- China’s Ministry of State Security linked crypto to money laundering, cyberattacks and espionage in an article published on 28 September.
- The ministry said foreign intelligence agencies send spy funds in crypto and tell recruits it is hard to trace, a claim it rejected because every transaction stays on a public ledger.
- The warning follows a February notice from the People’s Bank of China and seven other agencies that reaffirmed the crypto ban and extended it to tokenised real-world assets.
China’s Ministry of State Security warned that crypto has become a tool for money launderers, ransomware gangs and foreign spies.
The ministry, China’s top intelligence and security agency, published the warning on its WeChat account. It said some people believe that taking foreign money in crypto instead of through a bank card cuts the link to their identity. The ministry called that belief a dangerous misconception.
Foreign spy agencies exploit that belief, the ministry said. They tell the people they are recruiting that crypto moves unseen and is hard to check, then use it to send them spy funds.
The ministry also warned against well-paid part-time jobs that settle in crypto. When such a job involves photographing sensitive areas or handing over internal documents, it is very likely a trap set by foreign intelligence, the ministry said. It asked the public to report such approaches through its 12339 hotline.
Proceeds of telecom fraud, online gambling and cross-border smuggling are split up and moved through crypto to slip past financial regulators, according to the ministry. Ransomware gangs often demand payment in crypto alone to hide their identities, it added.
Crypto anonymity is a false premise, the ministry said. Every crypto transaction is written permanently to a public blockchain that cannot be altered, it said, and a wallet address hides its owner only for a time.
Swapping crypto for cash, or one coin for another, runs through trading platforms and payment interfaces that log device codes and IP addresses. Specialist agencies can match those device and IP records with on-chain data to identify the person behind a wallet.
Ban Widened in February
The warning also cited a notice the People’s Bank of China issued on 6 February with seven other agencies, including the securities regulator and the Ministry of Public Security.
That notice said Bitcoin, Ether and Tether should not and cannot circulate as money. It extended the crypto ban to tokenised real-world assets and barred unapproved offshore stablecoins pegged to the yuan.
China banned initial coin offerings and closed domestic exchanges in 2017, then outlawed mining in 2021. China’s central bank reasserted that all crypto business is illegal after a meeting of regulators last November.
Weeks before that meeting, Beijing had told Ant Group and JD.com to halt stablecoin plans in Hong Kong.
Andrew Fei, a Hong Kong partner at law firm King & Wood Mallesons, called the warning a timely reminder that crypto trading remains banned on the mainland.
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