China vs Crypto: Why Beijing Wants the Digital Yuan, Not Your Bitcoin

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 I strongly recommend reading this article all the way to the end; your money is precious, and knowledge is what protects it.

  1. Beijing has doubled down on its crackdown in 2025, extending pressure from trading and mining to stablecoins and cross-border flows.

  2. In my view, China is not moving toward “normalizing” private cryptocurrencies; it is tightening control while fast-tracking its own central bank digital currency, the e-CNY.

  3. Over the medium and long term, this combination of hard bans on decentralized tokens and aggressive promotion of a digital yuan will reshape global liquidity, regulation, and the investment narrative around crypto.

banbtc

1. China’s 2025 stance: no sign of a crypto thaw

If you were hoping for “China is quietly reopening to crypto,” I think that hope is misplaced.
Beijing’s recent statements and enforcement campaigns all go in the same direction: less room for private, decentralized crypto; more power for state-controlled digital money.

Over the past decade, the pattern has been consistent:

  • Banks and payment firms were pushed out of anything related to Bitcoin or other coins.

  • Domestic exchanges were shut down and ICOs were banned.

  • In 2021, all crypto transactions were declared illegal, and large-scale mining was banned nationwide.

  • Since then, regulators have repeatedly warned about speculation, fraud, and capital flight through “virtual currencies,” with a growing focus on stablecoins and cross-border OTC flows.

The key point is simple: China sees uncontrolled crypto not as an innovation to embrace, but as a risk to be contained.

2. What is effectively banned in Mainland China now

On paper, the environment for decentralized crypto in Mainland China is extremely hostile. In practice, there is still underground activity, but it operates under constant regulatory risk.

Broadly speaking, the current situation looks like this:

  • Trading services are illegal. Exchanges cannot openly provide spot, futures, or derivatives trading to Mainland users, regardless of whether the platform is domestic or offshore.

  • Banks and payment platforms must block crypto activity. Financial institutions are prohibited from offering clearing, settlement, or payment services linked to crypto.

  • Mining is officially banned. Large industrial farms have been targeted, and public operations inside China are considered illegal, even though some hashrate has quietly drifted back into regions with cheap power.

  • Stablecoins are specifically in the crosshairs. Authorities view dollar stablecoins and unregulated RMB-linked tokens as a direct threat to capital controls and monetary sovereignty.

From a risk perspective, that means any business or trading strategy that relies on Mainland Chinese liquidity is built on sand. The policy risk is not theoretical; it is structural.

3. The rise of the e-CNY: state-controlled digital money

While private cryptocurrencies are being squeezed out, China is pushing hard in another direction: its own central bank digital currency, the e-CNY.

The digital yuan is already being used in:

  • Public transport, retail payments, and e-commerce in selected cities

  • Tax refunds, government subsidies, and some public sector salaries

  • Pilot cross-border payments in cooperation with Hong Kong and a handful of trade partners

For Beijing, the e-CNY is a strategic tool:

  • Domestically, it offers programmable, fully traceable money, making it easier to enforce tax rules, target subsidies, prevent fraud, and reinforce capital controls.

  • Internationally, it is a long-term attempt to chip away at the dominance of the U.S. dollar in trade and settlement.

In other words, China is not anti-digital money at all. It is anti-digital money that it cannot fully see, control, or switch off.

CNYUSD
chart by TradingView

4. Hong Kong and “experimentation zones”: not a real liberalization

Many investors point to Hong Kong and ask: “Isn’t China actually opening up via the back door?”
I see it differently.

Hong Kong is building a licensing regime for virtual asset trading platforms and a framework for regulated stablecoins. A few exchanges are allowed to serve retail customers under tight rules, and there is open talk about future RMB-linked stablecoins issued under strict supervision.

This is important, but we should interpret it correctly:

  • It is a controlled laboratory, not a free-for-all crypto haven.

  • The goal is to test business models, legal structures, and technology that can coexist with capital controls and political priorities.

  • Ultimate power over the direction of this experiment still sits in Beijing.

So yes, Hong Kong matters for the future of regulated digital assets in the region. But it does not mean Mainland China is suddenly friendly to decentralized public-chain crypto.

5. Medium-term impact (1–3 years): how this hits the market

Over the next few years, China’s approach will shape the crypto landscape in several concrete ways.

1) Less “China retail” upside, more offshore and institutional flow

Past bull runs relied heavily on speculative flows from Chinese retail traders and miners using local platforms and gray-area payment channels.
That era is over.

  • Domestic exchanges are gone.

  • Payment channels are monitored.

  • OTC desks and offshore platforms serving Mainland users carry serious legal risk.

Some volume still leaks through VPNs and creative structures, but the wild, unrestrained Chinese retail bid is structurally weakened.
As a result, more of the action will come from:

  • U.S. and European regulated venues

  • Asian hubs like Hong Kong, Singapore, and Dubai

  • ETF products and compliant derivatives, rather than pure gray-area spot trading

2) Regulatory overhang as a permanent volatility trigger

Every time Beijing launches a new campaign against “virtual currency speculation,” markets remember how quickly sentiment can flip. Headlines about crackdowns can:

  • Freeze OTC liquidity, especially in Asian time zones

  • Hit stablecoin corridors and cross-border flows

  • Trigger short, sharp risk-off moves in major coins

Crucially, this risk is asymmetric. Negative surprises from China are always possible. A genuine positive surprise—like a meaningful easing of the ban—is extremely unlikely in my view.

3) Pressure on stablecoins and cross-border rails

China’s regulators are particularly wary of stablecoins because they:

  • Offer a pseudo-dollar inside a system with strict capital controls

  • Enable fast, pseudonymous cross-border transfers

  • Circumvent traditional banking rails

Medium-term, that means more pressure on any business model that relies on dollar stablecoins for Chinese clients, and stronger incentives for big Chinese firms to lobby for regulated, tightly controlled RMB-linked tokens instead.

4) Hashrate geography and mining valuation

Even under a formal ban, some mining continues in regions with cheap electricity and weak enforcement. That keeps a slice of global hashrate inside a jurisdiction that is openly hostile to decentralized crypto.

From an investment perspective:

  • This is a long-term concentration risk for Bitcoin’s security model.

  • Public miners operating in transparent, friendly jurisdictions may command a valuation premium as “clean” hashrate compared to anything in or near China.

6. Long-term impact (5–10 years): CBDC world vs permissionless crypto

Looking further ahead, China’s stance tells us a lot about where the global system might be headed.

1) CBDCs as the default, crypto as the alternative

If the digital yuan continues to grow domestically and expand into trade payments, it becomes a blueprint. Other central banks—especially in Asia—will copy parts of that design.

We could easily end up in a world where:

  • CBDCs and regulated stablecoins are the standard rails for everyday, legal payments.

  • Permissionless assets like Bitcoin and Ethereum are the alternative rail, mainly used for self-custody, censorship resistance, and speculation.

Ironically, the more aggressive governments become in pushing programmable, surveilled money, the stronger the ideological and practical argument for permissionless crypto becomes—for people who actively want something the state cannot rewrite.

2) Structural exclusion of Mainland China from open-chain innovation

By keeping public crypto markets illegal, Beijing risks sidelining itself from the messy but powerful innovation happening on open chains: DeFi, NFTs, on-chain identity, and whatever comes next.

Talent and capital that want to build in that world will gravitate to:

  • Hong Kong, Singapore, and Dubai

  • North America and Europe

  • Emerging hubs in Southeast Asia and Latin America

China may lead in closed, CBDC-centric systems, but it will have less influence over open standards in global digital finance.

3) Global regulatory drift toward “China-lite” models

Most democracies will not copy China’s full ban. But they are already drifting toward tighter control:

  • Heavier KYC and AML rules for all centralized platforms

  • Licensing and reserve requirements for stablecoin issuers

  • Clear separation between “tokenized regulated assets” and “high-risk public-chain tokens”

China effectively stretches the policy spectrum. Even if other countries stop far short of a total ban, they are moving in the same direction: more surveillance and control, less unregulated experimentation.

7. What this means for investors and traders

From a practical, money-on-the-line perspective, I draw a few clear conclusions:

  • Do not build a thesis on “China will relax the ban.” My personal view is that if anything, the crackdown will get stricter at the edges rather than looser.

  • Treat Chinese policy as a one-way risk factor. Negative headlines from Beijing can still knock the market; positive surprises that structurally improve the outlook for decentralized crypto are extremely unlikely.

  • Watch Hong Kong, but manage expectations. Licensed exchanges, future regulated stablecoins, and tokenization projects there are important, but they live inside a carefully controlled sandbox. They are not a ticket back to the old, wild Mainland bull flows.

  • Position yourself relative to the CBDC world. You either invest in infrastructure that plugs into regulated digital rails, or you deliberately hold and use permissionless assets as a hedge against those rails. Ignoring CBDCs altogether is no longer an option.

  • Be conservative with leverage around China-related news. If you insist on using high leverage, structure position size and stop-loss levels with the assumption that sudden, policy-driven gaps can appear in Asian sessions.

In short, China is not going to become a friendly jurisdiction for decentralized crypto. It is building a world where state-issued digital money and tightly controlled tokens dominate, while permissionless crypto survives as the alternative system at the edge. Your job as an investor is to decide how you want to be positioned in that split reality—and to size your risk accordingly.

This article is for informational and educational purposes only and does not constitute financial or investment advice; any decisions you make with your money are entirely your own responsibility.

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