Crypto Adoption in China Despite Ban: How 59 Million Still Trade Underground

China banned cryptocurrency - yet millions still trade it

China shut down crypto exchanges, blocked wallets, and fined traders. Officially, owning Bitcoin or Ethereum is illegal. But if you walk through Shanghai’s tech districts or scroll through WeChat groups in Guangzhou, you’ll find something else: people buying, selling, and holding crypto like it’s normal. In 2025, an estimated 59 million Chinese citizens still use cryptocurrency - more than in Japan, Germany, or the UK combined. How? Because bans don’t stop demand. They just push it underground.

The ban isn’t just a rule - it’s a wall

In September 2021, China made its stance crystal clear: no trading, no mining, no exchanges, no wallets. The People’s Bank of China called it a move to protect financial stability. Banks were ordered to cut off services to crypto users. Apps were scrubbed from app stores. Miners were forced to shut down rigs in Sichuan and Inner Mongolia. By 2022, the world’s largest crypto mining hub had gone silent.

But the government didn’t ban private ownership outright - it just refused to protect it. That’s the loophole. If you buy Bitcoin in China, the state won’t help you recover it if you get scammed. Your funds aren’t insured. Your contract isn’t enforceable. But you can still buy it. And millions do.

How do they do it? Offshore exchanges and encrypted P2P

Chinese users don’t use Binance or OKX from inside China anymore - those platforms left in 2021. Instead, they use VPNs. About 78% of Chinese crypto traders connect through virtual private networks to access offshore platforms like Bybit, OKX, and Gate.io. These aren’t casual users. These are people who know how to bypass the Great Firewall.

But the real story is peer-to-peer (P2P) trading. Over 63% of crypto transactions in China happen directly between individuals. WeChat and QQ are the new stock exchanges. Buyers and sellers meet in encrypted groups. They use escrow services - where a third party holds the money until the crypto is confirmed. The most popular method? Paying via Alipay or WeChat Pay, then sending USDT (Tether) directly to the buyer’s wallet. It’s fast, anonymous, and hard to trace.

One user on Zhihu, China’s version of Reddit, described the process: “I verify five things before I trade - their WeChat history, their real ID scan, their bank statement, their phone number, and a voice note saying their name.” That’s not paranoia. That’s survival.

Stablecoins are the secret weapon

Bitcoin and Ethereum are risky. But USDT? That’s the real currency in China’s crypto underground. In 2024, only 21.7% of crypto transactions used stablecoins. By mid-2025, that number jumped to 38.7%. Why? Because stablecoins act like digital cash you can send across borders without the government’s permission.

A mother in Chengdu sends money to her daughter studying in Australia. Traditional wire transfers take three days and cost 12% in fees. With USDT, it takes 15 minutes. Fees? Less than 1%. That’s not speculation - that’s survival against capital controls.

Even more telling: Chinese users are turning to stablecoins to protect savings from inflation. While the yuan holds steady, property values are falling, and local government debt is rising. For many, holding USDT isn’t about getting rich - it’s about not losing everything.

The government’s answer? The digital yuan

While cracking down on Bitcoin, China built its own digital currency: the e-CNY, or digital yuan. By the end of 2024, over 260 million personal wallets and 15.5 million business wallets were active. In the first half of 2025, the digital yuan processed 1.8 trillion yuan ($248 billion) in transactions.

It’s everywhere now: bus fares in Beijing, utility bills in Hangzhou, payroll for civil servants in Shanghai. The government controls every transaction. Every purchase is tracked. Every transfer leaves a digital fingerprint.

It’s the opposite of crypto. Crypto is anonymous. The digital yuan is surveillance. Crypto is decentralized. The digital yuan is central control. The government isn’t fighting crypto because it fears technology - it fears losing control.

Who’s using crypto? Young, tech-savvy, and desperate

It’s not random. Chinese crypto users are overwhelmingly young. The 25-34 age group makes up 37.5% of users - higher than the global average. Users over 45? Just 12.8%. That’s not coincidence. Younger people grew up with the internet. They know how to find hidden tools. They’ve seen their parents lose money in real estate. They’re looking for alternatives.

Gender? Still skewed. 89.2% of users are male - even higher than the global average of 86.9%. But the gap is closing. More women are joining, especially in cities like Shenzhen and Hangzhou, where tech culture is stronger.

And they’re not just trading. They’re building. Chinese developers created apps like “CryptoBridge” and “Silk Road Wallet” that bypass government blocks using domain fronting and encrypted tunnels. Over 8.7 million downloads happened in the first half of 2025 - all through third-party Android stores, not Google Play.

The cost of staying in the game

It’s not risk-free. In 2025, the China Cybersecurity Association reported $165 million in crypto fraud losses in just the first quarter. Scammers pose as traders, fake escrow services, and even fake government warning messages to steal funds.

Account freezes are common. A Reddit survey from r/CryptoChina found 68% of users had their bank accounts frozen after crypto activity. The average loss per freeze? 23,500 yuan ($3,250). Some lost savings. Others lost jobs - employers found out about crypto trades through bank records.

Yet 82% of those users kept trading. Half of them increased their investment in 2025 compared to 2024. Why? Because the alternative - trusting the system - feels riskier.

Is the ban cracking?

The official line hasn’t changed. In April 2025, PBoC Governor Pan Gongsheng said private crypto activity violates anti-money laundering laws and could lead to criminal charges. In July, authorities froze 1,287 bank accounts and fined $32.6 million.

But behind closed doors, things are shifting. Minutes from a July 2025 meeting of the Shanghai State-Owned Assets Supervision and Administration Commission hinted at change: “The rapid evolution of digital assets necessitates more nuanced regulatory approaches.” That’s not a policy reversal - but it’s not silence either.

Meanwhile, Hong Kong - technically part of China but with its own financial rules - has become the gateway. Seven licensed exchanges operate there. In April 2025, they handled $14.3 billion in monthly trading volume. Many Chinese traders use Hong Kong accounts to access global markets.

Analysts at Bernstein predict a 65% chance China will adopt a “controlled access” model by 2027 - like India’s 30% tax on crypto gains. Not legalization. Not freedom. But tolerance with strings attached.

What’s next? The paradox deepens

China’s crypto story isn’t about rebellion. It’s about necessity. People aren’t using crypto because they believe in decentralization. They’re using it because they need to move money, protect savings, and find opportunity outside a system that feels rigid and unresponsive.

The government’s digital yuan will keep growing. It’s efficient. It’s controllable. But it can’t replace the freedom people feel when they hold their own money - even if it’s illegal.

For now, crypto in China is a silent revolution. No protests. No headlines. Just millions of people quietly using tech to outmaneuver a ban that can’t be enforced - not at the individual level.