Hong Kong SAR has 0% CGT and regulated market | Activity | Taxable? | Tax Type | Rate | Reporting |
|---|---|---|---|---|
| Airdrops | No | Banned | N/A | N/A |
| Crypto-to-crypto | No | Banned | N/A | N/A |
| DeFi lending | No | Banned | N/A | N/A |
| Gifts received | Unclear | - | Varies | Unclear |
| Holding | Unclear | - | 0% | Unclear |
| Liquidity provision | No | Banned | N/A | N/A |
| Mining income | No | Banned | N/A | N/A |
| NFT sale | Unclear | Restricted | N/A | Unclear |
| Salary/payment in crypto | No | Banned | N/A | N/A |
| Sell for fiat | No | Banned | N/A | N/A |
| Staking rewards | No | Banned | N/A | N/A |
| Wrapped tokens | No | Banned | N/A | N/A |
China does not have a cryptocurrency tax framework because cryptocurrency trading and mining are prohibited activities under Chinese law. A series of regulatory actions culminating in the September 2021 joint notice from the People's Bank of China (PBoC) and nine other agencies declared all cryptocurrency trading, exchange services, and mining illegal and banned financial institutions from facilitating crypto transactions. This was not a new policy direction — it was the formalisation of restrictions that had been progressively tightening since 2013. There is no tax framework because there is no legal activity to tax.
The 2021 notice made the following activities illegal for entities and individuals in mainland China: operating a cryptocurrency exchange, providing exchange matching or order book services, providing cryptocurrency custody or wallet services, conducting token issuance and financing (ICOs), and mining cryptocurrency. Overseas exchanges providing services to mainland Chinese users were also declared to be conducting illegal financial activity.
The PBoC supplemented this with a technical interpretation clarifying that virtual currencies have no legal status as currency or legal tender in China, and that all activities related to virtual currency trading are illegal financial activities subject to criminal prosecution and civil liability.
The ban does not explicitly criminalise the passive holding of cryptocurrency. An individual who acquired Bitcoin before 2021 and continues to hold it in a self-custody wallet is in a legally ambiguous position — there is no formal prohibition on holding, but there are also no legal protections for holders, no legitimate recourse if assets are lost or seized, and no mechanism to convert holdings into RMB through legal channels.
Trading on overseas platforms using VPNs is technically illegal under Chinese internet regulations and constitutes participation in a prohibited financial activity under the 2021 notice. Despite this, a significant number of mainland Chinese individuals continue to trade via overseas platforms, accepting the legal and operational risk that this entails. This activity occurs entirely outside any legal framework and carries genuine criminal exposure — particularly for high-volume traders or anyone who facilitates others' access to overseas exchanges.
Hong Kong operates an entirely separate legal and regulatory system. Cryptocurrency trading is legal and regulated in Hong Kong under the SFC's VATP licensing regime. Mainland Chinese nationals who establish genuine Hong Kong residency — or who have Hong Kong Permanent Resident status — can legally trade on Hong Kong-licensed exchanges. The two systems are legally distinct: what is prohibited in Shenzhen is permitted in Hong Kong. However, routing mainland capital into Hong Kong crypto trading through informal channels (underground banking, Macau intermediaries) carries its own legal risks under mainland capital controls and anti-money laundering law.
The Chinese government is one of the largest holders of seized Bitcoin globally. Confiscations from fraud cases, Ponzi schemes, and criminal prosecutions have resulted in the state holding substantial BTC reserves — estimated at over 190,000 BTC based on publicly known seizures, though the total is not officially disclosed. The state has not articulated a clear policy on what to do with these holdings. Periodic liquidations have occurred through local government auctions in legally questionable circumstances, given that the assets themselves are technically prohibited. This is an ongoing policy inconsistency that reflects the gap between the ban's ideological intent and the practical reality of enforcement.
Individuals in mainland China who hold cryptocurrency face a specific set of practical constraints: no legal on-ramp or off-ramp to RMB, no exchange with legal status to assist them, no legal recourse if a counterparty defaults, and no tax reporting mechanism even if they wanted to declare holdings. The only legal path to realising value from existing holdings is to establish residence in a permitted jurisdiction (Hong Kong, Singapore, or elsewhere) and transact there — which requires genuine relocation, not merely opening an offshore account.
There is no crypto tax filing requirement in China because there is no legal crypto activity to report. Individuals who have engaged in prohibited trading have no legal avenue for voluntary disclosure. China is not a CARF participant and has not committed to implementing the framework, which is consistent with the position that there is no legal crypto activity to report on.
China taxes its residents on worldwide income. Establishing Chinese tax residency while holding crypto creates a position where the assets have no legal status, cannot be reported, and cannot be legally liquidated — while theoretically remaining within the worldwide income tax net. In practice, this contradiction is unresolvable within the current legal framework.
For mainland Chinese nationals who wish to legally access cryptocurrency markets, the practical path is establishing genuine residency in a jurisdiction where crypto is legal — Singapore, Hong Kong, UAE, or similar — and conducting all activity there. This requires genuine relocation, not merely an offshore account or shell entity. China does not impose a formal exit tax on crypto assets, but the Individual Income Tax Law imposes exit filing requirements on departing tax residents with significant assets, and capital controls restrict the transfer of large sums offshore without regulatory approval.
The situation is fluid. China has periodically signalled potential openness to regulated digital assets (particularly its own CBDC, the digital yuan), but there is no credible near-term signal of a reversal of the 2021 private cryptocurrency ban. Planning on the assumption of legalisation is speculative.
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