China (CN)

China maintains one of the world's strictest stances on cryptocurrencies, with comprehensive bans on cryptocurrency trading, mining, and payment services since 2021. All cryptocurrency transactions and related business activities are considered illegal financial activities. Despite the ban on decentralized cryptocurrencies, China actively develops its state-controlled CBDC (e-CNY/Digital Yuan) and promotes blockchain technology for enterprise and government applications through its "Blockchain Service Network" (BSN).

Key regulations

  • 2021 Crypto Ban
  • Notice on Further Prevention of Risks
  • Anti-Money Laundering Law

Entities

  • financial institutions
  • payment providers
  • exchanges
  • mining operations

Activities

  • trading
  • mining
  • payment services
  • token issuance

Core Compliance Expectations

  • Trading & Exchanges: All cryptocurrency trading and exchange services are prohibited. Foreign exchanges cannot provide services to Chinese citizens.
  • Mining: Cryptocurrency mining was banned in 2021, forcing major mining operations to relocate outside China.
  • Payment Services: Financial institutions and payment companies are prohibited from providing cryptocurrency-related services, including account opening, registration, trading, clearing, and settlement.
  • Token Issuance: ICOs (Initial Coin Offerings) and all forms of token fundraising are banned since 2017.
  • KYC/AML: Traditional financial institutions must implement strict controls to detect and prevent cryptocurrency-related transactions.

Actionable Best Practices

Complete Prohibition: All cryptocurrency activities (trading, mining, payments, custody) are banned. Foreign platforms cannot serve Chinese citizens, even through VPNs. Financial institutions must actively monitor and block crypto transactions.

Digital Yuan Focus: The state-controlled e-CNY is the only permitted digital currency. Enterprises should integrate e-CNY infrastructure for payments and develop merchant solutions within the official ecosystem.

Blockchain Development: Enterprise blockchain applications are encouraged through the government-backed Blockchain Service Network (BSN). Permissioned blockchains for supply chain, trade finance, and consortium networks are acceptable - but must not involve cryptocurrency tokens.

Data Compliance: All financial data must be stored within China. Blockchain applications must use state-approved data sources and maintain full regulatory transparency - no privacy features that prevent government surveillance.

Key Risks to Watch

Enforcement is expanding to offshore platforms serving Chinese users. Web3 technologies like NFTs and DeFi exist in regulatory gray areas. Chinese nationals operating crypto businesses overseas face potential legal issues. Hong Kong's separate crypto regulations may face mainland restrictions on capital flows.

Privacy-Preserving Technology Considerations

China encourages blockchain technology development through the Blockchain Service Network (BSN) and permissioned enterprise applications, but specific regulatory guidance on privacy-preserving technologies has not been explicitly published. Any blockchain implementation must comply with China's data localization requirements under the Data Security Law and Personal Information Protection Law (PIPL). All blockchain activity is subject to state oversight and regulatory access requirements. Enterprises considering privacy features in approved blockchain applications should engage directly with relevant Chinese authorities for regulatory clarity.

See also