They're not being used as currency or conducting business in virtual currency. The law is followed.

If I buy a Rolex watch, need to pay a carpenter, so I go to a pawn shop, sell the Rolex watch, pay the carpenter, who then just so happens to go to that same pawn shop and buy that same Rolex, I still paid him in non-Rolex currency, even though the net end result was a Rolex changing hands.

Nothing in the law prohibits the ownership or collection of cryptocurrency as a souvenir item or curiosity, only "China announced that financial and payment institutions are banned from pricing or conducting business in virtual currencies. The People’s Bank of China also reportedly said virtual currencies can’t be used as a form of payment because they aren’t real currencies." No financial or payment institution priced or conducted business in virtual currency, a private reseller did. And no payment was made directly. The law was followed perfectly.