When people repeatedly ask, “Is Bitcoin legal?”, what truly troubles them may not be the legal text itself, but rather a deeply ingrained mental habit — we are used to being compliant citizens who wait for permission from authority, rather than actively seeking the freedom granted by what the law does not prohibit.
This question, steeped in a uniquely Chinese context, reflects not only the tension between regulation and freedom, or innovation and stability, but also exposes a deeper identity confusion in this era of transition: should we remain obedient subjects, or step forward as proactive citizens who embrace the new and pursue the dividends of our time?
In January 2021, I published an article on Zhihu titled “Is Bitcoin Truly ‘Legal’ in China?” Unexpectedly, the article garnered over 35,000 views, 100 likes, more than 100 shares, and nearly 200 saves. Behind these numbers lies the long-standing confusion and urgent need for clarity surrounding this so-called “legality issue.”
Now, three years later, I feel compelled to revisit the question — not because legality alone is in dispute, but because a broader, globally significant civic dividend is quietly emerging.
1. The Problem
Legally speaking, Bitcoin has always been legal in China.
As I made clear in my 2021 article, China’s legal system follows the principle of legality of punishment, meaning that only laws passed by the National People’s Congress or its Standing Committee can restrict a citizen’s personal freedom.
To date, no Chinese law has declared owning or trading Bitcoin a criminal offense, nor does any criminal penalty exist for doing so.
This legal clarity has ensured that individuals in China have always been allowed to own and trade Bitcoin.
Yet many Chinese people still hesitate in the face of emerging technologies. Their first question is not “Is this prohibited?” but “Is this allowed?” This mental reflex is not an individual’s rational choice, but the collective unconscious left by two thousand years of imperial rule.
We are more accustomed to being compliant subjects, doing only what is explicitly permitted by law, rather than modern citizens under the rule of law — where anything not expressly forbidden is allowed.
This deep-seated cultural inertia is the true reason why the question “Is Bitcoin legal?” continues to be asked again and again.
Of course, many still have doubts, primarily due to the real-world challenges brought on by regulatory enforcement.
Although holding and trading Bitcoin is legal, the actual difficulties of doing so in China arise from strict regulatory controls.
This was covered in detail in my 2021 article, especially the “September 4th Incident” in 2017, when the People’s Bank of China and six other agencies jointly issued the “Announcement on Preventing Token Issuance Financing Risks,” which directly led to the shutdown of all domestic Bitcoin exchanges in China.
This regulatory crackdown did not target Bitcoin per se but was implemented to maintain financial stability and prevent systemic risk.
Looking back, we can better understand the rationale: amid the national ICO frenzy, financial risks were soaring. To avert broader economic instability, regulators opted for an “across-the-board” ban.
The cost was high, but from a regulatory perspective, it did succeed in stabilizing the financial system.
2. The World
After the closure of domestic platforms, Chinese traders turned to overseas markets, and the global Bitcoin trading landscape changed accordingly.
As I noted in 2021, among the world’s ten largest economies, only China prohibited banks and payment institutions from participating in Bitcoin trading. This pattern has remained largely unchanged. In major economies such as the United States, Japan, Germany, the United Kingdom, and South Korea, Bitcoin remains legal and freely tradable.
Since 2022, global economic turbulence and frequent interest rate hikes by the U.S. Federal Reserve have drawn capital away from emerging markets back to the U.S., placing additional pressure on China’s economy.
Particularly after Donald Trump returned to power, U.S. policy on digital assets underwent a crucial shift — from resistance to strategic absorption.
In 2024, Trump signed the Bitcoin Reserve Act, officially recognizing Bitcoin as a strategic reserve asset eligible for inclusion on the government balance sheet. The recently passed GENIUS Act (Governing Electronic Networks for Issued US-stablecoins) provided clear compliance pathways for stablecoins such as USDC and USDT. These are not just technical policy shifts but front-line maneuvers in a contest over monetary sovereignty.
Compared to the U.S., which is leveraging Bitcoin to counter inflation and reinforce its monetary dominance, China is more focused on maintaining industrial output, exports, and employment. With a still-dominant manufacturing base, China’s financial policy is not aimed at dominating global asset pricing, but rather at buffering the uncertainties of domestic economic restructuring.
In response to Trump’s Trade War 2.0 — revived tariffs, supply chain disruptions, and tightened chip sanctions — China needs a stable financial environment to absorb external shocks. “Stability” here means distancing itself from all high-volatility assets, no matter how innovative.
Bitcoin, by nature volatile and speculative, could — if tied to domestic financial markets — trigger a contagion of speculative behavior and secondary financial risks.
Thus, tightening regulation does not outright deny Bitcoin’s value, but acts as a buffer zone, delaying potential shocks to China’s financial system. With this context in mind, the challenges you face in moving funds in and out of crypto become easier to understand.
3. The “Enemy”
Bitcoin was created to build a decentralized, borderless financial system — free from the dominance of the U.S. dollar. Ironically, this aligns closely with China’s long-standing strategic objective of challenging dollar hegemony.
As early as 2009, Zhou Xiaochuan, former Governor of the People’s Bank of China, proposed the establishment of a supranational reserve currency (like the SDR). This vision closely mirrors Bitcoin’s ideals and has remained one of the PBoC’s strategic goals.
That’s why, in 2014, Zhou famously described Bitcoin as “a digital stamp” — a metaphorical move to classify it as a commodity, sidestepping direct conflict with currency regulation.
When I cited this metaphor in 2021, it deeply resonated with readers because it highlighted the delicate dance between regulation and legality.
Interestingly, decentralized stablecoins may prove to be China’s “grey weapon” in the fight against dollar hegemony. I’ve discussed this in detail in my article “Tariffs Are Blades, Money Is a Shield: A Chance to Break Dollar Dominance through Stablecoins.”
The key lies in what backs these stablecoins — not U.S. dollars, but decentralized assets such as BTC and ETH. As a result, they cannot be frozen, nor can they be arbitrarily targeted by the U.S. legal system.
This creates a strategic breathing room for China: without directly confronting U.S. dominance or tearing up geopolitical agreements, China can gradually decouple from the dollar’s clearing system.
In this light, maintaining a controlled capital environment and a stable RMB exchange rate — while quietly allowing blockchain-based “exit routes” — becomes a smart balancing act.
Decentralized stablecoins are like underground tunnels. In the high-pressure terrain of global finance, they offer China an alternative path. As the global monetary order transitions from centralized clearing to protocol-based settlement, Bitcoin — as a collateral asset behind these stablecoins — may evolve from a civilian hedge to a covert piece in state-level strategy.
4. The Dividend
In recent years, despite tight regulations, Bitcoin has continued to hit new all-time highs. Global acceptance is rising.
As the world’s second-largest economy, China’s stance on Bitcoin inevitably influences global markets. When regulatory winds shift in China, global crypto markets respond immediately.
This is the essence of the regulatory dividend.
Its logic is simple: when a market has been long suppressed, even a slight loosening of rules can unleash a wave of capital and skyrocket demand. This isn’t unprecedented — we’ve seen it before in China’s stock market, property sector, and online finance. Bitcoin is no exception.
Recall that before the 2017 crackdown, China accounted for nearly 90% of global Bitcoin trading volume. That number dropped to below 1% after the ban. With such vast demand long held back, any regulatory easing will likely trigger a massive resurgence in buying power.
A striking example is the UK Financial Conduct Authority’s March 2024 approval for institutional trading of Bitcoin-backed securities. This marked a policy breakthrough that drove Bitcoin’s price to a new high of $72,000. The global impact of this single move underscores how pivotal regulation is to crypto asset markets.
More importantly, the regulatory dividend coincides with structural changes in the crypto market. Once cautious Chinese institutions are now watching global crypto trends closely and investing via overseas funds.
For example, in December 2024, China Universal Asset Management Co., Ltd. publicly promoted its “China Universal Overseas Tech C (QDII-FOF-LOF)” fund via Alipay. The fund disclosed indirect exposure to Coinbase and the ARK 21Shares Bitcoin ETF. With a daily cap of 1,000 RMB and a minimum investment of just 10 RMB, it demonstrates how Chinese investors, though cautious, are finding compliant ways to tap into global crypto opportunities.
In the long run, the regulatory dividend isn’t just about price increases — it signals a reshaping of global capital flows. As China re-engages with the global Bitcoin ecosystem, capital will inevitably flood back into this long-underestimated market.
Bitcoin’s decentralized and globally liquid nature makes it one of the most efficient cross-border allocation tools in the world.
Thus, the true power of the regulatory dividend is this: it does not simply indicate future price hikes — it hints at China’s potential return to global financial relevance, with a more proactive, flexible, and competitive stance.
For investors today, that opportunity is only just beginning to reveal itself.
Conclusion
True legality is never just a matter of statutes — it’s a reflection of the consensus of the times. When we keep asking “Is Bitcoin legal?”, we’re really asking: who are we in this new world? Will we remain compliant subjects, or become citizens who seize the dividends of the age?
The debate over Bitcoin’s legality won’t be settled by a single clause. But the tide of decentralization cannot be reversed.
Dollar dominance will eventually fade. The decentralized order — both in money and in finance — is only just emerging.
Bitcoin, then, is not merely a volatile asset in a speculative market. It may be a gateway — to civic consciousness, and to the dividends of the future.
We are standing at a historic juncture: moving from the mindset of obedient subjects to the awakening of citizens. Bitcoin’s true value lies not just in its price, but in the vision it represents.
Let us remember this truth from our era:
In the age of a rising new order, the real risk is not volatility — but missing out.
If you don’t want to miss out on your civic dividend, you might want to read:
- Bitcoin: The Ultimate Hedge for Long-Term Thinkers
- Asymmetry: Bitcoin Through the Lens of Value Investing
Because action begins not with waiting, but with claiming your role as a citizen.
The “Compliant Citizen” Dilemma and the “Civic Dividend” of Bitcoin was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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