Crypto Taxation in China: Why There Is No Tax and What It Means

Key Points

• China has banned all crypto activities, so traditional tax concepts simply don’t apply.
• The ban covers trading, mining, ICOs, and even personal ownership.
• Violations can lead to confiscation, heavy fines, or criminal charges.
• China promotes the state‑run digital yuan as the only legal digital currency.
• Some experts hint at a future softening, but no concrete policy change exists yet.

What the crypto taxation China landscape looks like today

When people talk about cryptocurrency a digital asset that uses cryptography to secure transactions, they usually assume there’s a tax rule somewhere-capital gains, income, or VAT. In China the world’s most populous nation, governed by the Communist Party, the story is different. The People’s Bank of China (PBOC the country’s central bank and primary financial regulator) issued a comprehensive ownership ban on June12025. The decree treats any crypto‑related activity as an illegal financial act, not a taxable event.

How China got here: a 16‑year regulatory march

1. June2009 - Initial prohibition of virtual currencies to stop online payments with Bitcoin.
2. December52013 - Banks and payment firms barred from handling crypto transactions.
3. April12014 - PBOC orders closure of all Bitcoin trading accounts.
4. September302017 - ICOs banned; exchanges forced to shut down.
5. January2018 - Massive crackdown pushes mining rigs overseas.
6. June2021 - Mining ban enacted over energy‑use concerns.
7. September242021 - Comprehensive ban on trading, mining, and transactions.
8. May302025 - Final ownership ban decree signed; effective June12025.

Each step tightened control, culminating in a zero‑tolerance policy that eliminates any legal basis for tax collection.

Legal framework: why there is no crypto tax

The 2025 ownership ban states that crypto transactions are “illegal financial activities.” Because they are illegal, the tax code never gets a chance to classify them as income, capital gains, or value‑added tax. In practice, this means:

• There is no capital gains tax a tax on profit from the sale of an asset on crypto sales.
• Mining rewards or staking income are not subject to income tax tax on earned earnings because the activity itself is prohibited.
• Businesses cannot charge or deduct VAT value‑added tax on the sale of goods or services on crypto‑related services.

Any gains derived from illegal crypto activity are considered illicit proceeds. The state may confiscate them under criminal asset‑seizure laws, but that is a penalty, not a tax.

Enforcement: what happens if you ignore the ban

The crackdown is heavily enforced. Violations can trigger:

• Administrative fines ranging from ¥10,000 to ¥500,000.
• Criminal charges for “illegal fundraising” or “financial fraud,” potentially resulting in up to three years in prison.
• Asset seizure-any crypto held in wallets identified by authorities can be frozen and confiscated.
• Blacklisting of individuals and companies, making it impossible to open bank accounts or obtain financing.

Even foreigners staying in China or transiting through Chinese airports are subject to the same rules. The law does not distinguish between citizens and non‑citizens when it comes to crypto prohibition.

China vs. the rest of the world: a quick comparison

The table shows that China is the only major economy that has erased the tax question by outlawing crypto entirely.

Why China chose prohibition over taxation

The ban aligns with two broader policy goals:

• Digital yuan China’s state‑issued Central Bank Digital Currency (CBDC) is positioned as the sole legal digital monetary instrument. Eliminating competing tokens reduces fragmentation and strengthens state control.
• Preventing speculative bubbles and illicit capital flows supports financial stability, a core concern of the Communist Party.

By classifying crypto activities as illegal, the government sidesteps the administrative headache of tracking millions of wallets and applying complex tax rules.

Possible softening: what the July2025 Shanghai debate hinted at

On July102025, the Shanghai State‑owned Assets Supervision and Administration Commission hosted a round‑table on digital assets. Speakers discussed stablecoins, cross‑border payments, and the “strategic response” to global crypto trends. While no policy shift was announced, a few take‑aways emerged:

• Officials acknowledge the rapid evolution of digital assets and the need for a flexible regulatory toolkit.
• There is interest in shaping a limited, state‑approved framework for certain “controlled” token use‑cases, possibly linked to the digital yuan.
• Any future changes will likely preserve the core principle of central financial control.

For now, the ban remains in effect, and the tax question stays moot.

Practical advice for individuals and businesses

If you are a Chinese citizen, expat, or a foreign company with ties to China, keep these points in mind:

• Don’t attempt to trade or mine crypto on mainland soil. Even a small transaction can trigger investigations.
• Store any crypto holdings outside Chinese jurisdiction and use offshore wallets that are not accessible from within China.
• Report any crypto‑related income to tax authorities in your home country-China won’t tax it, but other jurisdictions will.
• Monitor official PBOC announcements; a subtle regulatory tweak could create new compliance obligations.

Looking ahead: the digital yuan’s role

The CBDC a digital form of a nation’s sovereign currency issued by its central bank-the digital yuan-is being piloted in major cities, integrated into payment apps, and linked to government subsidies. Its rollout demonstrates that China prefers a state‑controlled digital money system over a decentralized one. Should the digital yuan achieve widespread adoption, it could further marginalize any illicit crypto activity, reinforcing the ban’s long‑term viability.