Crypto Taxation in China: Why There's No Tax - Just a Total Ban

China doesn’t tax cryptocurrency because cryptocurrency is illegal. Not regulated. Not monitored. Not reported. Just banned.

If you’re used to countries like the U.S., Canada, or Australia taxing your Bitcoin gains like regular income or capital gains, China’s approach will feel like a punch to the gut - because it’s not about money. It’s about control. Since June 1, 2025, owning, trading, or mining crypto in China is a violation of national law. Not a tax issue. Not a reporting problem. A legal crime.

How China Got Here: A 16-Year Crackdown

China didn’t wake up one day and ban crypto. It spent over a decade slowly suffocating it.

In 2009, the government first warned that virtual currencies couldn’t be used to buy real goods. That was just a warning. Then came the real moves:

• December 2013: Banks barred from handling Bitcoin transactions.
• April 2014: Bitcoin exchanges forced to shut down accounts.
• September 2017: All Initial Coin Offerings (ICOs) banned. Trading platforms ordered to stop.
• January 2018: Miners kicked out of data centers. Many fled to Kazakhstan and Russia.
• June 2021: Mining banned nationwide over energy use. China used to produce 70% of Bitcoin’s hash power. Overnight, it dropped to near zero.
• September 2021: Trading, mining, and exchanges fully outlawed. No exceptions.
• May 30, 2025: Final decree issued. Private ownership of crypto is no longer just discouraged - it’s unprotected. Any crypto in your wallet is legally void.

This wasn’t random. It was a calculated, step-by-step elimination. Each move tightened the noose. By 2025, there was no gray area left.

No Tax, No Protection - Just Confiscation

Here’s the thing most people miss: If something is illegal, you don’t tax it. You seize it.

In every other country, if you sell Bitcoin for a profit, you pay capital gains tax. In China? If you sell Bitcoin at all, you risk having your bank account frozen, your assets seized, and possibly facing criminal charges for "illegal fundraising" or "financial fraud."

The People’s Bank of China (PBOC) doesn’t care how much you made. They care that you made it at all. Any profit from crypto is considered illicit. Not taxable. Confiscated.

And it’s not just traders. If you mine, stake, or even hold crypto as a long-term investment - you’re breaking the law. There’s no "personal use" exemption. No "small amount" loophole. No tax form to file because there’s no legal framework to file it in.

Financial institutions are banned from offering crypto services. No exchanges. No wallets. No crypto ATMs. No bank accounts linked to crypto. If you try to transfer crypto to a Chinese bank, the transaction gets blocked. If you succeed, your account gets flagged. And then shut down.

What About Foreigners?

Does this apply to tourists? Expats? Foreign workers?

Yes. Absolutely.

China’s ban applies to everyone on its soil. A U.S. citizen visiting Shanghai can’t legally hold Bitcoin. A German engineer living in Shenzhen can’t mine Ethereum. A Canadian student studying in Beijing can’t use crypto to pay for rent.

There’s no diplomatic exception. No "home country rules" override. If you’re physically in China, you’re subject to Chinese law. Period.

And enforcement is ruthless. Authorities use blockchain analysis tools to trace transactions. They cross-reference bank records with wallet addresses. If your wallet shows a transfer from a known exchange, and you’re a Chinese resident - you’re on their radar.

The Digital Yuan: China’s Alternative

China didn’t ban crypto to leave a vacuum. It replaced it with the digital yuan - a state-controlled Central Bank Digital Currency (CBDC).

The digital yuan isn’t decentralized. It’s not anonymous. Every transaction is logged by the People’s Bank of China. The government knows who you paid, how much, and when.

This is the real goal: total financial control. Not just oversight. Not just regulation. Complete dominance over money movement.

The digital yuan works through apps on your phone. No blockchain. No mining. No volatility. Just a digital version of cash - with a surveillance layer.

Compare that to Bitcoin: borderless, uncensorable, untraceable. China can’t allow that. So it banned it - and built its own version instead.

What Happens If You Get Caught?

There’s no official punishment chart. No fine schedule. But based on enforcement cases since 2021:

• First offense: Bank account frozen for 30-90 days. Crypto seized.
• Repeated activity: Criminal investigation opened. Possible charges of illegal fundraising.
• Large-scale trading or mining: Prison time. Fines up to 500,000 RMB (about $70,000 USD).

There are documented cases of people being sentenced to 1-3 years in prison for running small mining rigs in their homes. Others were fined for using crypto to pay employees.

Even holding crypto in a non-Chinese wallet - like a Ledger or Trezor - doesn’t protect you. If authorities find proof you used it within China, you’re still liable.

Is There Any Hope for Change?

In July 2025, a meeting in Shanghai raised eyebrows. Officials from the Shanghai State-owned Assets Supervision and Administration Commission discussed "strategic responses to stablecoins and digital assets."

Some experts interpreted this as a possible softening. Maybe China will allow regulated, state-monitored stablecoins. Maybe they’ll create a legal sandbox for enterprise blockchain use.

But here’s the catch: no policy changes have been announced. No law amended. No decree reversed. The ban is still total.

Even if China allows stablecoins tied to the yuan, it won’t mean Bitcoin or Ethereum become legal. It just means the government will control the next generation of digital money - not leave it to the market.

How This Compares to the Rest of the World

Over 50 countries have clear crypto tax rules. Taiwan taxes trading at 5% VAT. Japan treats crypto as property and taxes gains. The U.S. requires Form 1040 Schedule 1 for every crypto transaction. The UK, Germany, Australia - all have reporting requirements.

China is the only major economy that says: "Don’t even try."

Other countries want to tax crypto. China wants to erase it.

That’s not just a different tax policy. It’s a completely different philosophy about money, freedom, and state power.

What This Means for You

If you live in China: Don’t touch crypto. Not even as a curiosity. The risks far outweigh any possible reward. Your money, your assets, your freedom - all on the line.

If you’re outside China: Understand that Chinese citizens can’t legally move crypto out of the country. Any crypto you send to someone in China? It’s at risk of being seized. Any Chinese person trying to cash out crypto? They’re breaking the law.

If you’re a business: Don’t build products or services that assume crypto is legal in China. It isn’t. Period.

The message is simple: In China, crypto isn’t a financial asset. It’s a legal threat.