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Bitcoin in China: Live CNY Price, Best Exchanges, Taxes, and History

China has having an on-off relationship with cryptocurrency in general. In 2013, the government declared Bitcoin as a virtual commodity while allowing citizens to participate in online trading. 

Since 2017, China has taken a more strict strict stance on cryptocurrency due to investor protections and financial risk prevention. The Chinese banking system does not accept cryptocurrencies and will also steer clear from providing any crypto-related services. Initial coin offerings are illegal and cryptocurrencies are not recognized as legal tender. These measures have led to blocking websites for cryptocurrency trading platforms. 

Yet at the same time, China’s central bank has been planning of issuing its own centralized digital currency and bitcoin is legally recognized as a form of “virtual property.” 

Is Bitcoin Legal in China?

ICOs have been completely banned since September 4, 2017. The government basically considers ICOs to be unauthorized public financing. The ICO legislation has also imposed restrictions on the primary business of cryptocurrency trading platforms. Website and mobile applications that fail to comply are shut down by government authorities. Banks and all payment institutions are banned from directly or indirectly providing services for ICOs and cryptocurrencies.

However, owing to legislation since 2013, bitcoin is legally recognized and protected as a “virtual property.” However, this does not make cryptocurrency trading legal. Yet there is a bit of vagueness in terms of legal restrictions. The so-called Chinese “ban on cryptocurrencies” has been facilitated by “industry structure reform recommendation” from a state planning agency, considered more of a guideline than a rule. 

For the most part, OTC transactions are acceptable, mining is very much active, and China’s central bank, the PBOC, is reportedly considering issuance of its own digital currency. 

How to Buy and Sell Bitcoin in China 

In spite of the law, China still trades bitcoin. A major part of why Bitcoin is still holding ground in China is due to OTC options available in China. Huobi and locally managed WeChat groups act as marketplaces where buy and sell orders are offered manually and transactions are done in a peer-to-peer manner. These OTC desks do not facilitate trades, they mainly act as places for buyers and sellers to discover each other. Payment is usually handled peer-to-peer through WeChatPay, AliPay or banking wire. Although, as part of the “ban” China is trying to block  crypto-related payments on mobile platforms. The best and safest way to handle OTC trading in China is to follow these steps:

1. Agree on price 
2. Send RMB
3. Receive BTC once payment has been delivered.

Once you have your BTC in hand, you can engage in crypto-to-crypto exchanges like Huobi, OKEx, and Gate.io. 

Top Bitcoin exchanges in China

Huobi

At one point, Huobi was the world’s biggest bitcoin exchange by trading volume. Huobi was popular amongst Chinese retail investors due to its zero transaction fee offer. Following the 2017 ban, Huobi has migrated its headquarters to Singapore. Even so, more than 70 per cent of Huobi Global users are Chinese who live outside China or use a virtual private network service. As of September 2019, Huobi is moving into the blockchain phone market with the launch of its Android-based mobile phone, the “Acute Angle,” made by Whole Network, a blockchain project partly funded by the company’s venture capital arm, Huobi Capital.

OKEx

Based in Beijing, OKEx’s two main target markets are the Chinese domestic market and the international market based in Hong Kong. It offers OKCoin as a payment and a loan app for consumers. As part of the 2017 crackdown, China National Radio’s (CNR) “Voice of China” program has alleged that the crypto exchange OKEx is illegally working in China with Chinese clients. In 2018, founder Star Xu was detained in China in relation to suspected digital currency fraud. 

Gate.io

Initially founded in 2013 as Bter.com by CEO Lin Han, the exchange rebranded to Gate.io after the 2017 ban. It primarily focuses on crypto-to-crypto and Chinese yuan over-the-counter (OTC) trading. During the spring of 2019, Gate.io began raising money for launching Gate Points, which can be used for offsetting trading fees on the platform. It is also yet to launch its proprietary blockchain, Gatechain. 

Other methods

Owing to the strict restrictions on cryptocurrency trading, most of the trading occurs through OTC counters or peer-to-peer marketplaces. LocalBitcoins is one of the best over-the-counter exchanges used in China. BTC ATMs are banned in China and do not exist. 

China’s Tax Rules on Bitcoin Profits

There is currently no provision of tax applicable to cryptocurrencies. But since they are viewed as virtual property, the transaction involved value added tax as well as income tax for capital gains (if the trade is considered an investment). 

The official reply of the State Administration of Taxation regarding taxes on income originating from cryptocurrency trading recognizes the income generated by individuals who purchase virtual currency as taxable income for individual income tax. It is computed and paid under the taxable claus of “property transfer income”. The original price of the virtual currency sold by individuals shall be equal to the price for purchasing that virtual currency over the Internet plus the relevant tax and fees. Overall, the taxation regulation and assessment is pretty vague. 

In terms of mining, Chinese firm Bitmain Technologies is the world’s biggest maker of cryptocurrency mining rigs. It accounts for 75% of the equipment required to earn new units of cryptocurrency. Most mining firms undergo strict tax inspection and have to comply with Chinese legal customer disclosure, allowing the government to know on whose behalf who crypto is being mined. Since China has slowly been regulating mining, Bitmain and other firms have begun shifting their functions abroad. In April 2019, China’s state planning body proposed to restrict or phase out crypto-mining activities.

Where to Spend Bitcoin in China 

For a country with a predominantly cashless populace, China’s evolving stance on crypto currency bodes well for merchants desiring to accept cryptocurrency.

Bitcoin is officially recognized property by the Shenzhen Court of International Arbitration. This allows individuals and businesses to own and transfer Bitcoin without going against financial regulations. As a result, not only on peer-to-peer transfers but most merchants will accept crypto. Take for instance, Beijing Sci-Tech Report (BSTR), China’s oldest publication focused on Sci-Tech, has announced that it will accept Bitcoin for the 2019 subscriptions for their technology magazine, “Tech Life.” 

At the same time, Beijing’s plans to issue its own central bank digital currency means that there is general optimism about cryptocurrency in China. However, major mobile payment institutions like WeChat and AliPay, still ban cryptocurrency trading and transactions. For the most part, however, spending bitcoin in China works on a case-by-case basis because it is mostly handled through OTC networks. 

History of Bitcoin in China

Up until September 2017, China was at the forefront in the Bitcoin market as its citizens had become leading traders and miners of the cryptocurrency. However, in late 2017, the communist government of the nation decided on a blanket embargo on crypto-to-fiat trading and ICOs.

In January 2018, a fresh crackdown from Beijing saw fringe trading platforms such as P2P and over-the-counter resources banned. At the same time, mixed signals have been given over the status of cryptocurrency mining.

“To prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or ICOs,” the South China Morning Post quotes the PBoC-related publication as saying.

In Mainland China, even before the ban, banks were forbidden from trading Bitcoins, and payment processors could not use Bitcoin. All the Bitcoin exchanges were subject to the same internet censorship and licensing restrictions which are enforced by the Ministry of Industry and Information Technology.

Bitcoin Mining in China

China is the world leader when it comes to mining Bitcoin. Even after the ban, mining continues. Chinese mines comprise about 70% of the world’s Bitcoin processing power. That’s a lot.

This China domination is estimated at around $9.2 Billion Bitcoin market capitalization. Some critics view this influence as a threat to Bitcoin because China’s miners are opposing some of the reforms to improve Bitcoin transaction speed as bitcoin use expands.

So why is China mining so much? Two reasons. Cheap electricity and excess coal.

Electricity in China is extremely cheap as compared to other countries. Electricity costs is the most important factor for a profitable mining operation.

As mining difficulty increases, the least efficient miners are forced to shut down first. The miner that can solve the fastest gets the reward. China’s cheap electricity keeps Chinese miners at peak efficiency and allows them to outlast their competitors.

In China, energy producers can also burn coal and use the energy for Bitcoin mining. Instead of physically moving coal, it’s easy to just burn the coal and convert it into Bitcoin through mining.

Interestingly, the Chinese government has not been very intrusive with the mining operations. The government banned banks from trading Bitcoin in 2013, but individuals were permitted to trade, and miners were allowed to operate.