Cryptocurrency Trading in China is not illegal, and circumventing the Great Firewall for legal purposes is also not illegal.

Written by: Liu Zhengyao

According to an official article from the police in Xianning, Hubei ("17 mobile phones + 5 computers, 7 people arrested! Don’t touch the red line of 'going over the wall'!"), they recently cracked a case of "illegally using unauthorized channels for international networking" (which translates to using tools to access foreign internet). Cases of being caught while going over the wall are not rare every year, but this case attracted the attention of Lawyer Liu mainly because it involved cryptocurrency.

I. Case Summary

On April 6, 2025, the Xian'an Public Security Bureau received a tip-off and discovered that someone in the area was engaged in suspected illegal cross-border online business activities. The public security authorities ultimately uncovered a criminal group led by Tang Moumou, which used multiple network devices to illegally access the international internet through unauthorized channels, and engaged in illegal trading of virtual currencies and foreign exchange using overseas software.

The public security organs verified that the studio of Tang and others was conducting cross-border virtual asset trading by building a network channel, "which has formed a complete illegal chain." The article also stated that "after 24 hours of continuous evidence collection efforts by the police, complete electronic evidence was secured, and the involved personnel admitted to their illegal activities."

There is some ambiguity in the article released by the Xianning Public Security that at the beginning of the article, a total of 7 violators were administratively punished; However, the second paragraph also says that "the criminal team headed by Tang Moumou controlled 5 people involved in the case on the spot..." At the end of the article, it was said that the public security organs imposed administrative penalties on Tang Moumou and seven others. The number of people involved in the article and the nature of the cases are different, and it is important to know that the legal meaning of "criminal gang" is at least suspected of a criminal offense, which is a completely different legal consequence from an administrative offense. However, the last sentence of the article "At present, the case is being further investigated." It may be that the public security organs are still looking at whether the case constitutes a standard for filing a criminal case.

Of course, this may be due to the fact that the article's editor is not a legal practitioner, leading to a lack of rigor in the writing. The conclusion we can currently draw from the article by the Xianing Public Security Bureau is that Tang and others engaged in Cryptocurrency Trading by accessing foreign networks through means of bypassing the firewall, and were ultimately arrested and subjected to administrative penalties.

2. Is circumventing the Great Firewall illegal?

Including the Xianning Public Security Bureau, the national public security agencies currently impose penalties for circumvention behaviors based on Article 6 and Article 14 of the "Interim Regulations on the Administration of International Networking of Computer Information Networks" that took effect in China in 1997. That is, "unauthorized use of illegal channels for international networking."

However, Mr. Liu has analyzed in many articles that in the regulations that have not been amended so far, the provisions on "illegal channels" are limited to physical channels (wires, optical cables, communication satellites, etc.), and do not include virtual currency channels (such as VPNs).

In terms of time, for the regulations that came into effect in 1997, there was no GFW and virtual channel at that time, but later with the continuous popularization and development of the Internet in China, as well as changes in China's domestic and foreign political environment and other factors, China implemented Internet control, represented by GFW technology, Chinese mainland Internet blocked a large number of overseas websites, so later there was a "circumvention of the wall". However, this kind of Internet control is more due to technical and political factors, and Chinese laws, regulations, and departmental rules do not prohibit Chinese citizens from accessing the Internet abroad.

Therefore, Lawyer Liu's consistent viewpoint is that circumventing the firewall is not illegal, as there is no law that prohibits it. In fact, for law enforcement agencies such as the Public Security Bureau, determining whether an action is illegal is not essentially related to circumventing the firewall; for example, engaging in pornography or subversive political activities (according to legal evaluation standards in mainland China) is illegal even without circumventing the firewall.

3. Is Cryptocurrency Trading Illegal?

Is it illegal to trade cryptocurrencies while circumventing the firewall? Lawyer Liu's opinion is that it is not illegal. The reasons are as follows:

First, the "9.24 Notice" ("Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading and Speculation") only stipulates the principle of self-risk for legal entities, unincorporated organizations, and individuals in China investing in virtual currencies and their derivatives, and it only states that "those suspected of undermining financial order and endangering financial security shall be investigated and dealt with by the relevant departments according to the law."

Second, regarding the legal judgment of using overseas virtual currency exchanges: the "9.24 Notification" prohibits overseas virtual currency exchanges from conducting business in mainland China via the internet and classifies it as "illegal financial activity". However, this only pertains to the actions of virtual currency exchanges, meaning it only regulates the exchanges themselves; for mainland citizens who engage in Cryptocurrency Trading using overseas virtual currency exchanges, the "9.24 Notification" does not stipulate any adverse legal consequences.

Thirdly, if ordinary citizens or their composed studios are merely engaging in Cryptocurrency Trading to make money, it is hard to say that this would reach the level of disrupting the national financial order or endangering financial security. If it reaches such a level, judicial authorities would also need to provide evidence. Referring back to the case of Tang XX and the other seven individuals mentioned in the text, the police article also pointed out that they were involved in "illegal foreign exchange trading." If this foreign exchange is genuine foreign exchange, rather than "fake foreign exchange" like USDT or USDC, then Tang XX and the others may have violated relevant regulations set by the State Administration of Foreign Exchange or the central bank.

Four, Conclusion

Through the above analysis, we believe that it is not illegal to speculate in China, and it is not illegal to circumvent the wall for legitimate purposes. However, as a web3 lawyer, I must also point out that even if coin speculation is not illegal, China has actually cut off all channels for compliant deposits and withdrawals (for example, banks, third-party payment companies, etc. expressly prohibit the use of their payment and settlement channels for virtual currency transactions), and in practice, a large number of players in the currency circle have received stolen money when withdrawing money. Even if circumventing the wall is not illegal, we have hundreds of cases every year in which people are administratively punished simply for circumventing the wall. That is to say, even if there is no legal risk, even if there is no legal risk, it is full of "legal risk", even if this "legal risk" is essentially a risk created by the law enforcer's misunderstanding of the law, but once you fall into it, you will find that the difficulty and high cost of rights protection are unbearable for many ordinary people, so you can only admit it.

As legal practitioners, we hope and are trying to promote the authorities to clarify the regulatory standards for accessing foreign internet (although this may feel a bit strange or even absurd in the internet age), the interim regulations from 1997 are indeed completely outdated for this era.