China’s government has reportedly begun to impose a 20% personal income tax on investment profits for individual cryptocurrency investors and many Bitcoin (BTC) miners.
According to reports, this started in early 2022 and follows several major domestic exchanges handing to the tax authorities extensive information about some of the whales’ transactions.
This move suggests that the Chinese government may have finally recognized the legal status of cryptocurrencies, however, the reality is more complex, with tax authorities and financial authorities having differing views on the legality of crypto.
In October 2021, China Tax News, a subsidiary of the State Administration of Taxation, published an article stating that the services previously provided by overseas exchanges to Chinese residents were “not expressly prohibited by law”, but imposing taxes on the income they obtain from China.
Additionally, while China has strict constraints on illegal financial activities in the form of digital currencies, it doesn’t prohibit individuals from holding cryptocurrencies like Bitcoin, but rather defines the trading of virtual currencies as an “invalid civil act”.