There is no such thing as crypto taxation in China - not because the government forgot to write the rules, but because owning, trading, or mining cryptocurrency is illegal.

China doesn't tax crypto. It bans it.

If you're looking for a tax form for your Bitcoin gains in China, you won't find one. That's not an oversight. It's by design. Unlike the U.S., Canada, or even Japan, where crypto profits are taxed like capital gains, China has taken a hardline stance: no crypto, no taxes. The moment you buy, sell, or mine Bitcoin, Ethereum, or any other digital asset inside China, you're breaking the law.

This isn't a recent shift. It's the end result of a 16-year campaign to erase cryptocurrency from China's financial system. The first warning came in 2009, when authorities blocked virtual currencies from being used to buy real goods. That was just the start. By 2013, banks were ordered to stop handling Bitcoin transactions. In 2017, initial coin offerings (ICOs) were shut down. In 2021, mining operations were forced to shut down nationwide because of energy use. And on June 1, 2025, everything changed.

The People's Bank of China issued a sweeping ban that made it illegal to own, trade, or mine cryptocurrency. Not just businesses - individuals too. If you have Bitcoin in a wallet, you're not breaking the law just by holding it. But if you try to sell it, send it, or even mention it in a contract, you're in serious trouble.

What happens if you get caught?

There are no tax penalties. There are no fines for unreported gains. Instead, there are seizures, account freezes, and criminal charges.

Authorities don't care how much you made. They care that you traded at all. Any profit from crypto is treated as illegal proceeds. That means the government can and will take your coins - and your money - without compensation. Banks are required to monitor accounts for crypto-related activity. If they spot a transaction to a known exchange or mining pool, they report it. Your account gets frozen. You get questioned. If you're a business owner, you could face charges for illegal fundraising or financial fraud.

Foreigners aren't exempt. If you're visiting Shanghai, living in Beijing, or working remotely from Shenzhen, the same rules apply. No exceptions. No diplomatic immunity. No gray area. The ban is absolute.

Why did China go this far?

China didn't start out hostile to crypto. In fact, it was one of the biggest markets. In 2017, over 70% of global Bitcoin mining happened in China. The country produced more than half of all new Bitcoin. But as adoption grew, so did the risks - from capital flight to speculative bubbles to money laundering.

The government's solution wasn't regulation. It was elimination.

By banning crypto, China removed the entire problem: no trading means no volatility, no tax evasion, no offshore wealth moves. It also cleared the way for its own digital currency - the digital yuan. The People's Bank of China controls every transaction, every balance, every flow of money. There's no anonymity. No decentralization. No risk of losing control.

Compare that to the U.S., where the IRS treats crypto like property and demands you report every trade. Or the EU, where member states impose VAT on crypto exchanges. China didn't want to manage the system. It wanted to replace it.

Is there any legal way to hold crypto in China?

Technically, no. But the law has a weird loophole: private ownership isn't explicitly criminalized - only activities around it are.

If you bought Bitcoin in 2020 and never touched it since, the government won't knock on your door just because you have it. But if you try to sell it to a friend, use it to pay for something, or even tell someone you own it in writing - you're breaking the law.

Contracts involving crypto are void. Courts won't enforce them. If someone steals your coins, you can't sue. If you lend crypto to a friend and they don't pay back, there's no legal recourse. Your assets exist in a legal vacuum - unregulated, unprotected, and at constant risk of seizure.

What about mining?

Mining is dead in China. Not just discouraged - outlawed.

In 2021, authorities shut down over 80% of the world's Bitcoin mining capacity overnight. Data centers were unplugged. Power supplies were cut. Equipment was confiscated. The government cited energy waste and financial instability as reasons. And they were serious. Miners who tried to hide their operations were fined, jailed, or both.

Today, any new mining rig in China is an instant red flag. Power companies monitor usage patterns. If a household suddenly uses 15,000 kWh a month - enough to run dozens of ASIC miners - the authorities show up. No warning. No notice. Just shutdown.

What about the digital yuan?

China's answer to crypto isn't regulation. It's control.

The digital yuan (e-CNY) is a central bank digital currency (CBDC) issued and monitored by the People's Bank of China. Unlike Bitcoin, it's not decentralized. Every transaction is tracked. Every user is verified. There's no anonymity. You can't send it to someone without the state knowing who you are and what you bought.

The government promotes the digital yuan as more convenient, secure, and efficient than cash or crypto. And it's working. Over 260 million people have used it for daily payments - from street vendors to subway rides. The goal isn't to compete with crypto. It's to replace it entirely.

What's changing in 2025?

In July 2025, officials in Shanghai held a closed-door meeting to discuss digital assets. Some experts suggested China might soften its stance - especially around stablecoins and tokenized assets. But no policy changed. No law was amended.

The meeting didn't signal a return to crypto. It signaled a recalibration. The government is watching how other countries use blockchain for trade settlement, supply chains, and asset tokenization. But it won't allow decentralized systems. Any future move will be state-controlled, centralized, and fully monitored.

How does this compare to the rest of the world?

Most countries tax crypto. China bans it.

In Taiwan, crypto trading is taxed at 5% VAT. In South Korea, you pay 20% on profits. In the U.S., you report every trade to the IRS. Even countries like Nigeria and Vietnam, where crypto is popular, still require tax filings.

China is the only major economy that treats crypto like a drug - not an asset. Possession isn't illegal, but any activity around it is. That makes enforcement harder, but also more absolute.

What should you do if you're in China?

If you're living in China and you own crypto, your safest move is to do nothing.

Don't trade. Don't send. Don't mine. Don't even talk about it in writing. Keep your wallet offline. Don't link it to any Chinese bank account. If you're planning to leave the country, consider transferring your assets before you go - but know that doing so could still trigger scrutiny if you're flagged.

If you're a business owner, avoid any crypto-related services. Even offering to accept crypto as payment - even if it's for a foreign client - could get your company shut down.

There is no legal workaround. No tax advisor can help you. No accountant can file a return. The system doesn't recognize crypto as property. It recognizes it as a threat.

What’s next?

China's stance might look extreme. But it's working - for them.

The digital yuan is now integrated into daily life. Financial control is tighter than ever. Capital flight has dropped. Crypto speculation has vanished from the mainstream.

The rest of the world still taxes crypto because they believe it's here to stay. China believes the only way to win is to erase it. And so far, they've won.

If you're outside China and wondering whether this model could spread - don't count on it. Most governments want to tax crypto, not ban it. But if China's digital yuan becomes the global standard for CBDCs, other countries may follow its lead - not by banning crypto, but by replacing it with something they control.