A significant amount of illicit crypto activity still remains in China, highlighting the continuing use of cryptocurrencies despite Beijing's digital asset ban
Context & Ripple Effects
China's trading ban did not end participation: earlier coverage found Chinese residents continuing to trade digital assets after the 2021 prohibition, including through continued access to crypto markets. This report adds illicit activity to the evidence that a formal ban and actual market use remain materially different.
The pattern later extended to large flows through over-the-counter brokers, underscoring why activity can persist outside the most visible regulated venues.
First-order effects
- The report reinforces that Beijing's digital-asset trading ban has not fully removed crypto use in China, particularly activity operating outside compliant channels.
- Chinese users and intermediaries participating in illicit crypto activity face continued legal and enforcement exposure rather than access to a recognized domestic market.
Second-order effects
- Compliance teams at exchanges, brokers, and blockchain-analysis providers have stronger reason to scrutinize China-linked flows, even when the activity is routed through offshore or informal channels.
- A ban that displaces rather than eliminates demand increases the importance of peer-to-peer and over-the-counter routes, where transparency and consumer protections are weaker.
Third-order effects
- If this persistence continues, China will remain an example of the crypto legitimacy gap: domestic demand can survive a prohibition, but in less visible and more difficult-to-supervise forms.
- The longer-term policy question is whether enforcement can meaningfully constrain cross-border digital-asset activity without pushing more of it into informal networks.
The trend: Crypto bans are increasingly testing whether restrictions suppress demand or instead shift trading toward offshore and informal infrastructure.