China’s State Security Ministry Warns Crypto Is Not Truly Anonymous

Highlights:

• China’s Ministry of State Security says cryptocurrency transactions are traceable and not truly anonymous despite privacy claims.
• The ministry linked crypto use to money laundering, cybercrime and espionage, including payments tied to foreign intelligence.
• Officials say blockchain records, exchange activity, device data and IP addresses can help investigators identify users.

China’s Ministry of State Security (MSS) has warned that cryptocurrency transactions are not truly anonymous and can leave enough digital evidence for investigators to trace users. In a September 28 statement, the ministry said criminals and foreign intelligence services may promote crypto as a hidden way to move money, even though blockchain records can create a traceable transaction history.

The ministry said the idea that crypto can completely separate a payment from a person’s identity is misleading. It argued that decentralized transfers and wallet addresses may make transactions appear private, but they do not necessarily remove links to the people using them. “Virtual currency is not a place outside the law,” the ministry said.

BREAKING: China's Ministry of State Security warns that crypto's anonymity is an illusion and digital assets offer no legal escape for criminals. pic.twitter.com/rzc9XHp2X6

— SwanDesk (@SwanDesk) September 28, 2026

China Links Crypto to Money Laundering, Cybercrime and Espionage

The ministry identified several areas where it believes virtual currencies are being used for illegal activity. It said proceeds from telecom fraud, online gambling and cross-border smuggling can be split and transferred through crypto to avoid traditional financial controls. It also pointed to ransomware and other cyberattacks. According to the statement, hackers may demand payment in cryptocurrency because wallet-based transfers can make it harder to identify the recipient immediately.

The ministry separately claimed that foreign intelligence agencies have promoted crypto as a difficult-to-trace payment method when recruiting people and have used virtual currencies to deliver espionage funds. It said such activity poses a risk to the security of state secrets.

Ministry Says Blockchain Records Can Help Trace Crypto Payments

The statement focused heavily on how blockchain records work. The ministry said transactions recorded on public blockchains remain visible on distributed ledgers and cannot be deleted after confirmation. It added that a wallet address can temporarily separate a user’s real identity from the transaction address, but that separation is not always permanent. When users exchange crypto for fiat currency or move assets through trading platforms and payment services, other information may be created, including device identifiers and IP addresses.

According to the ministry, investigators and specialist firms can combine blockchain analysis with other data to reconstruct fund flows and potentially connect wallet activity with real-world users. The agency also warned about private-key risks. Users who hold their own private keys can permanently lose access to funds if they lose or have their keys stolen, while customers who leave keys with a trading platform take on the risk of platform failure or loss of access.

China Repeats Its Restrictive Cryptocurrency Policy

The ministry also referred to China’s broader restrictions on virtual currencies. The ministry cited a February 2026 notice in which the People’s Bank of China and other agencies said Bitcoin, Ethereum and Tether are not legal currency in China. The notice also classifies crypto-related businesses as illegal financial activities.

The ministry advised citizens to be cautious of high-paying jobs that require settling crypto, collecting information, and transferring suspicious money. It advised individuals who have national security issues to report them to China’s 12339 reporting mechanisms.