Custodial wallet / SaaS in China
Hosted wallet provider that holds keys on behalf of end users, often white-labeled to businesses (custody as a service).
Custodial SaaS is not permitted in China.
Verdict Details
- Permitted
- no
- Local entity required
- No
- Licensing burden
- High
- Last updated
- 2026-07-13
AML Obligations
- No specific AML/KYC/CDD mandates exist for crypto custodial wallet providers because all such services are illegal under Chinese law.
- The 2021 Notice (Circular 237) classifies virtual-currency-related business activities, including custody and exchange services, as illegal financial activities.
- The 2024 amended Anti-Money Laundering Law (effective 2025) expands AML obligations to non-financial sectors but does not create a compliance pathway for crypto custodians — enforcement is via criminal crackdown by PBOC, CAC, and Ministry of Public Security.
- Financial institutions are required to monitor and block crypto-related transactions, effectively preventing fiat on/off ramps for any custodial wallet SaaS.
Key Restrictions
- All virtual-currency-related business activities, including custody, exchange, and payment processing, are banned under Circular 237 (September 2021).
- No licensing or registration regime exists — there is no legal pathway to operate a custodial wallet service.
- Attempts to operate trigger enforcement actions including criminal penalties under the Criminal Law of the People's Republic of China.
- Cross-border crypto flows are monitored by SAFE and effectively blocked.
Key Risks
- Operators face criminal enforcement, asset seizure, and prosecution risk under China's Criminal Law.
- No regulatory clarity or grandfathering — the ban is absolute with no transition path.
- White-label clients would also be committing illegal financial activities, creating chain liability.
- Financial institutions are obliged to block crypto-related transactions, making fiat on/off ramps nearly impossible.
- Ministry of Public Security actively cracks down on crypto money laundering, and enforcement precedent is well established.
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
Exchanges, custody providers, and payment processors: All banned; no licensing regime exists, as these facilitate prohibited activities like money laundering and capital flight.
Registration vs. licensing: Neither applies—operations are illegal under a prohibition regime, not a registration or licensing framework.
Key requirements: Irrelevant due to the ban; AML/KYC is not mandated for crypto but enforced via monitoring/blocking by financial institutions; no capital or local presence standards for crypto firms.
Application process: None available; attempts to operate trigger enforcement actions.
In September 2021, the People's Bank of China (PBOC) and nine other agencies issued the "Notice on Further Prevention and Control of Virtual Currency Trading Hype Risks" (Circular 237), classifying virtual currency-related business activities as illegal financial activities. This effectively bans all VASP operations, including exchanges, transfers, and custody services, with no licensing or AML compliance pathway available.
China's Anti-Money Laundering Law, amended in 2024 (effective 2025), expanded AML obligations beyond traditional financial institutions to include non-financial sectors and certain traders, while the 2021 'Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading' continues to prohibit financial institutions and payment companies from providing services to virtual asset service providers and criminalizes related activities.
No specific AML/KYC, CDD, or suspicious transaction reporting mandates exist for VASPs in China because such providers are illegal; instead, authorities enforce crackdowns via PBOC, Cyberspace Administration of China (CAC), and Ministry of Public Security.
No search results provide China-specific VASP regulations post-2021 ban; any operations would violate national law, potentially leading to penalties under the Criminal Law of the People's Republic of China.
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- high
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Not permitted — custodial wallet / SaaS operations are illegal in China under the 2021 ban (Circular 237), which classifies all virtual-currency-related business activities as illegal financial activities; no licensing regime exists, and enforcement is via criminal penalties.
Questions this verdict aims to answer
- What custody license / qualified-custodian status applies?
- What segregation, insurance, and proof-of-reserves rules apply?
- What AML obligations attach to the SaaS vs the white-label client?