CMS Expert Guide to Crypto Regulation in China

Cryptocurrency regulation in China has been relatively strict, with multiple crackdowns on various aspects of the industry.

In December 2013, the People’s Bank of China (PBOC) and four other authorities jointly released the Circular on the Prevention of Risks from Bitcoin (关于防范比特币风险的通知), which mandated that all financial institutions must refrain from conducting business related to Bitcoin.

In September 2017, the PBOC and other authorities issued the Announcement on Preventing Initial Coin Offering (ICO) Risks (关于防范代币发行融资风险的公告) (“ICO Ban”), highlighting that initial coins or virtual currencies do not possess legal status as official currencies and cannot circulate or be used as currency in the market. This Announcement also prohibits all forms of initial coin offering activities and exchange services for token financing and trading platforms.

In January 2018, the Payment and Settlement Division of the Business Administration Department of the PBOC issued the Notice on Self-Inspection and Rectification of Providing Payment Services for Illegal Virtual Currency Transactions(关于开展为非法虚拟货币交易提供支付服务自查整改工作的通知), which strictly prohibits all legal person payment institutions from  providing services for any virtual currency transactions and requires these institutions to take effective measures to prevent payment channels from being used for virtual currency transactions.

Separately, in September 2021, the National Development and Reform Commission issued the Circular on Regulating Virtual Currency “Mining” Activities (整治虚拟货币 “挖矿” 活动的通知). This circular prohibits new virtual currency “mining” projects and mandates the accelerated withdrawal of existing projects.

On 6 February 2026, the PBOC and seven other central authorities jointly issued the Circular on Further Preventing and Resolving the Risks of Virtual Currency and Related Activities (关于进一步防范和处置虚拟货币等相关风险的通知) (“Circular 42”). Circular 42 replaces and expressly repeals Circular 237 issued in 2021, and maintains China’s prohibitive regulatory approach towards virtual currencies while further expanding and clarifying the regulatory framework. Key provisions of Circular 42 include:

1. Illegality of virtual currency activities and expansion to RWA tokenisation: Circular 42 reiterates that virtual currencies, including Bitcoin, Ether and Tether, do not possess legal status as legal tender in China and that all virtual currency-related business activities constitute illegal financial activities. Critically, it expands the prohibition framework to cover real-world asset (RWA) tokenisation, providing that such activities may constitute illegal issuance of token vouchers, unauthorised public offering of securities, illegal operation of securities and futures businesses, and illegal fundraising, and should therefore be prohibited, except for activities approved by the competent authorities and conducted through specified financial infrastructure.
2. Restrictions on offshore issuance: Without approval from the relevant authorities, domestic entities and their controlled overseas entities may not issue virtual currencies overseas. Circular 42 further provides that no domestic or overseas entity or individual may issue RMB-pegged stablecoins overseas without approval from relevant authorities.
3. Strengthened prohibition on financial and intermediary services: Financial institutions (including non-bank payment institutions) are prohibited from providing account opening, fund transfer, clearing or settlement services for virtual currency-related business activities, issuing or selling virtual currency-related financial products, accepting virtual currencies or related financial products as collateral, or conducting insurance business related to virtual currencies. Additionally, financial institutions (including non-bank payment institutions) are prohibited from providing custody, clearing and settlement services for unauthorised RWA tokenisation activities and related financial products, while relevant intermediary and information technology service providers are prohibited from providing intermediary or technical services for such activities and products.
4. Crackdown on offshore service provision: The Circular provides that overseas entities and individuals shall not provide unlawful virtual currency-related services to domestic entities in any form. Similarly, overseas entities and individuals are prohibited from providing unauthorised RWA tokenisation services to domestic entities.
5. Strict supervision of domestic entities conducting overseas crypto/RWA business: Circular 42 introduces a new section imposing strict regulation on domestic entities venturing overseas. Without regulatory approval, domestic entities and their controlled offshore entities are prohibited from issuing virtual currencies overseas. Domestic entities conducting overseas RWA tokenisation business in the form of external debt, or asset-securitisation-like or equity-type RWA tokenisation based on domestic rights and interests, are subject to strict supervision by NDRC, CSRC, SAFE and other relevant authorities in accordance with their respective responsibilities under a “same business, same risk, same rules” principle. Overseas subsidiaries and branches of domestic financial institutions providing RWA tokenisation-related services must incorporate such activities into their domestic compliance and risk management frameworks.
6. Continued crackdown on virtual currency mining: All existing mining projects must be shut down, new projects are strictly prohibited, and mining equipment manufacturers are banned from providing sales or other services domestically.
7. Market access and advertising restrictions: Enterprises and individual businesses are prohibited from including terms such as "virtual currency", "virtual assets", "cryptocurrency", "crypto assets", "stablecoin", "real-world asset tokenisation" or "RWA" in their registered names or business scopes. Supervision of virtual currency and RWA-related advertisements will be strengthened by the competent authorities.
8. Legal liability: On the criminal side, entities or individuals conducting or facilitating virtual currency or RWA tokenisation-related illegal financial activities shall be criminally prosecuted where a criminal offence is constituted. On the civil side, any investment in virtual currencies or RWA tokens that violates public order and good morals shall be deemed invalid, with all resulting losses borne by the investors.

Concurrently, on 6 February 2026, the CSRC issued the Regulatory Guidance on Issuing Asset-Backed Security Tokens Overseas with Domestic Assets (关于境内资产境外发行资产支持证券代币的监管指引), which implements the offshore RWA regulatory framework under Circular 42 by establishing a CSRC filing regime for the offshore issuance of asset-backed security tokens backed by domestic assets. Domestic entities controlling qualifying underlying assets may, after completing the CSRC filing process, issue asset-backed security tokens overseas, subject to applicable cross-border investment, foreign exchange, cybersecurity and data security requirements and any required approval, filing or security review procedures, as well as the disqualifying circumstances specified in the Guidance.

In addition, although China’s criminal law does not create a standalone crypto-specific offence, criminal liability may arise under general criminal offences, and subsequent judicial rules expressly address the use of virtual assets or virtual currencies in certain criminal activities, in June 2021, the Supreme People’s Court (“SPC”), the Supreme People’s Procuratorate (“SPP”), and the Ministry of Public Security jointly issued the Opinions on Several Issues Concerning the Application of Law to Handling Criminal Cases Involving Telecommunications Network Fraud and Other Criminal Cases (II) (关于办理电信网络诈骗等刑事案件适用法律若干问题的意见（二）), which makes it clear that in the process of investigating a case by the public security authorities, if a virtual currency dealer is explicitly told that the person with whom they are dealing is suspected telecommunications network fraud, and still continues to deal with such person,  the dealer shall be held criminally liable for the offence of assisting in information network criminal activities in accordance with the provisions of Article 287 paragraph 2 of the Criminal Law. If a dealer knows that the proceeds of a telecommunications network fraud offence and the proceeds thereof have been converted into property or cashed out through virtual currencies, etc., at a price that is significantly different from the market price, in accordance with the provisions of Article 312, paragraph 1, of the Criminal Law, he or she shall be held criminally liable for the offence of disguising or concealing the proceeds of crime or the proceeds therefrom, unless there is evidence proving that the dealer was genuinely unaware of the offence.

Further, in August 2024, the SPC and SPP issued the Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Money Laundering (关于办理洗钱刑事案件适用法律若干问题的解释), which expressly provides that transferring or converting criminal proceeds and the proceeds thereof through “virtual asset” transactions may constitute a method of disguising or concealing the source or nature of such proceeds.

According to the ICO Ban and the far-reaching Circular 42, token issuance financing, exchange and other virtual currency-related business activities are classified as illegal financial activities and are strictly prohibited in China.  Commercial custody, borrowing/lending and yield/staking services involving fungible virtual currencies would generally fall within this prohibitive framework where they constitute virtual currency-related business activities or related financial products. Additionally, Circular 42 generally prohibits RWA tokenisation activities in China, subject to the exception for activities approved by the competent authorities and conducted through specified financial infrastructure.

NFTs are not explicitly banned in China. However, depending on their structure and the rights represented by them, certain NFT-related arrangements may fall within other prohibited activities, including the RWA tokenisation regime introduced by Circular 42. In April 2022, the China Internet Finance Association, China Banking Association, and China Securities Association jointly issued the Initiative to Address NFT-Related Financial Risks (“NFT Initiative”). The NFT Initiative recognises NFTs as an application of blockchain technology with the potential to positively drive industrial digitisation.

On the other hand, the initiative underscores the importance of adhering to certain norms to prevent financial risks associated with NFTs. This includes:

• Avoiding the inclusion of financial assets such as securities, insurance, credit, or precious metals in the underlying goods of NFTs to prevent the issuance of financial products through trading.
• Steering clear of practices that diminish the non-fungible characteristics of NFTs, such as splitting ownership or creating batches, to evade ICO restrictions.
• Refraining from offering services for NFT trading involving centralised exchanges, continuous listing trading, and standardised contract trading to avoid setting up an exchange.
• Not using virtual currencies like Bitcoin, Ethereum, or Tether as valuation and settlement tools for NFT transactions.
• Implementing real-name authentication for issuers, sellers, and buyers, maintaining customer identity information and transaction records, and actively participating in anti-money laundering efforts.
• Refrain from direct or indirect investment in NFTs and from providing financial support for NFT investments.

In addition, China also promulgated the Regulations on the Administration of Blockchain Information Services (区块链信息服务管理规定) in 2019, which stipulate that blockchain information service providers should fill in information such as the service provider's name, service category, service form, application field, server address, and other information through the blockchain information service filing management system of the Cybersapce Administration of China to fulfil the filing procedures within ten working days from the date of service provision. The blockchain information service filing requirement remains in force. However, such filing constitutes a filing for the relevant blockchain information service and does not itself constitute regulatory approval of the relevant entity, product or business, including the issuance, sale or trading of NFTs (also commonly referred to as “digital collections” in China).

NFTs are therefore treated differently from fungible virtual currencies and are not subject to the blanket prohibition applicable to virtual currency-related business activities solely by virtue of being NFTs. However, NFT-related activities should comply with the restrictions under the NFT Initiative, including those against financialisation or securitisation, ICO-like fractionalisation and centralised or continuous trading, and where an NFT-related arrangement constitutes RWA tokenisation under Circular 42, the applicable RWA restrictions will apply.

In a further development toward the compliant operation of digital collections, the Standardization Administration of China officially issued two recommended national standards on 2 December 2025, i.e. GB/T 46842-2025 Asset Management — Guidelines for Transactions of Cultural Digital Assets Trading (资产管理—文化数字资产交易实施指南) and GB/T 46843-2025 Asset Management — Guidelines for Cultural Digital Assets Valuation (资产管理—文化数字资产价值评估指南). These standards use the regulatory term "cultural digital assets" rather than "NFT". They provide unified operational frameworks for the trading process and valuation of such assets, signalling the emergence of implementable compliance benchmarks for cultural digital asset transactions.

According to Circular 42, overseas entities and individuals are expressly prohibited from unlawfullyproviding virtual currency-related services to domestic entities “in any form”. Internet enterprises are prohibited from providing online business premises, marketing, or paid traffic services for such activities, and relevant websites, applications, and public accounts may be closed or otherwise dealt with by the relevant authorities in accordance with law. Domestic entities or individuals who know or should know that an offshore entity is unlawfully providing virtual currency-related services to domestic entities but nevertheless provide assistance to such offshore entity shall be held legally accountable. Active solicitation by offshore virtual currency businesses to domestic customers would therefore be prohibited.

Although Circular 42 does not expressly distinguish between “active solicitation” and “reverse solicitation”, on a strict reading, the prohibition on offshore entities providing virtual currency-related services to domestic entities “in any form” is not limited to services involving active solicitation. In the absence of any express carve-out for reverse solicitation, services provided on a reverse solicitation basis may therefore also fall within the prohibition, and reverse solicitation should not be regarded as a safe harbour under Circular 42.