2025-09-22
China's relationship with Bitcoin is a story of dominance followed by prohibition. Once the world's leading mining hub, China has since imposed sweeping bans on trading and mining, reshaping both its domestic market and global crypto dynamics.
This article breaks down what the China Bitcoin ban means, why it happened, how underground activity persists, and what the future might hold.
China has played a central role in the development and global adoption of Bitcoin. In the early years, Chinese investors and exchanges accounted for a significant proportion of global trading activity.
The country's abundant and inexpensive electricity, coupled with domestic access to mining hardware, positioned China as the world's leading Bitcoin mining hub.
However, regulatory priorities shifted over time. Authorities cited financial risk, fraud prevention, environmental sustainability, and the protection of monetary sovereignty as reasons to impose increasingly stringent restrictions.
Today, China has transitioned from a leading adopter of Bitcoin to a jurisdiction enforcing comprehensive prohibition.
Understanding China's influence is essential, as regulatory actions and policy decisions in Beijing have consistently shaped both domestic and global cryptocurrency markets.
1. Legal Classification and Limitations on Bitcoin Ownership
Bitcoin is recognised as a virtual commodity rather than legal tender. Individuals may hold it as an asset, but cannot use it for payments or commercial transactions. Banks and financial institutions are prohibited from offering cryptocurrency services.
2. Historical Overview of Regulatory Restrictions and Prohibitions
Key milestones in China's cryptocurrency regulation include:
2013: Banks barred from processing Bitcoin transactions.
2017: ICOs banned and domestic exchanges closed.
2021: Mining and cryptocurrency trading formally prohibited.
These measures have repeatedly influenced global market dynamics.
3. Enforcement Mechanisms and Compliance Monitoring
Regulatory oversight is conducted by the People's Bank of China, the State Administration of Foreign Exchange, and other agencies.
Enforcement includes banking compliance checks and electricity monitoring. Despite these measures, underground operations continue to function through covert or fragmented setups.
1. Historical Dominance in Global Bitcoin Mining
Before the 2021 ban, China accounted for the majority of global mining hashrate, benefiting from low-cost energy and proximity to hardware manufacturers. Following regulatory restrictions, global mining activity migrated to other countries.
2. Adaptation through Underground Mining Operations
Studies indicate that mining activity persists in smaller, dispersed, and less visible facilities, allowing China to maintain a notable share of global hashrate despite official prohibitions.
3. Risks of Centralisation and Policy-Driven Constraints
Concentration of mining power within a single jurisdiction raises concerns about centralisation and regulatory influence. Energy restrictions and environmental policies further challenge underground operations.
1. Domestic Economic Effects of Mining and Trading Bans
The regulatory crackdown led to business closures, relocation of mining companies, and loss of tax revenue. Authorities emphasise the environmental benefits of reduced energy consumption.
2. Global Market Repercussions of China's Policy Decisions
China's regulatory announcements frequently trigger global price volatility and reshape the geographic distribution of mining activity.
3. Alternative Digital Currency Strategies and Blockchain Initiatives
China promotes the digital yuan as a controlled central bank digital currency while supporting blockchain applications in supply chain management and digital identity. This illustrates a preference for centralised, regulated innovation over decentralised cryptocurrencies.
Strengthened Enforcement Measures: Expansion of surveillance and penalties targeting underground mining and trading.
Energy and Environmental Constraints: Continuing restrictions on mining due to climate and energy policies.
Persistence of Covert Mining Operations: Strong economic incentives suggest underground activity will continue.
Global Regulatory Influence: China's approach may inform policies in other jurisdictions.
Q1: Is owning Bitcoin legal in China?
Individuals may hold Bitcoin as a virtual asset, but trading or using it for transactions is prohibited.
Q2: Why did China ban mining and crypto trading?
Authorities cited financial risk, speculation, fraud prevention, energy consumption, and protection of monetary sovereignty.
Q3: Does China still contribute to global mining?
Despite the ban, China continues to contribute to global hashrate through underground operations, estimated between 15–20%.
Q4: What legal alternatives exist for Chinese investors?
Direct trading is not allowed domestically, but some exposure is possible via overseas platforms, blockchain-related equities, or participation in the digital yuan.
China's approach demonstrates a balance between eliminating domestic cryptocurrency activity and maintaining international influence.
Its historical dominance, ongoing underground mining operations, and economic significance ensure China remains central to global discussions on cryptocurrency. Understanding this regulatory landscape is essential for investors, policymakers, and market participants.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
