Chinese Crypto Holders: Legal Protection and Risks in 2026

By 2026, an estimated 58 million Chinese citizens still hold cryptocurrency - not because it’s legal, but because it’s nearly impossible to fully erase digital assets from people’s wallets. The government doesn’t want you to own Bitcoin, Ethereum, or any other crypto. But it also doesn’t have a clear way to take it away. This contradiction is the core reality for every crypto holder in China today: you can hold it, but you can’t protect it.

What’s Actually Illegal?

Since 2021, China has banned all cryptocurrency-related business activities. That includes trading on exchanges, mining, running crypto businesses, or even advertising crypto services. In 2025, the ban got stricter: any activity that involves buying, selling, or transferring crypto between individuals or companies is now considered an illegal financial transaction under Circular No.237. Courts routinely throw out lawsuits from people who lost money in crypto scams - not because the scam was fake, but because the underlying asset is illegal.

Here’s the catch: holding crypto isn’t explicitly illegal. The government hasn’t passed a law saying, “It’s a crime to have Bitcoin in your wallet.” But that doesn’t mean you’re safe. If you’re caught using crypto to move money out of the country, evade taxes, or fund an unlicensed business, you could face criminal charges. The law doesn’t target ownership - it targets what you do with it.

There’s No Legal Protection - Period

Chinese courts treat crypto as a “virtual commodity,” not property. That means if your wallet is hacked, you get scammed, or someone steals your private keys, you have zero legal recourse. You can’t file a police report that will get your Bitcoin back. You can’t sue the exchange or the hacker. The law doesn’t recognize your ownership. Even if you have screenshots of transactions or blockchain records, the court will say: “This asset isn’t protected under Chinese law.”

In July 2025, some media outlets reported that China officially recognized Bitcoin as legally protected property. That turned out to be a misinterpretation. What actually happened was a single provincial court in Shanghai issued a ruling in a civil dispute involving NFTs, stating that digital assets could be treated as “valuable objects” for the purpose of contract enforcement - not as legal property. It was a narrow, non-binding decision. No national law changed. No new rights were granted. The confusion spread because people wanted to believe the ban was lifting.

What You Can’t Do - And What Happens If You Try

You can’t open a crypto account at any Chinese bank. You can’t use Alipay or WeChat Pay to buy Bitcoin. You can’t trade on domestic exchanges - they’ve all been shut down since 2017. Even using a VPN to access Binance or Kraken is risky. In 2025, authorities started cracking down on VPN providers used for crypto transactions. If you’re caught, you could be fined for circumventing state regulations, and your bank account might be frozen for suspicious activity.

Mining? Completely banned. Any hardware found running mining software - even a single GPU in a home setup - can be seized. Energy regulators have been instructed to cut power to suspected mining operations. There are no legal loopholes here.

Over-the-counter (OTC) trading still exists, but it’s dangerous. People trade through private Telegram groups or peer-to-peer platforms, often paying in cash or bank transfers. But if the counterparty disappears or the transaction is flagged as money laundering, you’re on your own. No buyer protection. No dispute resolution. Just silence.

The Government’s Real Goal: e-CNY, Not Crypto

China isn’t trying to stop innovation - it’s trying to control it. The state is pouring billions into the digital yuan (e-CNY), a central bank digital currency (CBDC) that lets the government track every transaction in real time. Unlike Bitcoin, e-CNY gives authorities full visibility: who paid whom, when, and for what. It’s designed to replace cash, reduce fraud, and eliminate untraceable financial flows.

Blockchain technology? Still encouraged - as long as it’s centralized. The government funds blockchain projects for supply chain tracking, land registries, and public services. But these systems are permissioned, controlled, and monitored. They’re the opposite of decentralized crypto.

The message is clear: you can have digital money - but only if the state controls it.

Why Do So Many People Still Hold Crypto?

If it’s illegal and unprotected, why do 58 million people still hold crypto? The answer is simple: it’s too late to stop.

Millions bought Bitcoin years ago when regulations were looser. Others bought during price spikes, hoping to escape inflation or currency controls. Many hold crypto as a hedge against the yuan’s volatility. Some just believe in the technology. And because there’s no effective way to confiscate digital wallets - especially if keys are stored offline - the government can’t force people to sell.

The result? A quiet, underground market. People store crypto on hardware wallets. They avoid linking wallets to their real identities. They rarely move large sums. They accept the risk - because the alternative - losing everything to a collapsing currency - feels worse.

The Future: No Legalization, Just More Gray

Will China ever legalize crypto ownership? Almost certainly not. The government’s control over capital flows is too important. The digital yuan is too far along. Legalizing Bitcoin would undermine its entire monetary strategy.

But the enforcement will likely stay inconsistent. Small holders won’t be targeted. Big traders might be. People who use crypto for legitimate reasons - like sending money to family overseas - might slip through the cracks. The state prefers to let the threat hang over people’s heads rather than make a clear rule.

That’s the reality: you’re not breaking the law by holding crypto. But you’re also not protected by it. You’re living in a legal gray zone where your assets exist, but your rights don’t.

What Should You Do If You Hold Crypto in China?

If you’re one of the 58 million:

• Don’t trade. Don’t use exchanges. Don’t promote crypto to others.
• Don’t link your crypto wallet to your bank account or ID.
• Use cold storage - hardware wallets, paper keys, offline backups.
• Never use a VPN to access crypto services - it increases your risk of being flagged.
• Understand that if you lose your coins, there’s no help coming.
• Keep records of how you acquired your crypto - in case authorities ask.

There’s no safe way. Only less risky ways.

What About Foreigners in China?

The rules apply to everyone. Whether you’re an American, German, or Australian living in Shanghai, you’re subject to the same ban. Your crypto wallet isn’t protected by your passport. If you’re caught trading or mining, you could face fines, account freezes, or deportation. Foreigners aren’t exempt - they’re just harder to track.

Final Reality Check

Crypto in China isn’t a legal issue. It’s a survival issue. You’re not fighting the law - you’re navigating around it. The government doesn’t care if you own 0.1 BTC or 10 BTC. It cares if you use it to move money, challenge control, or disrupt the system. As long as you stay quiet, stay private, and don’t try to profit from it, you’re unlikely to be targeted.

But remember: the moment you need help - if you’re hacked, scammed, or pressured to sell - the law won’t help you. Your crypto is yours only as long as no one else takes it.