China has entered a new era of cryptocurrency regulation with the most stringent measures to date. Effective June 1, 2025, a comprehensive policy came into force that completely bans individuals from holding, trading, or mining cryptocurrencies. The digital yuan (e-CNY) is now the only officially recognized currency in the country.
Historic Crackdown: China's Strictest Crypto Ban
Between 2017 and 2020, China accounted for 60% to 75% of the global Bitcoin hashrate, making it a central mining hub. However, regulatory pressure began in 2017 with bans on ICOs and domestic exchanges, and has now escalated to an outright prohibition. The People's Bank of China framed the ban as a way to promote financial stability, reduce systemic risks, and strengthen national security. Officials stressed that the new framework closes loopholes from earlier restrictions and applies to both individual and commercial crypto activity.
Officials argue that virtual currency transactions undermine financial stability and disrupt China's financial order.
Additionally, banks, payment institutions, and financial service providers are banned from offering crypto-related services. Advanced AI tools now monitor financial transactions to flag suspicious crypto activity. Practical measures such as account freezes have further increased the risks of investing in cryptocurrencies.
Offshore Stablecoins Curbed, Digital Yuan Reigns Supreme
The new rules specifically target offshore stablecoins, particularly those pegged to the yuan. No private or foreign company can issue a stablecoin linked to Chinese assets or the yuan without direct government authorization. Authorities emphasize that stablecoins function as a form of money and must be subject to strict regulation. This stance could significantly undermine Hong Kong's ambitions to become a regional crypto hub, as Beijing signals that yuan-linked stablecoins not issued under state control will not be tolerated.
Despite the harsh bans, China continues to invest in blockchain technology. Following a call from President Xi in 2019 to embrace blockchain, the technology has expanded across various sectors from government services to finance. Legislative reforms include new cryptography laws and the incorporation of virtual asset inheritance into civil law. However, blockchain innovation is encouraged only in tightly regulated, state-approved domains. Initiatives like the Blockchain-based Service Network (BSN) are exploring tokenization of real-world assets through official infrastructure.
Legal Gray Area for Individual Holders
While the ban is severe, individual crypto ownership remains in a legal gray area. Courts usually refrain from criminal penalties against holders, though disputes involving such assets may lack legal protection. Regulators have repeatedly stated that only state-backed digital currencies will serve as official payment methods, and decentralized cryptocurrencies will not be accepted in China.
China's primary objective is to consolidate monetary sovereignty through the digital yuan and reduce dependence on the US dollar in global finance. The restrictive approach to the crypto sector is closely tied to its aim of channeling blockchain innovation under strict state control. Notably, the People's Bank of China pioneered one of the world's first state-backed digital currency projects.