The rise of digital currencies like Bitcoin has sparked global debate over their role in modern economies. As two of the world’s largest economic powers, the United States and China have taken notably different approaches—yet both are navigating how to regulate this transformative technology. While neither country recognizes Bitcoin as legal tender, their regulatory frameworks diverge significantly in areas such as payment use, trading platforms, and fundraising. This article explores the similarities and differences between U.S. and Chinese policies on digital currency, highlighting key legal developments and practical implications.
Denial of Legal Tender Status
Both the U.S. and China agree on one fundamental point: digital currencies like Bitcoin are not legal tender. This shared stance reflects broader concerns about monetary sovereignty, financial stability, and state control over currency issuance.
China’s Position
In China, only the People’s Bank of China (PBOC) has the authority to issue legal currency—physical RMB notes and coins. According to the People’s Bank Law, no other form of money holds official status. This principle was reaffirmed in key regulatory documents:
- The 2013 “Notice on Preventing Bitcoin Risks” (Yinfa [2013] No. 289) explicitly stated that Bitcoin “is not issued by monetary authorities, lacks legal tender status and compulsion, and is not truly a currency.”
- The 2017 “94 Announcement” reiterated that virtual currencies “do not have equivalent legal status to currency” and cannot be used as a medium of exchange in the market.
Even the PBOC’s own digital currency, Digital Currency Electronic Payment (DC/EP), does not become legal tender until formally issued through proper legal procedures.
United States’ Position
Under U.S. law (31 U.S.C. § 5103), only coins and currency issued by the federal government, including Federal Reserve Notes, are considered legal tender. However, a 2020 federal court ruling in Washington D.C. recognized Bitcoin as “money” under the District’s Money Transmitters Act—not because it is legal tender, but because it functions as a medium of exchange, payment method, or store of value.
This distinction is crucial: while Bitcoin isn’t fiat currency, it can still be treated as money for regulatory purposes such as anti-money laundering (AML) enforcement. Some states, like North Carolina, have codified this view—recognizing virtual currency as a transactional tool but explicitly stating it lacks legal tender status.
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Digital Currency as a Payment Medium
When it comes to using cryptocurrencies for payments, the U.S. and China take opposing paths.
China: Focus on Property Rights, Not Payments
China treats Bitcoin primarily as a virtual commodity, not a payment instrument. The 2013 notice labeled it a “specific virtual commodity,” and subsequent court rulings have upheld this classification.
The Civil Code of China (effective 2021) reinforces this by protecting data and virtual property under civil law (Article 127). The 2020 judicial opinion from the Supreme People’s Court further emphasizes the need to protect digital assets like cryptocurrency.
However, financial institutions and non-bank payment providers are prohibited from offering services related to cryptocurrency transactions—such as account opening, trading, clearing, or settlement—effectively blocking its use as a payment method.
United States: Embracing Functional Use
In contrast, the U.S. acknowledges both the property and payment functions of digital currency.
Regulatory guidance from FinCEN (Financial Crimes Enforcement Network) treats convertible virtual currencies (like Bitcoin) similarly to traditional money when used in transfers. Financial institutions handling crypto must comply with the Bank Secrecy Act, including customer identification and transaction reporting.
Moreover, multiple states require licensing for money transmission involving digital assets—indicating formal recognition of their role in everyday finance. This regulatory integration allows platforms to legally facilitate cryptocurrency payments and remittances.
Regulation of Cryptocurrency Trading Platforms
The treatment of exchanges highlights one of the starkest contrasts between the two nations.
China: A Strict Ban
The 94 Announcement banned all forms of cryptocurrency exchange services:
- Prohibition of fiat-to-crypto and crypto-to-crypto trading
- Ban on acting as a central counterparty
- Closure of pricing and information intermediary services
As a result, major exchanges like Huobi and OKX moved operations overseas, maintaining only technical support within China.
United States: Regulated Market Access
The U.S. allows cryptocurrency exchanges to operate under a structured regulatory framework:
- Platforms must register with FinCEN as Money Service Businesses (MSBs)
- State-level licenses (e.g., under D.C.’s or North Carolina’s Money Transmitters Acts) are also required
- Tax obligations are clearly defined by the IRS—virtual currency transactions are taxable events just like stock trades
These measures create a compliant environment where innovation can thrive under supervision.
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Cryptocurrencies as Fundraising Tools
Another area of divergence lies in initial coin offerings (ICOs) and token-based fundraising.
China: Complete Prohibition
China draws a hard line: no unauthorized token issuance or fundraising. The 94 Announcement defines “token issuance financing” as illegal if it involves raising Bitcoin or Ethereum from investors via unregulated token sales.
Despite growing acceptance of blockchain technology, this ban remains in effect—meaning digital assets cannot legally serve as fundraising instruments.
United States: Compliance-Based Acceptance
The SEC does not ban token sales outright. Instead, it applies securities laws to determine legitimacy:
- Unregistered public offerings or fraudulent schemes face enforcement
- But compliant projects—such as those registered under Regulation A+ or exempted under Regulation D—can legally raise funds using cryptocurrency
Notable examples include:
- Blockstack (2019): Raised $28 million via SEC-qualified Reg A+, accepting Bitcoin and Ethereum
- tZero (2018): Raised $120 million under Reg D, allowing crypto payments
This approach supports innovation while protecting investors through disclosure and compliance.
Frequently Asked Questions
Q: Can I use Bitcoin to pay for goods in China?
A: No. While individuals may hold Bitcoin as property, its use as a payment method is strictly prohibited by financial regulators.
Q: Is cryptocurrency legal in the U.S.?
A: Yes—with conditions. It's treated as property for tax purposes and regulated as money for AML compliance when used in transactions.
Q: Does China recognize any digital currency as legal?
A: Yes—the PBOC's e-CNY (digital yuan) is being piloted nationwide and is considered legal tender once fully launched.
Q: Are crypto exchanges legal in the U.S.?
A: Yes, provided they comply with federal AML rules and obtain necessary state licenses.
Q: Can U.S. companies raise capital using cryptocurrency?
A: Yes, if the offering complies with SEC regulations—either through registration or exemption.
Q: Is holding cryptocurrency illegal in China?
A: Not explicitly banned for individuals, but financial institutions cannot facilitate transactions, limiting practical usage.
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Conclusion
While both the U.S. and China deny Bitcoin the status of legal tender, their regulatory philosophies differ sharply. The U.S. adopts a functional, compliance-driven model, integrating digital assets into existing financial frameworks. In contrast, China prioritizes control and stability, restricting private cryptocurrencies while advancing its own central bank digital currency (CBDC).
Yet signs suggest gradual evolution. With growing judicial recognition of virtual property rights and active development of DC/EP, China may eventually open limited channels for digital asset use—within tightly controlled boundaries. Meanwhile, the U.S. continues refining its regulatory approach to balance innovation, consumer protection, and systemic risk.
As global digital economies expand, these contrasting models will shape not only domestic policy but also international standards for the future of money.
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