On-shore VASP in China
Locally-incorporated VASP that operates under full local jurisdiction, holding all required licenses and registrations.
On-shore VASP is not permitted in China.
Verdict Details
- Permitted
- no
- Local entity required
- No
- Licensing burden
- None
- Last updated
- 2026-07-13
AML Obligations
- No specific AML/KYC/CDD or suspicious transaction reporting mandates exist for VASPs because such providers are illegal under Circular 237 (2021).
- The 2024 Anti-Money Laundering Law amendment (effective 2025) expanded AML obligations beyond traditional financial institutions but does not create a compliant pathway for VASPs — they remain banned.
- Enforcement is conducted by PBOC, Cyberspace Administration of China (CAC), and Ministry of Public Security via monitoring, blocking, and criminal penalties.
Key Restrictions
- All virtual-currency-related business activities (exchange, custody, payment processing) are classified as illegal financial activities under the September 2021 PBOC Circular 237.
- No licensing or registration regime exists for VASPs — operations are prohibited outright, not subject to conditional permission.
- Attempts to operate trigger enforcement actions by PBOC, CAC, and Ministry of Public Security, potentially including criminal penalties under the PRC Criminal Law.
Key Risks
- Operating a VASP in China carries high risk of criminal enforcement, seizure of assets, and penalties under the Criminal Law of the PRC.
- Regulatory ambiguity: the 2024 AML law amendment does not carve out a legal pathway for VASPs — the ban remains in full effect.
- Tax obligations (20% CGT for individuals, 25% CIT for businesses) apply to prohibited activities, creating exposure without any legal compliance framework.
- Offshore holdings of Chinese tax residents are taxable on a worldwide basis, creating tax liability even for offshore operations serving Chinese residents.
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.
Individuals face a flat 20% capital gains tax (CGT) on profits from selling, trading, or exchanging crypto (including crypto-to-crypto trades, NFTs, and DeFi activities), calculated as the difference between sale price and acquisition cost in RMB using official exchange rates; this applies regardless of holding period and treats crypto under "property transfer income."
Businesses pay 25% corporate income tax on crypto-related gains.
Offshore crypto holdings are taxable for Chinese tax residents on a worldwide income basis, with no exemption for foreign platforms.
People’s Bank of China (PBOC): Leads AML policy, supervises institutions, conducts inspections (www.pbc.gov.cn).
Ministry of Public Security: Cracks down on crypto money laundering.
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.
Prohibited — an on-shore VASP cannot legally operate in mainland China because all virtual-currency-related business activities are classified as illegal financial activities under the 2021 PBOC Circular 237, with no licensing or registration regime available and enforcement leading to criminal penalties.
Questions this verdict aims to answer
- What license(s) are required to operate locally?
- What capital, governance, and reporting obligations apply?
- What is the application process and timeline?