China banned cryptocurrency - yet millions still trade it

China outlawed crypto trading, mining, and exchanges in 2021. Officially, owning Bitcoin or Ethereum is illegal. Banks are forbidden from handling crypto transactions. Apps must block crypto wallets. Yet, by 2025, 59 million Chinese citizens are actively using cryptocurrency. That’s more than the entire population of Australia. How is this possible?

The answer isn’t rebellion. It’s adaptation. Chinese users didn’t stop using crypto. They just got smarter about how they use it.

How crypto stays alive under a ban

China’s ban targets businesses, not individuals - but even that loophole is blurry. The government says private ownership isn’t illegal, but it offers zero legal protection. If your crypto gets seized, frozen, or stolen? You have no recourse. Still, people keep doing it.

Most Chinese crypto users access exchanges like Binance, OKX, or Bybit - all of which officially left China in 2021. But they don’t use their real IP addresses. They use VPNs. A 2024 Chainalysis report found that 78% of Chinese crypto traders rely on virtual private networks to bypass government firewalls. Some use specialized apps like CryptoBridge or Silk Road Wallet, which hide behind encrypted domains and fake website fronts. These apps aren’t on the Google Play Store or Apple App Store. They’re downloaded from third-party Android stores or shared via WeChat.

Peer-to-peer (P2P) trading is the real backbone. Over 63% of all crypto transactions in China happen through P2P, according to a June 2025 Lightspark analysis. Buyers and sellers meet in WeChat groups or QQ chats. They use escrow services: one person sends money, the other sends crypto. The escrow holds it until both sides confirm. It’s risky - scams are common - but it’s the only way to trade without a bank.

Stablecoins are the secret weapon

Bitcoin and Ethereum are volatile. For everyday use in China, that’s a problem. So most people trade stablecoins - especially USDT (Tether).

By Q2 2025, 38.7% of all crypto transactions in China were in stablecoins, up from just 21.7% in 2024. Why? Because they’re a workaround for capital controls. If you want to send money to family abroad - say, for tuition in Australia or medical care in Canada - traditional banks charge high fees and take days. With USDT, you send it in minutes. The recipient cashes out locally. One user on WeChat’s ChainTalk forum said: “Using USDT to send money to my daughter in Australia saves me 87% in fees. Takes 15 minutes, not three days.”

Stablecoins also act as a hedge. With inflation concerns and property market crashes, some see crypto as a better store of value than yuan-denominated savings.

The digital yuan vs. crypto: Two worlds

While cracking down on Bitcoin, China is pushing its own digital currency: the e-CNY, or digital yuan. The People’s Bank of China launched it in 2020. By end of 2024, it had 260 million individual wallets and 15.5 million corporate wallets. In the first half of 2025, it processed 1.8 trillion CNY ($248 billion) in transactions.

The digital yuan isn’t crypto. It’s a state-controlled digital version of cash. Every transaction is tracked. The government knows who paid whom, when, and how much. It’s designed for control, not freedom.

That’s why crypto thrives in parallel. People don’t want to trade crypto because they hate the yuan. They want crypto because they want privacy. They want to move money without the state watching. The digital yuan is the opposite of that.

Who’s using crypto in China - and why

It’s not random. The users are specific.

Age matters. The biggest group? People aged 25 to 34. They make up 37.5% of Chinese crypto users - higher than the global average of 31%. Older users, over 45, are rare - only 12.8% of users. They don’t trust it. They don’t understand it.

Gender? Heavily skewed. 89.2% of users are male, compared to 86.9% globally. Tech-savvy young men dominate.

Why do they do it? Three reasons: investment, remittances, and distrust. Many see crypto as a way to grow wealth outside the stock market, which is tightly controlled. Others use it to send money overseas - something the government tightly restricts. And some just don’t trust the system. After real estate crashes, bank freezes, and corporate defaults, crypto feels like a backup plan.

The cost of breaking the rules

It’s not risk-free. In Q1 2025 alone, Chinese users lost 1.2 billion CNY ($165 million) to crypto scams, according to the China Cybersecurity Association. Fake exchanges, fake P2P escrow services, and phishing attacks are everywhere.

Account freezes are common. A Reddit survey from r/CryptoChina found that 68% of users had at least one bank account frozen because of crypto activity. The average loss per freeze? 23,500 CNY ($3,250). Some lost everything.

And the government isn’t backing down. In May 2025, China’s State Administration of Foreign Exchange shut down 27 P2P platforms. In July, the People’s Bank of China froze 1,287 bank accounts and fined individuals 237 million CNY ($32.6 million) for crypto-related violations.

Yet, despite all this, 82% of users in the same Reddit survey said they’re still trading - and 45% are investing more than they did in 2024.

What’s next? The quiet shift

Is China going to lift the ban? Probably not soon. But it’s not as rigid as it looks.

Documents from the Shanghai State-owned Assets Supervision and Administration Commission, leaked in July 2025, suggest officials are starting to acknowledge reality. One deputy director said: “The rapid evolution of digital assets necessitates more nuanced regulatory approaches.”

Meanwhile, Hong Kong - still technically part of China but operating under its own legal system - has become a crypto hub. Seven exchanges are now licensed there. In April 2025, they processed $14.3 billion in monthly trading volume. Many Chinese users access these platforms through Hong Kong-based accounts.

Some analysts, like those at Bernstein, predict China will eventually adopt a model like India’s: a 30% tax on crypto gains, not a ban. That would mean legalization with heavy regulation. The probability? 65% by 2027.

For now, the ban stands. But enforcement is uneven. The government can shut down exchanges. It can freeze bank accounts. But it can’t stop people from sending USDT through WeChat. It can’t stop a 28-year-old engineer in Shenzhen from buying Bitcoin with a VPN and a friend’s escrow service.

China didn’t kill crypto. It forced it underground. And underground, it grew stronger.

Why this matters beyond China

This isn’t just a China story. It’s a global one.

If a country with the world’s most advanced surveillance state can’t stop crypto adoption - what does that mean for other nations? What happens when people value privacy and freedom of movement more than government control?

China’s experiment shows that bans don’t eliminate demand. They just make it more dangerous, more hidden, and more sophisticated. The people who use crypto in China aren’t speculators. They’re survivors. They’re using technology to protect what they have - money, family, future.

That’s not rebellion. That’s human behavior.