2026 China Crypto Rules: 7 Must‑Avoid Actions

Title: 2026 Mainland China Crypto Regulations – 7 Actions Users Must Absolutely Avoid

The People’s Republic of China has rolled out a sweeping set of rules in early 2026 that tighten the government’s long‑standing stance on virtual currencies. While the country continues to champion the digital yuan, it has reiterated that cryptocurrencies such as Bitcoin, USDT, or USDC have no legal tender status and any related activity on the mainland is deemed an illegal financial service. For anyone living in or dealing with mainland users, understanding the new red lines is the first step toward protecting both accounts and capital. Below is a concise listicle of the most critical prohibited behaviors, followed by an in‑depth look at why each is off‑limits and where you can find the original regulatory texts.

Key Prohibited Actions for Mainland Users

1. Holding or trading unregistered crypto assets on domestic platforms
2. Participating in tokenised asset‑backed securities without a licence
3. Using overseas exchanges or service providers to serve mainland residents
4. Buying, selling or minting NFTs and digital collectibles that lack official approval
5. Employing privacy‑enhancing tools (mixers, anonymity coins) to evade detection
6. Conducting cross‑border crypto transfers without complying with new reporting standards
7. Treating crypto holdings as taxable income or seeking tax deductions

1. Holding or trading unregistered crypto assets on domestic platforms

The China Securities Regulatory Commission (CSRC) reiterated on 6 February 2026 that virtual currencies “do not possess the same legal status as fiat money.” Any activity that involves buying, selling, or storing cryptocurrencies on a platform that is not expressly authorised by the state is classified as an illegal financial activity. The regulatory notice explicitly states that “domestic issuance or trading of virtual currency‑related services is prohibited.” Consequently, even peer‑to‑peer swaps conducted through local apps can expose users to enforcement actions.

2. Participating in tokenised asset‑backed securities without a licence

On the same day, the CSRC issued the so‑called “No. 1 Order” – a set of guidelines governing the issuance of asset‑backed securities tokens (ABSTs). The document requires a separate securities licence for any entity that wishes to tokenize real‑world assets such as real estate, commodities, or equities. Individuals who invest in or facilitate the issuance of these tokens without the appropriate licence are violating the new framework and may face civil penalties.

3. Using overseas exchanges or service providers to serve mainland residents

A joint circular from the People’s Bank of China (PBOC) and eight other ministries released on 6 February 2026 expressly bans “foreign units and individuals from providing virtual‑currency‑related services to residents of the mainland.” This means that accessing an offshore exchange, even through a VPN, to trade or hold crypto on behalf of a Chinese citizen is now a regulatory breach. The authorities view such cross‑border service provision as an attempt to circumvent domestic prohibitions.

4. Buying, selling or minting NFTs and digital collectibles that lack official approval

The 14 February 2026 “Web3 New Regulations” paper clarifies that while the mainland continues to prohibit most crypto activities, certain cross‑border NFT projects may be permitted under strict conditions. However, any domestic NFT transaction that is not part of a government‑sanctioned pilot or does not involve a licensed cultural‑heritage entity is considered non‑compliant. The regulator’s focus is on preventing the use of NFTs for money‑laundering or speculative bubbles.

5. Employing privacy‑enhancing tools (mixers, anonymity coins) to evade detection

The February risk‑prevention document highlights a specific crackdown on “tools that obscure transaction trails, such as mixers, privacy‑focused coins, and decentralized exchanges (DEXs) that lack KYC/AML controls.” Users who attempt to hide the source or destination of crypto funds using these methods are directly violating the new anti‑money‑laundering (AML) provisions.

6. Conducting cross‑border crypto transfers without complying with new reporting standards

Although the Chinese tax authority does not currently recognise crypto assets for tax purposes, the February 6 circular introduces a reporting obligation for any cross‑border flow of digital assets that could be linked to illicit activity. Failure to disclose such transfers to the State Administration of Foreign Exchange (SAFE) may trigger investigations under the broader “risk prevention and disposal” framework.

7. Treating crypto holdings as taxable income or seeking tax deductions

A January 7 2026 commentary on the tax treatment of crypto notes that “the tax bureau will not levy taxes on assets it does not recognise as legal tender.” While this may seem to provide a loophole, the regulator warns that misrepresenting crypto transactions as taxable events could be construed as falsifying financial records, which is itself a punishable offense under Chinese financial law.

Further Reading

• Full text of the CSRC “Regulatory Guidelines for Asset‑Backed Securities Token Issuance” (commonly referred to as No. 1 Order): https://www.csrc.gov.cn/pub/newregulation2026
• Joint circular on virtual‑currency risk prevention by the PBOC and eight ministries: https://www.pbc.gov.cn/crypto2026
• Analysis of the February 14 2026 Web3 regulations (English translation): https://www.blockchainlaw.cn/web3reg2026
• Legal commentary on crypto tax implications in Mainland China: https://www.chinataxblog.com/crypto2026

FAQ

Q1: Can I legally hold USDT in a foreign wallet while living in Mainland China?

A: No. The February 6 2026 regulations prohibit mainland residents from holding or transacting in any cryptocurrency, regardless of whether the wallet is hosted abroad. Accessing a foreign wallet is considered a “foreign service” to a domestic user and is therefore illegal.

Q2: Are there any circumstances under which NFTs are allowed in China?

A: Only NFT projects that receive explicit government approval—typically those tied to cultural heritage, state‑backed digital art initiatives, or cross‑border pilots—are permissible. All other domestic NFT activities remain prohibited under the Web3 regulations.

Q3: What are the penalties for using a crypto mixer to conceal transactions?

A: The risk‑prevention notice classifies the use of mixers and other anonymising tools as a violation of AML rules. Penalties can range from fines to criminal prosecution, depending on the scale of the concealed transaction and any associated illicit activity.

Staying compliant in 2026 requires mainland users to treat crypto as a strictly off‑limits activity unless expressly authorised by the state. By respecting the seven red lines outlined above, participants can avoid regulatory entanglements while the Chinese financial system continues its pivot toward the digital yuan.

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⚠️ Risk Disclaimer: Crypto prices are highly volatile. This is not investment advice.