The dramatic rise of decentralized finance (DeFi) in mid-2020 sparked a significant bull market across the digital currency landscape. Entering 2021, Bitcoin and other virtual currencies saw substantial price increases, with Bitcoin reaching an all-time high near $58,000. This surge attracted attention from major media outlets, including repeated coverage on China’s national television network, CCTV. Many newcomers are now asking: Why is Bitcoin so popular, and is it actually legal?
To understand the legality of cryptocurrencies like Bitcoin, it helps to reflect on the history of money. Societies once used seashells as currency, later shifting to copper, silver, and gold. These materials had intrinsic value beyond their monetary use but were heavy and difficult to divide. Eventually, governments introduced paper currency backed by their credibility and authority. From that point, traditional money no longer held inherent value—its worth came from state endorsement.
This evolution shows that money isn’t inherently tied to physical forms. As society progresses, so do its monetary systems. Today, most people already use electronic money through platforms like Alipay and WeChat Pay. If money can be digital, it’s reasonable to consider Bitcoin a form of currency. In fact, PayPal, often referred to as the "American Alipay," recently integrated Bitcoin, Ethereum, and Litecoin into its payment system. Starting soon, users will be able to transact directly with merchants using these cryptocurrencies.
So, is it legal to hold Bitcoin in China? The short answer is yes.
At the national level, two major regulatory documents provide guidance on Bitcoin and similar cryptocurrencies:
Document One: Released on December 5, 2013, by the People’s Bank of China and four other regulatory bodies, "Notice on Preventing Bitcoin Risks" (Yin Fa [2013] No. 289) classifies Bitcoin as a "specific type of virtual commodity." This means Bitcoin is treated as property—a type of asset or "object" in legal terms. Under Chinese law, holding this kind of intangible virtual property is not illegal.
As the notice clearly states:
"Bitcoin transactions, as a form of commodity trading on the internet, are free to be participated in by the general public—provided they assume the risks themselves."
This indicates the government’s stance: while it doesn’t encourage public participation in Bitcoin trading, it doesn’t prohibit it either. Individuals are free to take part but must be aware of the risks.
Document Two: Issued on September 4, 2017, by seven government agencies including the Central Bank and the Cyberspace Administration, the "Announcement on Preventing Risks from Token Offerings" highlights several investment dangers, such as fake assets, operational failures, and speculative trading. It reminds investors to stay cautious and assumes responsibility for their own risks. Importantly, it doesn’t forbid individuals from investing.
A fundamental legal principle applies here: what is not forbidden is allowed. Since there’s no explicit prohibition against holding Bitcoin, it remains lawful.
In summary, Bitcoin is recognized as a virtual commodity and falls under the category of personal property protected by law. Anyone in China can legally buy, sell, and hold Bitcoin, though they must be fully aware of the accompanying risks.
Frequently Asked Questions
Q: Can I freely trade Bitcoin in China?
A: While holding Bitcoin is legal, exchanging it for fiat currency through Chinese financial institutions is prohibited. Trading between individuals or on international platforms isn’t explicitly outlawed but isn’t officially supported.
Q: Are cryptocurrencies considered legal tender in China?
A: No. Cryptocurrencies like Bitcoin are not recognized as official currency. They are treated as virtual commodities or assets, not equivalent to state-issued money.
Q: What are the main risks of holding Bitcoin in China?
A: Key risks include market volatility, potential fraud or scams, regulatory changes, and cybersecurity threats such as hacking or theft. Always exercise caution and use secure storage methods.
Q: Do I need to pay taxes on Bitcoin investments?
A: Currently, China hasn’t issued specific tax guidelines for cryptocurrency gains. However, as with any asset, it’s advisable to comply with general income and capital gains tax regulations.
Q: Is mining Bitcoin still allowed in China?
A: Cryptocurrency mining has been heavily restricted since 2021 due to environmental and financial concerns. Large-scale operations are banned, though individual mining exists in a legal gray area.
Q: How can I securely store my Bitcoin?
A: Consider using a hardware wallet for long-term storage or a reputable software wallet for frequent transactions. 👉 Explore more secure storage strategies to protect your digital assets.