. Hong Kong has a separate stablecoin licensing regime, effective since 1 August 2025. A Hong Kong licence does not authorise cryptocurrency services in mainland China.
Timeline and Key Legal Instruments (2013–2025)
PBOC and other agencies define Bitcoin as a virtual commodity, not legal tender. Financial institutions are barred from pricing or settling in Bitcoin. The overarching motive is financial stability and investor protection.
A joint circular bans initial coin offerings (ICOs) and compels closure of domestic crypto exchanges. “Token financing trading platforms” must cease operations. The move responds to retail speculation and illegal fundraising risks.
The Regulation on Blockchain Information Services (CAC) introduces filing obligations for blockchain information services, real‑name registration for users, content moderation duties, and cybersecurity compliance under the PRC Cybersecurity Law.
The Encryption Law takes effect, setting a framework for commercial and core cryptography, certification and security assessment. It underpins how encryption technologies are deployed and supervised in China, distinct from cryptoassets.
A landmark notice by multiple authorities (including PBOC, CAC, MPS, CSRC and others) declares all virtual currency‑related business activities illegal in the mainland. It targets exchange operations, order‑matching, token issuance, derivatives, and services provided by offshore platforms to mainland residents.
The National Development and Reform Commission (NDRC) and provinces escalate enforcement against Bitcoin mining machines, barring power supply and mandating clean‑up of mining projects.
The Supreme People’s Court and Supreme People’s Procuratorate refine guidance on illegal fundraising, fraud and money laundering with crypto elements. Courts continue to recognise crypto as property in civil contexts while affirming invalidity of contracts that violate public policy or mandatory financial rules.
Financial regulators tighten bank oversight for crypto‑adjacent flows in cross‑border payments and online platforms. Consultations and pilots around yuan‑linked stablecoins in offshore markets advance, with China‑origin protocols emphasising regulatory‑compliant public blockchain models. Mainland policy remains centred on capital controls, state‑directed innovation and investor protection.
Core Pillars of China Cryptocurrency Laws
Legal classification: virtual commodity, not legal tender
Mainland authorities consistently define cryptocurrency as a virtual commodity without the attributes of legal tender. In practice this means:
- Crypto cannot be used to denominate prices or settle obligations in the mainland financial system.
- Contracts whose main purpose is prohibited activity (e.g., operating an exchange or using crypto as consideration in payment) risk being deemed invalid.
- Courts may still treat crypto as a form of property or a digital asset interest for civil disputes (e.g., claims for restitution after fraud). This limited recognition does not convert crypto into a lawful payment instrument.
Platform and issuance bans: ICO, IEO and trading services
Since 2017, the core target has been “token financing trading platforms” and related intermediation. Prohibitions cover:
- ICO/IEO/IFO and similar primary token financings aimed at mainland residents.
- Operation of cryptocurrency trading platforms (order books, escrow, matching engines, market‑making, derivatives, staking‑as‑a‑service, prime brokerage).
- Providing access to offshore platforms to mainland residents, including marketing, customer onboarding, and payment facilitation.
- Advertising or promotion of crypto services to mainland users (consider the PRC Advertising Law and unfair competition rules).
Mining ban and energy enforcement
Policy makers cite energy intensity, financial risk and local safety violations to prohibit mining. Localities have shut down projects, seized equipment, and warned industrial parks and power plants against hosting miners. The mining restrictions continue in 2026. Notice No. 42 requires closure of existing mining projects, prohibits new projects and restricts domestic sales and related services by mining-machine manufacturers.
Cross‑border vigilance and SAFE rules
China’s foreign exchange regime, administered by SAFE, tightly supervises cross‑border flows. Banks must detect and report suspicious transactions, especially where crypto may be used to circumvent capital controls (e.g., via online gaming chips, OTC forex channels, intermediated gift cards). Enterprises transacting with China should assume enhanced documentary checks on trade authenticity, beneficial ownership, and source of funds.
Cyber, data and blockchain information services
Operating any public‑facing web or app service with blockchain features for mainland users triggers a complex stack of obligations:
- PRC Cybersecurity Law, Data Security Law, and Personal Information Protection Law (PIPL) for network security, data classification, cross‑border transfers, and personal data processing.
- Regulation on Blockchain Information Services for provider filings, real‑name KYC, content moderation, retention and audit duties.
- Strict controls on anonymisation tools; providers must be able to perform compliance checks and cooperate with investigations.
Enforcement playbook and agencies
- PBOC: Defines crypto activities as illegal financial activities and directs banks/payment firms to block flows.
- NAFR (successor to CBIRC): Supervises banks and insurers; enforces AML/KYC and risk controls.
- CSRC: Oversees relevant securities and real-world asset tokenisation activities. In February 2026, it introduced rules for offshore issuance of asset-backed security tokens backed by mainland assets. Such transactions require compliance with applicable approval, filing and supervisory requirements; they are not subject to an unconditional blanket prohibition.
- CAC: Oversees internet content and blockchain information services; orders takedowns of unlawful apps and sites.
- MPS and local police: Investigate fraud, illegal fundraising, gambling, money laundering with crypto elements.
- SAFE: Controls foreign exchange, scrutinising cross‑border remittances and settlement authenticity.
- Courts and procuratorates: Invalidate illegal contracts, recognise property rights for victim recovery, and pursue criminal cases.
Tax and Accounting Touchpoints for Virtual Assets
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: Prohibited activities can lead to confiscation and penalties, but their illegality does not automatically establish an exemption from enterprise income tax. Tax obligations must be assessed separately under the applicable rules, including those covering monetary and non-monetary income.
- Withholding and VAT: Cryptocurrency payment restrictions do not automatically eliminate tax obligations arising from an underlying transaction. China’s VAT Law, effective from 1 January 2026, includes non-monetary consideration in taxable sales and provides for market-price valuation. VAT, invoicing and any withholding obligations require separate assessment; tax compliance does not legalise prohibited crypto settlement.
- Cross-border scenario planning: Geo-blocking, excluding RMB settlement and restricting mainland marketing do not, by themselves, prevent Chinese tax exposure. Relevant factors include effective management, establishments, personnel, agents, income sources and applicable tax treaties. Market-access restrictions and tax obligations require separate analysis.
Illustrative example (non‑mainland venue): A UK exchange licensed in the EEA geo‑blocks mainland IPs and prohibits RMB deposits. A mainland individual uses a foreign VPN and trades; later, they appear in a mainland fraud case. A court may recognise the victim’s claim as property recovery, yet the regulator may still scrutinise the exchange for any mainland marketing footprint. Tax authorities could also examine whether proceeds touch mainland reporting obligations. The practical lesson: design for robust non‑solicitation, country screening, and channel controls—then document them.
Market Impact and Practical Repercussions
- Payments: Importers/exporters must use authorised banking rails. Paying a mainland supplier in USDT or BTC—even from Hong Kong—can trigger bank blocks and regulatory inquiries, and may jeopardise the supplier’s accounts.
- Liquidity and spreads: The crackdown reduces domestic liquidity and funnels activity to informal P2P channels, which face higher enforcement risk and inconsistent pricing.
- Risk concentration: Fraud rings, illegal gambling, and unlicensed forex desks have used crypto as liquidity. Police focus on these touchpoints; innocent counterparties can be swept up as funds pass through linked wallets.
- Vendor risk: Overseas platforms serving Chinese‑speaking users must ensure no mainland onboarding, no RMB payment methods, and strict affiliate controls to prevent covert solicitation.
Digital Yuan (e-CNY) in 2026: Scope and Limits
The e-CNY operates within a PBOC-supervised digital renminbi framework. From 1 January 2026, e-CNY balances in commercial-bank wallets are treated as bank deposit liabilities, with interest paid under applicable deposit-rate rules and protection under the deposit insurance framework. Authorised non-bank payment institutions must maintain 100% reserves against the e-CNY they manage. It is not a private cryptocurrency.
- 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.
Stablecoins and Offshore Yuan Experiments
Hong Kong’s Stablecoins Ordinance took effect on 1 August 2025, establishing a licensing regime for regulated fiat-referenced stablecoin issuance. The HKMA granted its first two stablecoin issuer licences in April 2026. The regime is therefore operational, rather than merely a licensing concept under discussion.
- Mainland stance: Private stablecoins remain restricted domestically; any eventual trials would be tightly controlled within sandboxes and ring‑fenced payment scenarios.
- Offshore focus: Offshore CNH stablecoins target trade finance, remittances, and liquidity between RMB‑linked markets and global venues. The aim is faster settlements and lower costs without undermining mainland capital controls.
- Corporate takeaway: If your supply chain relies on RMB, monitor developments in Hong Kong and other compliant offshore hubs. Do not extend any stablecoin product to mainland users without explicit regulatory permissions and robust geo‑fencing.
Judicial Rulings and Arbitration Signals
Civil recovery is not guaranteed. Notice No. 42 provides that investments in virtual currencies, RWA tokens and related financial products that violate public order and good morals are invalid, with resulting losses borne by investors. Recovery depends on the claim and circumstances.
- 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)
Compliance Playbook for International Companies
- Non‑solicitation of mainland users: No Chinese‑language onboarding aimed at the mainland, no RMB rails, no mainland KOLs or ad buys, and strict affiliate governance. Keep logs proving geo‑blocks and traffic filtering.
- Geo‑fencing: Block PRC IP ranges, WeChat/Alipay rails, and China‑issued cards. Implement residency checks and documentary audits for high‑risk regions.
- Product scope: No spot/derivatives access for mainland users; no stablecoin mint/burn for PRC residents; no cryptocurrency mining services.
- KYC/AML: Apply customer due diligence under the provider’s governing law and a documented risk assessment. Chinese nationality alone does not establish a universal enhanced due diligence requirement. Residence, mainland connections, source of funds, transaction behaviour and other relevant risk factors must be assessed.
- Sanctions and export controls: Screen for PRC entity lists, sensitive tech parties, and cross‑checks under UK/EU/US regimes.
- Data compliance: If you touch mainland users inadvertently, assess obligations under PRC Cybersecurity Law, Data Security Law and PIPL; avoid data localisation triggers by design.
- Advertising hygiene: Avoid claims that could be interpreted as soliciting mainland investors; maintain translations that make clear territorial exclusions.
- Audit trail: Retain evidence of geo‑blocking, policy enforcement, rejected onboarding and declined payments to rebut mainland nexus theories.
- Use licensed EMI/PI institutions in the UK/EU for fiat on/off‑ramp. Maintain segregated accounts and clear flow‑of‑funds justifications.
- Document trade purpose for cross‑border remittances; expect banks to question invoices and beneficial owners where China is involved.
- Do not propose or accept crypto settlement for mainland counterparties. Convert to fiat currencies through regulated channels.
- Appoint a board‑level compliance champion; align risk appetite with written mainland policies.
- Integrate chain analytics to flag flows linked to China enforcement typologies (fraud, gambling, underground banks).
- Train customer support to recognise and reject mainland solicitations; track metrics of declined users and payment attempts.
- Coordinate with reputable local counsel for mainland‑specific opinions when in doubt; document all decisions.
Use‑Case Risk Matrix (Mainland China)
| Use case | Risk level | Notes |
| Paying a mainland supplier in USDT | Very high | Likely bank blocks; potential SAFE and AML issues for both parties. |
| Marketing a global exchange to mainland users | Very high | Advertising ban; platform access prohibition; takedowns and enforcement. |
| Allowing sporadic P2P OTC from PRC IPs | High | Violates non-solicitation; creates AML and operational exposure. |
| Enterprise blockchain (permissioned) with CAC filing | Medium | Possible if not crypto-related; comply with CAC and cybersecurity rules. |
| e-CNY settlement via authorised bank | Medium | Compliant route for RMB payments; access and use cases remain limited. |
| Offshore issuance of an RMB/CNH-pegged stablecoin | Prohibited without required approval | Chinese regulatory approval is required; excluding mainland users does not remove the issuance restriction. |
| Holding crypto privately while residing in China | Medium–High | Civil property recognition exists, but trading/servicing is prohibited; follow personal risk discipline and law. |
Frequently Asked Questions
Cryptocurrency is not legal tender in mainland China and most commercial activities relating to it are illegal. Courts may recognise crypto as property in civil disputes, but that does not authorise trading, intermediation, token issuance or payment in crypto.
The February 2026 rules reaffirm mainland restrictions and extend controls over offshore issuance and RWA tokenisation. They do not establish general liberalisation of mainland cryptocurrency trading.
No. Paying for goods or services in Bitcoin in the mainland risks contract invalidity and enforcement actions. Settlement must occur through authorised fiat rails.
Private holding is not expressly criminalised, and courts have described crypto as property in civil contexts. However, participating in trading, brokering, mining, promotion or exchange operations remains prohibited. Foreigners face the same enforcement baseline as citizens.
Mining is banned nationwide. Authorities target power suppliers, industrial parks and hosting providers, and they have seized mining equipment in prior campaigns.
NFTs are not granted special legal tender status. Domestic “digital collectibles” operate on permissioned platforms with real‑name rules and content moderation. Secondary trading resembling a crypto marketplace is constrained by the same financial risk policies.
Providers of blockchain information services must file with the CAC, implement real‑name registration and content controls, and comply with the PRC Cybersecurity Law, Data Security Law and PIPL. These obligations are independent of crypto prohibitions and apply to permissible enterprise blockchain use.
There is no positive regime for domestic crypto trading (it is prohibited). In theory, if crypto is treated as property, gains could fall within property transfer income for IIT in certain lawful contexts. In practice, legality, source and China nexus are determinative. Always seek tailored tax advice.
Repeated or organised P2P dealing risks being characterised as participation in prohibited crypto services. Banks are required to report suspicious patterns, and enforcement has targeted OTC rings and underground banks.
Enterprise blockchain (supply chain, provenance, trade finance) is possible within the CAC filing regime and cybersecurity laws. Token issuance, public token trading or decentralised finance remain off‑limits for mainland users.
Mainland China has no general licensing route for private stablecoin business. Under the February 2026 rules, offshore issuance of RMB-pegged stablecoins also requires approval from the relevant Chinese authorities, regardless of whether mainland users are targeted.
Even if an offshore CNH stablecoin is available, paying a mainland counterparty in that instrument risks settlement rejection and regulatory issues on the mainland side. Convert to fiat and use compliant banking rails.
Authorities may seize crypto in fraud or gambling investigations. Disposal practices (e.g., sale via agents) have existed, but a unified, transparent procedure remains under discussion. The direction of travel is toward clearer rules and stronger oversight.
Key Sources and Official Documents to Know
- 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.
Mainland vs Hong Kong vs e‑CNY: A Quick Comparison
| Dimension | Mainland China | Hong Kong/Offshore RMB | e-CNY |
| Legal status of private crypto | Cryptocurrency business activities prohibited; civil recovery is not guaranteed | Hong Kong’s stablecoin licensing regime is operational; offshore RMB-pegged issuance also requires relevant Chinese approval | PBOC-supervised digital renminbi; commercial-bank wallet balances are deposit liabilities under the framework effective from January 2026 |
| Payments | Crypto not legal tender; banks block crypto-related flows | Subject to local rules; cross-border to mainland still sensitive | Authorised use via banks/payment institutions |
| Mining | Banned | N/A in mainland context | N/A |
| Blockchain services | Allowed if filed with CAC and compliant; no token trading | Permitted per local law | Not applicable—state money system |
Executive Checklist for 2026
- Adopt an explicit no‑mainland‑users policy; enforce with technology and process.
- Verify residence and mainland connections when applying territorial restrictions. Assess Chinese document holders living abroad under the applicable onboarding rules and risk-based due diligence requirements; enhanced due diligence is required where mandated by law or justified by risk.
- Vet affiliates and marketing channels; ban Chinese‑language solicitations that reach the mainland.
- Implement chain analytics with alerts for China‑specific typologies (fraud, gambling, OTC layering).
- Codify sanctions/export‑control screens for sensitive PRC entities and sectors.
- Prepare evidence packs (geo‑block logs, rejected onboardings, blocked payments) to demonstrate compliance.
- Monitor e‑CNY and offshore CNH stablecoin developments; be ready to participate only through licensed venues.
- Engage RUE for licensing, tax and policy documentation; coordinate with PRC local counsel for country‑specific opinions.
Targeted Takeaways for UK/EU Founders
- Do not settle with mainland counterparties in crypto—even via Hong Kong. Convert to fiat using regulated EMIs and banks.
- Do build documented geo‑fencing and no‑solicitation controls for China; regulators will expect proof.
- Monitor e‑CNY integration pathways for supply chains and refunds; pilots are expanding but remain compliance‑centric.
- Explore offshore CNH stablecoins only within licensed environments and outside the mainland user base.
- Engage specialist counsel early; aligning product scope and market access now is cheaper than remediation later.
Contact RUE
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 license, 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.
RUE helps founders and financial institutions turn complex rules into clear execution. For a confidential discussion about licensing, payments architecture, tax and a China‑safe go‑to‑market, contact us at RUE. We operate globally and coordinate with trusted local counsel where PRC‑specific legal advice is required.
Why Regulated United Europe?
Regulated United Europe OÜ (RUE) is a European legal consulting firm specializing in financial licensing, company formation, and regulatory compliance. Since 2016, we have helped hundreds of businesses obtain crypto, gambling, forex, and EMI/PSP licenses across 35+ jurisdictions.
With offices in four EU countries and a team of experienced lawyers, we provide end-to-end support — from initial consultation and company registration to license acquisition and ongoing compliance management.
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