Recently, there is a lot of reports on the legality of cryptocurrency in China.
It is not a secret that China is one of the most powerful countries in Asia, and is also becoming an influential player on the global stage.
With this power comes responsibility, and it is important for any individual and firm to know what they are doing when operating within China’s borders.
One question that many companies ask is whether or not cryptocurrency is legal in China?
Is the China government is against it or for it?
In this post, we will answer these questions:
- What is the current situation about is cryptocurrency legal in china?
- Is China trying to ban cryptocurrencies such as Bitcoin, Ethereum, etc?
- And what are some other possible reasons why they are regulating this market so tightly?
- What does the future hold for the Cryptocurrency market in China?
- Are there penalties for using digital currencies like cryptos in China?
- Can China residents buy, trade, and invest in cryptos?
Plus, many more.
Is Cryptocurrency Legal in China Today?
What is the current situation today?
China has banned financial institutions and payment companies from providing services relating to cryptocurrency transactions, warning investors against speculative crypto trading.
China’s decision impacts the future of Bitcoin as it will make obtaining funds more difficult for exchanges, investors, and miners in this area.
China recently announced a ban on cryptocurrencies amid speculation that they are being used by criminal organizations to launder money through Initial Coin Offerings (ICO) or other methods.
The Chinese authorities have also urged traders not to invest their savings into virtual currencies.
Because they can come with high risk due to largely unpredictable markets which could lead them to lose all of their capital should price fall sharply at any point in time – an issue many people around the globe face when investing without researching thoroughly first beforehand.
What effect does this ban have on Chinese or individuals living in China?
Well, inasmuch as China has banned crypto exchanges and initial coin offerings, and financial institutions – the good news is that they have not barred individuals from holding cryptocurrencies.
More on this later on. 🙂
Before that, lets take a look at…
What is the History of China and Cryptocurrency?
First, the frown of cryptocurrency by the China government started in 2013.
When the People’s Bank of China (PBOC) and five other ministries or commissions issued a notice that prohibits financial institutions from dealing in Bitcoin.
On April 1, 2014, the People’s Bank of China ordered commercial banks and payment companies to close bitcoin trading accounts within two weeks.
Despite this decree, over 50% of Bitcoins were still traded in Yuan as trade is now done through P2P networks or by using foreign currency like US dollars that can be converted into Yuan without going through a bank account.
The People’s Republic announced on April 1st, 2014 that they would not tolerate Bitcoin use for financial transactions from Chinese citizens due to its volatility and potential security threats.
Which led them to ban any company with banking affiliation from doing business with Bitcoin-related enterprises such as exchanges, mining pools, cryptocurrency wallets, etc.
This was the same time Initial coin offerings (ICO) were banned.
Exchange platforms that traded cryptocurrencies or provided crypto services were also ordered to be closed following the crackdown on ICO.
173+ crypto-related platforms have been closed down since then.
In December 2017, PBOC is said to have instructed local governments to remove all cryptocurrency-related information from their websites.
This is likely because these governments saw cryptos as tools for speculation and not investments.
It is possible that this is some form of protectionism against foreign competition – it seems like the Chinese government is trying to prevent people from buying crypto with Yuan while simultaneously preventing foreigners from investing in bitcoin on exchanges based inside china’s borders.
Then in 2018, PBOC is said to have ordered the closure of all Chinese Bitcoin exchanges, forbidding people from trading in cryptocurrencies.
Adding salt to the injury, by January 2018, many bitcoin mining operations in China had stopped operating.
The Latest Crypto Ban in China
Finally, the latest cryptocurrency ban (in 2021) in China was really a crazy one.
China has done many crackdowns in the past. But this one in 2021 is different than the one in 2017.
Things were different this time. For instance, it affected the price of Bitcoin globally.
Another effect was that Huobi Mall and BTC.TOP, two of the largest crypto miners in the world announced their exit from China the day after the crackdowns in 2021 were announced.
As reported by Reuters, the Chinese government further made clear that institutions cannot use virtual currencies or accept them.
They can’t provide exchange services between cryptocurrencies and the yuan or foreign currencies either.
In addition, the country prevents institutions from providing services to keep cryptocurrency. Institutions are also not allowed to make crypto-related financial products.
And virtual currencies cannot be used as investment targets for any trust or fund product.
Banks and payment gateway services are being told they need to do more to closely monitor the money that is involved in cryptocurrency trading.
With these bans and drastic limitations of cryptocurrencies in Asia’s most populous country, it’s evident that China as a nation will probably not be crypto-friendly any time soon.
That said, lets take a look at other frequently asked questions (FAQs) regarding this.
FAQs on Legality of Cryptocurrency in China
Is Cryptocurrency regulated in China?
No, crypto is not regulated in China.
A country that has declared cryptocurrency as an illegal currency and also banned crypto-related activities – obviously has no business regulating crypto.
Can I Buy and Hold Cryptocurrency in China?
Despite being barred, you can still buy and hold cryptocurrency in China.
A number of exchanges, notably Coinmama, CEX.io, Huobi, and OKEX have been able to operate offshore by providing services from countries with more lenient regulations.
So, yeah it is legal to buy, hold and even invest in crypto while in China. All from an online crypto exchange.
Is Crypto or Bitcoin Mining Legal in China?
No, it is not legal to mine crypto in China.
Bitcoin is banned and it is illegal to mine it or use the cryptocurrency as a payment method, or for trading with other currencies.
In fact, China used to be the largest mining base in the world.
But due to the recent ban, crypto mining companies have since moved to more favorable countries, similar to the move of the cryptocurrency exchanges as well.
Is Coinbase legal in China?
No, Coinbase is not available in China.
As you already know, China is a notoriously difficult country to do any crypto business in.
The government imposes strict regulations for startups and cryptocurrency adoption, making it nearly impossible for new companies like Coinbase to enter the market.
And Coinbase has made it known that they have no plans to open up an offering for Chinese residents.
Is Binance legal in China?
Binance started in China but they moved headquarters to another country because the government is making it hard for people to trade cryptocurrency.
How can I sell my Bitcoin in China in 2021?
If you have any crypto asset or Bitcoin stored in any crypto wallet, and you live in China, you can sell it off via crypto exchanges.
But, is this legal?
Yes, it is! There is no law that prohibits crypto trading on exchanges operating offshores of China at the moment.
What is the future of cryptocurrencies in China?
The future of cryptocurrency in China right now looks pretty dark. In my opinion, there’s certainly something coming in the near future and is going to make it even harder for people who want to trade cryptocurrencies in this Asian country.
China is not a free country:
You can’t do anything without government permission, including mining, buying, investing, and trading cryptos.
This is why I’m saying China is never going to be an open market for bitcoin or any other cryptocurrency because they are trying so hard on banning everything possible that’s related to crypto.
Is Cryptocurrency Legal in China – Final Thoughts
China is a communist country where people are supposed to trade in the government currency only.
The government does not like competition, so it is against cryptocurrencies that can rival their own money system and be used for other things besides trading.
This is one of the reasons why bitcoin is not legal in China; any mining or transactions with Bitcoins done by institutions will likely attract serious action by China government.
It’s also illegal for companies based inside China to conduct trades using bitcoins.
With these, it is not really surprising that bitcoin is illegal in China.
Finally, if you’re in China and you’d like to trade or invest in crypto – you can do that from these exchanges:
Any questions? Ask them below!