Crypto Taxation in China: Why the Ban Means No Taxes

Key Takeaways

• China treats all crypto activities as illegal, so traditional tax concepts simply don’t apply.
• The People's Bank of China (PBOC) issued a sweeping ownership ban on June 1 2025.
• Any crypto‑related income is deemed illicit and can be confiscated.
• Foreign individuals in China face the same prohibitions as citizens.
• While the ban is strict, a July 2025 Shanghai debate hints at possible softening, though no policy change is official yet.

When it comes to Cryptocurrency taxation in China is a unique regulatory situation where the government has chosen outright prohibition instead of a tax framework. That means the usual questions about capital‑gains rates, mining income, or reporting thresholds are largely moot. Instead, you need to understand the ban itself, the enforcement mechanisms, and the few gray areas that still exist.

How the Ban Evolved: A 16‑Year Timeline

The Chinese approach didn’t appear overnight. It began in June 2009 with a simple warning against virtual currencies used for buying goods. Over the years, the government added layers of restriction:

• December 5 2013: Banking regulators barred banks and payment providers from handling Bitcoin transactions.
• April 1 2014: The People’s Bank of China (PBOC) ordered the shutdown of all Bitcoin trading accounts.
• September 30 2017: Initial Coin Offerings (ICOs) were declared illegal, forcing exchanges to close.
• January 2018: A crackdown pushed most mining farms offshore.
• June 2021: The government halted crypto mining to curb energy use.
• September 24 2021: A comprehensive ban on trading, mining, and transactions took effect.
• May 30 2025: The PBOC issued a final ownership ban, effective June 1 2025.

Each step tightened control, culminating in a zero‑tolerance stance that eliminates any tax considerations.

What the 2025 Ownership Ban Actually Says

The decree, titled “Comprehensive Ownership Ban,” does three things:

1. Prohibits all crypto‑related transactions, including buying, selling, swapping, and staking.
2. Orders the seizure of crypto assets held on domestic platforms.
3. Imposes severe administrative and criminal penalties for violations.

Because the law treats crypto activity as an illegal financial activity, not a taxable event, the tax code never gets involved. Any profit you make from a prohibited trade is automatically classified as illicit proceeds, subject to confiscation.

Who Enforces the Ban and How?

The enforcement chain runs from the PBOC down to local public security bureaus. Typical actions include:

• Freezing bank accounts linked to crypto exchanges.
• Shutting down mining farms-both legal and clandestine.
• Seizing digital wallets discovered during investigations.
• Imposing fines up to 5 million CNY for institutional violators.
• Prosecuting individuals for “illegal fundraising” or “financial fraud” if they run unregistered ICOs or exchange services.

Because the state can label crypto gains as “criminal proceeds,” the risk isn’t just a tax audit; it can turn into a criminal case.

Is Private Ownership Entirely Illegal?

Interestingly, the legislation stops short of expressly criminalizing the mere act of holding a private wallet. However, the lack of legal protection means:

• Contracts involving crypto are void in Chinese courts.
• Any attempt to move crypto into a domestic exchange triggers immediate seizure.
• Foreigners traveling in China are subject to the same rules; no exemption for non‑citizens.

In practice, the gray area offers no safe harbor. Holding assets is a legal risk that can be swept away if authorities discover the wallet.

What Happens to Existing Crypto‑Related Income?

If you earned Bitcoin mining rewards before the 2021 mining ban, those rewards are now considered unlawful income. The government can label them “illicit proceeds” and confiscate them under the anti‑money‑laundering (AML) statutes that accompany the ban. There’s no capital‑gains filing, no tax credit, just a risk of losing the assets entirely.

Comparison: China vs. Taiwan’s Crypto Tax Model

This table shows why “crypto taxation in China” is a moot point-there simply is no tax framework to apply.

Why the Digital Yuan Matters

The digital yuan, also called the e‑CNY, is China’s central bank digital currency (CBDC). Unlike private tokens, the e‑CNY is fully regulated, can be used for retail payments, and is integrated with the country’s payment infrastructure. The government’s heavy investment in the digital yuan is a cornerstone of why it wants to eradicate competing cryptocurrencies: a single, state‑controlled digital money system simplifies monetary policy and eliminates the risk of capital flight.

Potential Softening: The July 2025 Shanghai Debate

On July 10 2025, the Shanghai State‑owned Assets Supervision and Administration Commission hosted a round‑table on digital assets. Participants discussed how stablecoins might fit into China’s financial ecosystem and whether limited, regulated crypto services could coexist with the digital yuan. No official policy shift followed, but the discussion signals that the government is at least monitoring global trends. Until an amendment is published, the ban-and the resulting lack of tax rules-remains the legal reality.

Practical Advice for Individuals and Businesses

If you’re based in China or planning a long‑term stay, here’s what you should do:

1. Delete any domestic exchange accounts. Keeping them open risks automatic freezing.
2. Avoid holding crypto on‑shore wallets. If you must keep assets, store them on hardware devices outside China and never connect to a Chinese ISP.
3. Do not advertise or promote crypto services. Even informal advice can be treated as “financial fraud.”
4. Keep documentation outside of China. Should authorities request information, you’ll have a defensible record that the assets were held abroad.
5. Monitor official PBOC releases. Any amendment will likely be posted on the central bank’s website and Chinese state media.

Following these steps helps you stay out of the crosshairs of a regime that treats crypto like a contraband good.

Future Outlook: Will China Ever Tax Crypto?

The short answer: unlikely in the near term. The current priority is to cement the digital yuan’s dominance. If the government ever relaxes the ban, it will probably do so under a tightly‑controlled licensing scheme-similar to what Taiwan adopted-but even then, taxation would be a secondary concern to state oversight. For now, “crypto taxation in China” remains a theoretical exercise rather than a practical filing requirement.