In recent years, China has steadily intensified its efforts to regulate virtual currencies, claiming to eliminate speculative activity surrounding them. These efforts peaked in September 2021 with a sweeping ban on all cryptocurrency-related business activities. For fintech startups, small tech companies, and digital service providers that embrace the new form of global payment and interact with Chinese entities in their day-to-day business operations, it is important to understand the full scope and implications of China’s regulatory position.
A Historical Journey: Caution to Prohibition
China's reaction to cryptocurrencies began in a cautious skeptical manner and went on to become an outright ban. In December 2013, the People's Bank of China (PBOC) and other financial supervisors issued a notice classifying Bitcoin as a virtual commodity without legal tender status. Payment companies and financial institutions were expressly prohibited from providing services associated with Bitcoin transactions.
By September 2017, Chinese regulators moved forward to shut down all Initial Coin Offerings (ICOs), referring to them as illegal fundraising activities. Crypto exchanges in the country were also forced to shut down. These first measures clearly showed that the Chinese government viewed cryptocurrencies as a potential threat to financial stability and the domestic public order.
2019 to 2021: Escalating Regulatory Pressure and Enforcement
From 2019 to 2021, Chinese authorities intensified enforcement against cryptocurrency activities. This period saw increased scrutiny of crypto mining operations, particularly due to concerns over energy consumption. Regional governments were instructed to phase out mining operations, especially in provinces where electricity was subsidized or heavily reliant on coal.
In parallel, crypto trading was pushed further underground as Chinese users continued to access offshore exchanges using VPNs and peer-to-peer platforms. In response, regulators tightened controls over payment channels, instructing financial institutions and payment processors to block accounts suspected of facilitating virtual currency transactions. Law enforcement also began targeting marketing and promotional efforts tied to crypto, signaling a broader campaign to eliminate both the infrastructure and influence of crypto in China.
This period laid the groundwork for the formal and comprehensive ban introduced in September 2021, which consolidated the regulatory efforts of the previous eight years into a coordinated legal and enforcement framework.
The 2021 Ban: A Unified and Total Prohibition
On September 24, 2021, ten Chinese authorities jointly issued the most far-reaching policy to date: 《关于进一步防范和处罚虚拟货币交易炒作风险的通知》 ("Notice on Further Preventing and Handling the Risks of Virtual Currency Trading and Speculation") [Yin Fa (2021) No. 237].
This document reaffirms that cryptocurrencies such as Bitcoin, Ethereum, and Tether do not possess the same legal status as fiat currency in China and must not circulate as currency in the market. It clearly defines all business activities involving virtual currencies as illegal financial activities, including:
- Conversion between fiat and virtual currencies;
- Virtual currency-to-virtual currency exchanges;
- Token issuance and financing (including ICOs);
- Virtual currency derivatives trading;
- Acting as a central counterparty in crypto transactions;
- Providing pricing, information intermediary, or technical services for virtual currencies.
Crucially, the notice extends criminal liability to individuals and organizations facilitating such activities, even if they are not directly engaged in the transactions. It also confirms that offshore exchanges serving Chinese residents via the internet are considered illegal, and domestic personnel working for them may face legal consequences.
Investors, too, are subject to legal risk. Civil transactions involving crypto that violate public order or good morals ("公序良俗") are declared legally void, and any resulting losses must be borne by the investor. If these transactions endanger the financial order or national security, they may be prosecuted under applicable laws.
Institutional Responsibilities and Enforcement Mechanisms
The notice introduces a comprehensive enforcement framework involving ten agencies, including the PBOC, Cyberspace Administration of China (CAC), Supreme People's Court, Supreme People's Procuratorate, Ministry of Industry and Information Technology (MIIT), Ministry of Public Security, State Administration for Market Regulation (SAMR), China Banking and Insurance Regulatory Commission (CBIRC), China Securities Regulatory Commission (CSRC), State Administration of Foreign Exchange (SAFE).
It mandates cross-department coordination and emphasizes local governments' responsibility to prevent, monitor, and resolve crypto-related risks within their jurisdictions.
Financial institutions and non-bank payment providers are prohibited from offering any services related to virtual currencies. These include account opening, fund transfers, clearing and settlement, crypto-linked insurance products, or accepting virtual currencies as collateral. Any violations must be reported, and institutions are required to strengthen transaction monitoring mechanisms.
Internet and telecommunications regulators are empowered to shut down websites, mobile apps, and mini-programs that offer crypto services. Companies are prohibited from including terms like “virtual currency” or “encrypted asset” in their names or business scopes. Advertising of crypto services is also subject to strict scrutiny and enforcement.
Criminal enforcement will be intensified through coordinated national campaigns such as the "Anti-Money Laundering Special Action," "Anti-Gambling Campaign," and the "Broken Card Operation (断卡行动)." Accordingly, crypto investment and trading fall under the same category of illegal fundraising, fraud, money laundering, and pyramid schemes.
Industry self-regulatory organizations, including the China Internet Finance Association and the China Payment & Clearing Association, are tasked with strengthening compliance among member institutions, reporting violations, and supporting information-sharing efforts.
Implications for Crypto-Adopting Fintechs and Cross-Border Tech Businesses
For fintech startups, VCs, and tech companies adopting cryptocurrency for cross-border payments, fundraising, asset trading or investing in crypto-related startups, China’s 2021 crypto ban poses significant and potentially overlooked compliance risks. While crypto-related activities such as wallet services, token issuance, and decentralized finance (DeFi) solutions may be permitted or tolerated in some jurisdictions, any direct or indirect interaction with Chinese users or counterparties brings heightened regulatory exposure.
Even if your company is not based in China, your crypto-related offerings—such as cross-border payment processing, crypto investment products, or blockchain-based platforms—may violate Chinese regulations if they are accessible to Chinese residents. This includes seemingly minor touchpoints such as allowing Chinese IP addresses, translating promotional materials into Chinese, or enabling fiat-to-crypto conversions that could be accessed via local payment rails.
For example, a fintech platform offering Bitcoin-based cross-border remittances, or a VC firm tokenizing fund units for international investors, must take extra precautions to ensure Chinese residents are geo-blocked and not exposed to marketing or onboarding flows. Any technical, operational, or legal pathway that could tie your business to users or entities in China could lead to enforcement actions—including takedown requests, asset freezes, or reputational harm.
If your business has Chinese partners, vendors, or investors, their involvement in crypto-related activities could also raise red flags. Contracts should be reviewed for risk allocation, and due diligence should include crypto compliance checks. Chinese authorities have made it clear that associating with prohibited activities—even indirectly—can lead to liability.
These risks are not theoretical. China’s enforcement strategy is multi-agency, multi-channel, and tech-enabled. Blockchain forensics, financial monitoring, domain takedowns, and user reporting mechanisms are all part of the government’s toolbox. International businesses that fail to actively assess and mitigate crypto exposure in relation to the Chinese market may face consequences far beyond regulatory fines.
To minimize exposure, crypto-adopting firms should implement:
- Geo-blocking of IP addresses originating from mainland China;
- User and transaction screening to identify connections to entities or users located in mainland China;
- Localized disclaimers and legal notices that clearly state services are not available to residents of mainland China;
- Contractual and operational reviews of business arrangements that may involve Chinese counterparties engaged in crypto activities.
However, it is equally important that these precautions are not applied overbroadly. Individuals from mainland China who now hold permanent residency or passports of other countries should not be automatically excluded from using crypto-related services, provided they are legally residing and transacting in jurisdictions where such activities are permitted. Compliance policies should be guided by jurisdiction of residence and legal status, rather than nationality or ethnic background, to ensure fairness, prevent over-compliance, and reduce the risk of discrimination.
Ultimately, if your fintech or crypto-enabled venture touches global markets, compliance with China’s crypto ban should be treated as a high-priority operational risk, but it should be approached with precision and legal nuance.
Conclusion: A Clear Line Drawn
As of October 2021, China’s position is clear: all cryptocurrency activities, whether conducted domestically or offshore but serving Chinese users, are illegal. While blockchain technology remains encouraged under regulated frameworks, virtual currencies are banned from issuance, trading, or circulation.
International businesses must not assume that legal permissibility in one jurisdiction guarantees safe operations in another. For fintech companies and startups operating across jurisdictions, especially those interacting with China, understanding and respecting local regulatory boundaries is essential.
For tailored guidance on legal risks or regulatory compliance related to crypto, get in touch with our vetted legal experts or contact our customer support at support@trustiics.com.