What is the current legal landscape for your practice area in your jurisdiction?

In the People’s Republic of China (“China”), the legal environment presents two starkly contrasting trajectories for blockchain and crypto assets. On one hand, blockchain is hailed as a vital tool for driving national economic and technological advancement; on the other hand, crypto assets are viewed as sources of financial instability and illicit activities, subject to comprehensive regulatory prohibition.

Embracing Blockchain Technology

The Chinese government regards blockchain as a core technology for industrial transformation and has incorporated it into national strategic planning. The 14th Five-Year Plan explicitly lists blockchain as a key digital economy industry for development. This top-down support has spurred substantial investment and exploration of blockchain applications across multiple sectors, including supply chain finance, product traceability, intellectual property protection, and government services.

Furthermore, China has also ventured into the field of central bank digital currencies The e-CNY, as the digital form of the legal tender, has been piloted in select cities. This development underscores the government’s intent to maintain control over the digital currency domain, viewing it as part of the financial infrastructure.

Prohibition of Crypto-Asset Activities

Conversely, China has adopted a clear restrictive stance toward crypto assets. It is important to note that in the Chinese regulatory context, the term “virtual currency” specifically refers to blockchain-based crypto assets, including decentralized crypto assets such as Bitcoin and Ether, as well as various tokens.

The regulatory framework is anchored by a series of key documents, notably the 2017 “Announcement on Preventing Token Fundraising Risks” (“Announcement No. 94”) in 2017 and the “Notice on Further Preventing and Dealing with Speculation Risks in Virtual Currency Trading” (“Notice No. 924”) in 2021.

These regulations collectively establish the following principles:

• Virtual currencies are defined as “virtual commodities” without the legal status of fiat currency and are prohibited from being used as circulating currency in the market.
• All commercial activities related to virtual currencies are illegal, including operating cryptocurrency exchanges (CEX), providing intermediary or pricing services, token issuance (ICOs), and derivatives trading.
• Notice No. 924 explicitly states that overseas cryptocurrency exchanges offering services to Chinese residents also constitute illegal financial activities. Financial institutions and payment companies are banned from providing any crypto-related services, encompassing account opening, registration, trading, clearing, and settlement.

This prohibitive stance extends to cryptocurrency mining, banned nationwide since 2021. Judicially, while mere possession is not explicitly illegal, crypto trading contracts are deemed void. Criminal activities involving crypto assets, such as money laundering or fraud, are severely punished.

Importantly, in October 2025, the PBOC Governor explicitly stated that policy documents issued since 2017 “remain in effect,” and authorities will continue to crack down on domestic virtual currency operations while closely monitoring offshore stablecoins.

What three essential pieces of advice would you give to clients involved in your practice area matters?

Given China’s complex regulatory landscape, foreign enterprises and investors must act with caution and strategic clarity. The following are three key recommendations:

First, clearly distinguish between “blockchain technology” and “crypto assets”

Although these two terms are often used interchangeably worldwide, they are treated entirely differently under the China law. Clients should focus their business models on the legitimate applications of blockchain technology, which the Chinese government strongly encourages and supports. Businesses should position themselves as “blockchain service providers” rather than “crypto companies.” They must avoid any involvement in the issuance or trading of publicly circulated crypto assets. Even projects involving non-fungible tokens (NFTs) must be structured as “digital collectibles,” emphasizing their nature as intellectual property and cultural products, while strictly avoiding financial attributes.

Blockchain service providers must file with the Cyberspace Administration of China (CAC). As of October 2025, the CAC has completed 20 batches of filings covering over 4,000 blockchain information services. Moreover, clients must comply with the Personal Information Protection Law and Data Security Law, especially regarding cross-border data transfers.

Leverage Hong Kong as a strategic compliance gateway by adopting a prudent business structure.

While China strictly prohibits virtual currency-related activities, the Hong Kong Special Administrative Region (“Hong Kong”) is actively developing a regulatory framework for virtual assets (Note: “virtual assets” and “digital assets” in Hong Kong both refer to crypto assets, essentially corresponding to “virtual currency” in Mainland parlance), including licensing regimes for virtual asset trading platforms and, more recently, regulatory frameworks for stablecoin issuers. For international clients, Hong Kong offers a unique and valuable platform to participate in the broader crypto ecosystem in a compliant manner.

In practice, a common business model we observe involves a Hong Kong entity directly providing crypto asset services to clients while a Mainland entity providing technology development, system maintenance, and back-office functions. The key to this structure is ensuring that the Hong Kong entity is a substantive operating entity with independent decision-making authority and risk-bearing capacity, while the Mainland entity provides purely technical services without engaging in any issuance, trading, or handling of crypto assets.

Proactively address compliance requirements as a competitive advantage

In China’s evolving regulatory environment, proactive compliance is not merely a legal obligation but a foundation for building trust and competitive advantage. Clients should establish robust compliance frameworks, conduct regular risk assessments, and maintain close communication with regulatory authorities. This forward-looking approach enables businesses to adjust strategies in advance rather than reactively responding to new restrictions.

What are the greatest threats and opportunities in your practice area law in the next 12 months?

The next 12 months will be a period of divergence. Participants in industrial blockchain and compliant digital asset applications will benefit from favorable policies; meanwhile, entities involved in cryptocurrency trading and related financial activities will face intensified regulatory pressure and must adopt extremely cautious, compliance-first strategies.

Greatest Opportunities

Tokenization of Real-World Assets under a compliant framework. Although trading decentralized tokens as securities is prohibited, leveraging blockchain technology to represent and manage ownership of tangible and intangible assets still holds immense potential. The key is to structure these projects as non-publicly traded financial instruments, serving as enterprise solutions within closed or permissioned blockchain systems to enhance asset transparency and management efficiency.

Deeper application of blockchain across more industries. As enterprises demand greater transparency and traceability, blockchain-based solutions will be adopted in supply chain management, product traceability, and intellectual property protection. This creates broad market opportunities for technology companies to develop enterprise-grade blockchain applications.

Hong Kong offers compliant pathways for enterprises aiming to enter the global crypto market. The implementation of Hong Kong’s regulatory framework and the maturation of the virtual asset licensing regime create new opportunities for cross-border business. Enterprises capable of establishing compliant business structures bridging Mainland China and Hong Kong will gain a competitive advantage in this field.

Greatest Threats

Enhanced enforcement against OTC trading and money laundering. With official exchanges shuttered, a large volume of crypto trading has shifted to peer-to-peer OTC platforms, operating in a regulatory gray area. Regulators are becoming increasingly adept at identifying and combating these activities. Cryptocurrencies, especially stablecoins like USDT, continue to be used for illegal foreign exchange transactions and money laundering and remain enforcement priorities.

Stringent scrutiny of Web3 projects with financial attributes. The boundary between legitimate technological applications and prohibited financial products remains blurred. Regulators will closely monitor Web3 projects in areas such as GameFi, SocialFi, and DeFi for any disguised token issuance or speculative trading activities. The threat extends beyond regulatory sanctions to potential criminal liability for founders and operators.

Risks of cross-border regulatory arbitrage. The government will strictly guard against projects registered offshore but primarily targeting Mainland Chinese users, potentially taking measures such as website blocking, penalizing domestic marketing activities, and investigating Mainland-based team support.

How do you ensure high client satisfaction levels are maintained by your practice?

At Han Kun Law Offices, maintaining high client satisfaction is founded on our professional expertise, global network, and service philosophy. As a leading law firm in China, we have developed a distinctive competitive advantage in the rapidly evolving and highly regulated fields of blockchain and crypto assets.

First and foremost, Han Kun enjoys an outstanding reputation in the fintech arena. We have consecutively been ranked as a Band 1 firm in the Legal 500 from 2019 through 2025, a testament to the market’s recognition of our professional capabilities.

Our team possesses a deep understanding of the legal frameworks governing blockchain technology. We continuously monitor legislative developments, judicial precedents, and enforcement trends both in China and globally, enabling us to go beyond generic legal advice and provide clients with meticulous, industry-specific insights.

Secondly, Han Kun boasts a robust global service network. We maintain offices in Beijing, Shanghai, Shenzhen, Haikou, Wuhan, and Hong Kong, as well as overseas offices in Singapore, New York City, and Silicon Valley. With over 700 professionals, we deliver seamless, diversified legal services to clients worldwide.

Thirdly, we are committed to delivering proactive and pragmatic advice. In areas where regulation often remains ambiguous, clients need practical guidance to navigate grey zones and mitigate risks. We do not simply tell clients what they cannot do; rather, we collaborate with them to identify innovative yet compliant solutions that achieve their objectives.

By combining an outstanding reputation in fintech, a global office network covering major commercial centers, and a pragmatic, efficient service philosophy, Han Kun strives to be an indispensable legal partner for clients in the blockchain and crypto asset sectors.

What technological advancements are reshaping your practice area law and how can clients benefit from them?

The rapid development of artificial intelligence (AI) and large language models is profoundly transforming the legal services industry. Han Kun actively embraces this technological revolution by independently developing and locally deploying an AI assistant system, significantly enhancing service efficiency and quality.

Unlike solutions that rely on third-party cloud services, we opt for a local deployment model to ensure absolute security and privacy protection of client data. Our locally deployed AI system fundamentally eliminates the risk of data breaches, as all processing occurs on Han Kun’s internal servers, keeping client information under strict security controls at all times.

In document translation, the AI assistant demonstrates remarkable efficiency advantages. Traditional manual translation is time-consuming and prone to inconsistencies, especially when handling highly technical specialized terminology. Our AI assistant, specially trained to accurately comprehend the legal meanings of terms, ensures consistent and precise terminology across languages. For standardized legal documents, the AI assistant can complete initial translations within minutes, after which lawyers review and polish the text, thereby securing valuable time for our clients.

The AI assistant also plays a crucial role in drafting simple transactional documents. For example, in complex multi-party transactions, customized signature pages must be prepared for each party. The AI assistant can automatically generate all necessary signature pages based on the main transaction documents, ensuring uniform formatting and accurate information, which substantially reduces lawyers’ time spent on such repetitive tasks.

It is important to emphasize that the application of AI technology at Han Kun is always centered on lawyers’ professional judgment. The AI assistant is a powerful tool; however, the essence of legal services lies in analyzing complex situations, assessing risks, and formulating strategies. Our approach is “AI-enabled, lawyer-led,” leveraging technology to improve efficiency while ensuring quality through professional oversight.

For clients, Han Kun’s AI application brings multiple benefits: faster response times, higher document quality, more competitive service costs, and, most importantly, absolute assurance of data security. In the innovative and challenging field of blockchain and crypto assets, Han Kun’s deep integration of technology and professional expertise delivers truly future-oriented legal services.