China

## Report: Retail Cryptocurrency Trading Status in China

**Topic:** Retail_Trading_Status
**Description:** Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued)

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**1. Current Status:** `Banned`

**2. Narrative Explanation:**

The status of retail cryptocurrency trading in China is categorized as `Banned`. This determination is based on comprehensive regulatory actions taken by Chinese authorities, most notably the joint circular issued in September 2021 by the People's Bank of China (PBOC) and nine other key government bodies, including the Supreme People's Court and the Ministry of Public Security.

This pivotal 2021 circular explicitly declared all cryptocurrency-related transactions and business activities as illegal financial activities within China. This includes:
*   Exchanging legal tender (like the Yuan) for cryptocurrencies, and vice versa.
*   Trading between different cryptocurrencies.
*   Acting as a central counterparty or providing matching services for crypto transactions.
*   Token issuance financing (Initial Coin Offerings - ICOs).
*   Trading in cryptocurrency derivatives.
*   Providing information, intermediation, or pricing services for cryptocurrencies.

Financial institutions (banks) and non-bank payment service providers are strictly prohibited from offering any services related to cryptocurrency transactions, such as account opening, registration, trading, clearing, or settlement. Furthermore, the ban explicitly extends to overseas cryptocurrency exchanges providing services to residents within mainland China via the internet. Authorities are mandated to monitor and block access to these platforms and hold facilitators accountable.

Prior to the 2021 blanket ban on transactions, China had already taken significant steps to curtail the crypto market. In 2017, ICOs were banned, and domestic cryptocurrency exchanges were ordered to close. In May 2021, a crackdown on cryptocurrency mining was initiated, citing financial risks and environmental concerns related to energy consumption.

Despite the comprehensive ban on trading and related financial activities, there is a nuance regarding the *possession* of cryptocurrencies by individuals. Several court rulings and legal interpretations, including recent opinions from Shanghai courts (November 2024), have recognized cryptocurrencies like Bitcoin as "virtual commodities" or "property" under Chinese law. This means that merely holding cryptocurrencies as personal property is generally not considered illegal for individuals. However, this recognition as property does *not* legitimize engaging in the banned trading activities or using crypto as a currency for payments. The focus of the ban remains firmly on the *transactional* and *business* aspects of cryptocurrencies to maintain financial stability and prevent illicit activities.

While individuals might legally *hold* crypto, they face significant hurdles and legal risks if they attempt to *trade* it, convert it to fiat currency through official channels, or use services facilitating such transactions, as these activities fall under the scope of the 2021 ban. Over-the-counter (OTC) trading persists in a legal gray area but carries substantial risk given the explicit prohibition on crypto-related financial activities.

**3. Supporting Excerpts:**

*   **PBOC Circular (September 2021):** "The new PBOC circular declares all cryptocurrency transactions illegal. It makes clear that cryptocurrency conversion, buying and selling cryptocurrencies as a central counterparty, providing matching services for cryptocurrency transactions, ICOs, cryptocurrency derivative transactions, and cryptocurrency translations are all illegal financial activities. Banks and other financial institutions are prohibited from providing any service to cryptocurrency transactions." (Source: Library of Congress, summarizing the PBOC circular)
*   **PBOC Circular (September 2021) on Overseas Exchanges:** "The PBOC circular notably states that overseas cryptocurrency exchanges providing services to Chinese residents through the internet is also illegal. Their employees in China, as well as other companies, organizations, and individuals providing services to these overseas exchanges, will be held liable in accordance with law..." (Source: Library of Congress, summarizing the PBOC circular)
*   **World Economic Forum (January 2022):** "In late September 2021, the People's Bank of China (PBOC) banned all cryptocurrency transactions. The PBOC cited the role of cryptocurrencies in facilitating financial crime as well as posing a growing risk to China's financial system owing to their highly speculative nature." (Source: World Economic Forum)
*   **Shanghai Court Opinion (November 2024):** "A Shanghai court has affirmed that Chinese citizens can legally own cryptocurrencies, such as Bitcoin, classifying them as virtual commodities with property-like attributes. Judge Sun Jie of the Shanghai Songjiang People's Court clarified this stance, noting that while personal ownership is lawful, business-related cryptocurrency activities remain prohibited. This includes investments, token offerings, and exchanges, which are considered illegal fundraising or destabilizing to the financial system." (Source: Crystal Intelligence, reporting on Shanghai court opinion)
*   **Shanghai Court Opinion (November 2024):** "As a virtual commodity with the attributes of property, cryptocurrency ownership is not prohibited by Chinese law, Sun wrote. This does not extend to business activity, however, as it can disrupt economic and financial order or act as payment for illegal activity... 'That is why laws and regulations always maintain a high-pressure crackdown on speculative activities in cryptocurrency trading,' Sun said in the opinion." (Source: South China Morning Post, reporting on Shanghai court opinion)
*   **CMS Law (Expert Guide):** "Emphasis of the illegality of virtual currency-related activities: The Circular emphasizes that virtual currencies do not possess legal status as official currencies in China, and declares that virtual currency related business activities are classified as illegal financial activities..." (Source: CMS Law Firm)

**4. Source URLs:**

*   **PBOC Circular Summary (Library of Congress):** https://www.loc.gov/item/global-legal-monitor/2021-09-24/china-central-bank-issues-new-regulatory-document-on-cryptocurrency-trading/
*   **World Economic Forum Analysis:** https://www.weforum.org/agenda/2022/01/china-cryptocurrency-ban-bitcoin/
*   **Crystal Intelligence Report on Shanghai Court Ruling:** https://crystalintelligence.com/news/shanghai-court-confirms-legal-cryptocurrency-ownership/
*   **South China Morning Post Report on Shanghai Court Ruling:** https://www.scmp.com/tech/policy/article/3286918/shanghai-court-says-crypto-ownership-legal-under-china-law-amid-bitcoin-price-surge
*   **CMS Law Expert Guide:** https://cms.law/en/int/expert-guides/cms-expert-guide-to-crypto-regulation/china
*   **Forbes Report on 2021 Ban:** https://www.forbes.com/sites/siladityaray/2021/09/24/chinas-central-bank-says-all-cryptocurrency-transactions-are-illegal/
*   **Library of Congress (General Regulation Overview):** https://www.loc.gov/law/help/cryptocurrency/china.php
*   **Reuters Report on 2021 Ban:** https://www.reuters.com/world/china/china-central-bank-says-all-crypto-related-transactions-illegal-2021-09-24/
*   **Mondaq Report on Shanghai Court Ruling (Feb 2025):** https://www.mondaq.com/fin-tech/1579234/shanghai-court-recognises-the-legality-of-crypto-ownership-for-individuals