Crypto Taxation in China: Why the Ban Means No Taxes

If you thought you needed to file a crypto tax return in China, you’re out of luck. The country has taken a hard‑line stance that treats every crypto‑related activity as illegal, which effectively eliminates any tax‑reporting requirement. This article breaks down how the ban evolved, what the law looks like today, and why "crypto taxation" is essentially a moot point for anyone inside China’s borders.

From Skepticism to Full Prohibition - A 16‑Year Journey

Back in June2009 the People's Republic of China issued its first warning against virtual currencies, fearing they could be used to purchase real‑world goods anonymously. The People's Bank of China (the country’s central bank and primary regulator of financial markets) tightened the noose over the next decade:

• December52013 - banks and payment firms barred from handling Bitcoin transactions.
• April12014 - all Bitcoin trading accounts ordered shut.
• September302017 - outright ban on Initial Coin Offerings (ICOs).
• January2018 - mining operations forced offshore.
• June2021 - mining crackdown citing energy waste.
• September242021 - comprehensive ban on trading, mining, and transactions.
• May302025 - the final ownership ban decree (a legal order that prohibits private possession of any cryptocurrency) takes effect on June12025.

The result? China now operates on a zero‑tolerance model where crypto is treated as a criminal activity, not a taxable event.

What the Current Legal Framework Actually Says

The May302025 decree classifies crypto transactions as “illegal financial activities.” The key takeaways are:

1. All forms of cryptocurrency trading are prohibited.
2. Mining any digital token, including crypto mining, is illegal.
3. Holding crypto is not explicitly criminal, but any related contract is void and offers no legal protection.
4. Financial institutions cannot provide custodial, exchange, or settlement services for crypto.
5. Violations trigger administrative fines, asset seizure, and possible criminal charges.

Because the law never labels these activities as taxable income, there is no framework for capital‑gains tax, income tax on mining rewards, or value‑added tax on transactions.

Why "Crypto Taxation" Doesn’t Exist in China

In most jurisdictions, the tax authority asks:

• Did you earn crypto? → Income tax.
• Did you sell crypto for profit? → Capital gains tax.
• Did you provide services and get paid in crypto? → Payroll tax.

China’s ban flips the script. Since the activity itself is illegal, any profit is deemed illicit proceeds and is subject to confiscation, not tax. The government’s focus is enforcement, not revenue collection.

For example, if a person mined Bitcoin in a hidden basement and sold it on a foreign exchange, Chinese authorities would treat the proceeds as “illegal earnings” and seize the assets under anti‑money‑laundering statutes. No tax form, no declaration, just a criminal case.

Enforcement - Penalties and Asset Seizure

Enforcement mechanisms are harsh:

• Administrative fines range from ¥10,000 to ¥100,000 for first‑time offenders.
• Repeat violations can lead to criminal charges carrying up to 7years in prison.
• All crypto assets found in a suspect’s possession are subject to confiscation without compensation.
• Foreign nationals inside China face the same penalties as citizens.

The People's Bank of China coordinates with public security and market supervision bodies to monitor online activity, blockchain analytics, and even electricity usage patterns to locate illegal mining farms.

How China Differs From Its Neighbors - A Quick Comparison

The contrast shows why China’s approach is an outlier: rather than creating a tax code, it chose outright prohibition.

Is the Ban Permanent? Signals of a Possible Shift

In July2025, a Shanghai State‑owned Assets Supervision and Administration Commission meeting sparked speculation. Participants discussed stablecoins and the digital yuan's role, hinting that the government may soften its stance on private digital assets. So far, no concrete policy changes have been announced, but two trends are worth watching:

• China continues to push the digital yuan (the state‑issued central bank digital currency (CBDC)) as the official digital payment method.
• International pressure and the rise of stablecoins may force regulators to consider limited, state‑controlled usage scenarios.

Until an official revision lands, the safest assumption remains: no crypto activity = no tax filing.

Practical Checklist for Anyone in China

1. Stop all crypto trading or mining immediately. Continuing after June12025 exposes you to criminal liability.
2. If you already hold crypto, consider moving assets out of China before the ban’s enforcement date. Use legal offshore accounts and be aware of foreign exchange controls.
3. Do not open any crypto‑related accounts with Chinese banks or payment providers.
4. Keep records of any crypto transactions that occurred before the ban. While you won’t file taxes, documentation may help if authorities question the source of funds.
5. Stay updated on official announcements from the People's Bank of China and the State Council regarding digital assets.
6. If you’re a foreigner visiting China, avoid using any private crypto wallets while on Chinese soil. The ban applies equally to non‑citizens.

Following these steps reduces the risk of frozen accounts, fines, or even imprisonment.

Frequently Asked Questions