The Evolution of China's Virtual Asset Policy: Exploring the Current Regulatory Status of Central Bank Digital Currency and Bitcoin

Policy Overview

• As of September 2025, the Chinese government has not officially lifted the ban on Bitcoin or incorporated it into the national reserve asset system.
• The regulatory framework in China will come into full effect on June 30, 2025, with the People's Bank of China as the main regulatory authority.
• Personal ownership of virtual assets is legally limited, but commercial transactions and mining activities are still prohibited.
• Geopolitical and financial security considerations are the main reasons for China's strict regulation.

Evolution of Regulatory Policies

China's regulation of virtual assets began in 2013 and has gradually tightened over more than a decade. The main stages of regulatory policy development include:

| Time Point | Key Policy | Regulatory Impact | |------------|--------------|------------| | 2013 | The People's Bank of China issued a notice defining Bitcoin as a virtual commodity | Prohibiting financial institutions from participating in related businesses | | 2017 | Ban on ICOs, closure of domestic cryptocurrency exchanges | Crackdown on speculative activities, trading shifts overseas | | 2021 | Comprehensive ban on cryptocurrency trading and mining activities | Mining industry relocation, the United States becomes the new mining center | | November 2024 | Shanghai Court Recognizes Legality of Personal Cryptocurrency Holdings | Policy Adjustments on Individual Level, Commercial Activities Still Prohibited | | June 2025 | The regulatory framework for virtual assets comes into full effect | Establish the People's Bank of China as the main regulatory authority |

The comprehensive ban implemented by the Chinese government in 2021 had a significant impact on the global cryptocurrency market. According to knowledge base data, before the ban was imposed, China accounted for 67% of global Bitcoin mining activities. After the ban, this proportion rapidly decreased, and mining activities shifted significantly to regions such as the United States.

Policy Background and Regulatory Logic

China's cautious attitude towards cryptocurrency stems from multiple considerations, mainly including:

1. Financial Stability and Risk Prevention

Chinese regulatory authorities believe that cryptocurrencies may threaten financial stability and trigger systemic risks. The core purpose of the State Council's ban on cryptocurrency trading in 2021 was to curb the spread of financial risks and capital outflow. Regulatory documents clearly state that virtual currency trading activities disrupt the economic and financial order, breeding illegal activities such as money laundering and illegal fundraising.

2. Currency Sovereignty and Central Bank Digital Currency

China is actively developing its central bank digital currency (digital renminbi), which fundamentally contradicts the concept of decentralized virtual assets such as Bitcoin. The digital renminbi aims to strengthen the central bank's control over the issuance and circulation of currency, rather than undermine national monetary sovereignty.

3. Energy Consumption and Carbon Emission Targets

In 2021, the National Development and Reform Commission classified Bitcoin mining as an obsolete industry, partly due to its high energy consumption characteristics conflicting with China's carbon neutrality goals. It is estimated that Bitcoin mining once consumed a significant proportion of electricity resources in some provinces of China.

Recent Policy Dynamics Analysis

Despite the clear official stance, there have been some recent developments worth noting:

Personal Holding Rights Confirmation

In November 2024, the Songjiang People's Court in Shanghai pointed out in a case opinion that individual possession of cryptocurrencies is not illegal, marking the first acknowledgment of their property nature in judicial practice. This indicates that on a personal level, the policy may have been slightly adjusted, but it does not represent a relaxation of restrictions on commercial activities.

Differentiated Policies of the Hong Kong Special Administrative Region

As a Special Administrative Region under "one country, two systems", Hong Kong has implemented a regulatory framework for virtual assets that is different from that of the mainland:

• On June 1, 2023, the licensing system for virtual asset trading platforms in Hong Kong officially came into effect.
• As of June 2025, 11 virtual asset trading platforms have obtained licenses.
• On June 27, 2025, the Hong Kong Financial Services and the Treasury Bureau, in conjunction with the Securities and Futures Commission, released a consultation document planning to extend the regulatory scope to virtual asset trading and custody services.

This differentiated policy arrangement is seen by some analysts as the "policy testbed" for the Chinese government to observe the cryptocurrency market, allowing for the assessment of the impact of virtual assets in a relatively controlled risk environment.

Market Speculation on Bitcoin Reserves

Market speculation that emerged in March 2025 claimed that China might consider holding Bitcoin as a reserve asset, and these rumors temporarily drove up the price of Bitcoin. Some reports mentioned that China might hold approximately 195,000 Bitcoins (allegedly from assets seized in a Ponzi scheme crackdown in 2020).

However, these claims lack official confirmation, and analysts believe they are more likely to be market speculation rather than based on actual policy changes. According to existing public information, the Chinese government has not expressed any intention to include Bitcoin in its official reserves.

Geopolitical and Economic Factors

China's virtual asset policy is also influenced by broader geopolitical and economic factors:

Considerations for De-Dollarization Strategy

China has strategic considerations regarding the U.S. dollar-dominated international financial system. Some analysts believe that decentralized value storage tools could theoretically serve as a means to counter Western financial sanctions, but this conflicts with China's goals of financial security and effective regulation.

International Competition of Digital Currency

China is actively promoting the internationalization of the digital yuan and participating in multilateral cooperation projects such as mBridge and BRICS Pay, which are alternative international payment systems. Compared to the digital yuan, decentralized cryptocurrencies are difficult to incorporate into China's international financial strategy framework.

Capital Controls and Foreign Exchange Policy

China maintains relatively strict capital control policies, and preventing capital outflow is one of the important motivations for virtual asset regulation. According to analysis, after the comprehensive ban in 2021, China's related capital flows significantly decreased, and the domestic cryptocurrency industry development was also suppressed.

Assessment of Future Policy Directions

Based on the evolution of existing policies and the economic environment, an objective assessment of the direction of China's virtual asset policy can be conducted:

Possibility and Limitations of Policy Adjustment

Considering Hong Kong's regulatory trials and the judicial recognition of the legality of personal holdings, limited cryptocurrency activities may be allowed under specific conditions in the future, but the possibility of a full lifting of the ban remains low. Any policy adjustments may follow the principle of "controllable risks and gradual advancement."

Evolution of Regulatory Focus

China's regulatory focus on virtual assets may gradually shift from an outright ban to a classified regulatory approach, distinguishing the risk characteristics of different types of virtual assets and implementing differentiated regulatory measures. This trend has already been reflected in the regulatory practices in Hong Kong.

Institutionalization of Policy Framework

With the full implementation of the virtual asset regulatory framework on June 30, 2025, China's regulation of virtual assets will become more institutionalized and systematic, forming a unified regulatory system centered around the People's Bank of China, thereby reducing policy uncertainty.

Regulatory Challenges and Institutional Choices

China faces multiple challenges in the regulation of virtual assets, including:

Regulatory Boundary Definition

There is a natural tension between the cross-border liquidity of virtual assets and national regulatory sovereignty. Even with strict bans in place, individuals can still participate in overseas markets through various technical means, which poses a challenge to traditional regulatory models.

Technical Regulatory Capability Construction

The rapid development of blockchain technology requires regulatory agencies to continuously enhance their technical capabilities. Chinese regulatory agencies have been strengthening their research on blockchain technology, including the development of regulatory technology tools to improve regulatory efficiency.

International Coordination and Standard Setting

Regulation of virtual assets requires global coordination. China participates in international mechanisms such as the Financial Action Task Force (FATF) and seeks international cooperation in combating the illegal use of virtual assets while maintaining its own regulatory autonomy.

Based on currently reliable information, the Chinese government has not indicated plans to officially lift the ban on Bitcoin or to use it as a reserve currency. Its policy remains primarily restrictive, aimed at maintaining financial stability, protecting investors' rights, and controlling capital flows. Regardless of how policies are adjusted, they will be influenced by complex geopolitical and economic factors.