China Doubles Down on Crypto Ban After Detecting New Trading Activity

Hong Kong Stocks Tumble on Central Bank Warning

China's central bank has taken decisive action to reinforce its comprehensive prohibition on cryptocurrency trading, following clear indications of renewed speculative activity in virtual assets within the mainland market. On November 28, 2025, the People's Bank of China organized a high-level coordination meeting that brought together representatives from 13 different government agencies. The primary objective of this gathering was to strengthen enforcement mechanisms and systematically eliminate illegal digital currency activities that have recently emerged despite years of stringent regulatory measures.

The meeting placed particular emphasis on stablecoins, identifying them as significant vehicles for money laundering operations, fraudulent schemes, and unauthorized cross-border capital transfers. Chinese officials reiterated their fundamental position that virtual currencies possess no legal tender status within the country's financial system and cannot serve as legitimate monetary instruments in domestic markets. Any business activities related to cryptocurrencies are classified as illegal financial conduct that threatens the stability of the national economy and undermines the government's monetary policy objectives.

According to Reuters, Hong Kong-listed companies with exposure to cryptocurrency and blockchain businesses experienced substantial market losses immediately following the announcement of Beijing's renewed enforcement campaign. Yunfeng Financial Group, which has been actively expanding its operations in asset tokenization services, witnessed its stock price plummet by more than 10% during early Monday trading sessions. Similarly, Bright Smart Securities recorded approximately 7% losses, while OSL Group, a prominent digital asset trading platform, saw its valuation decline by over 5%.

This widespread selloff in Hong Kong's equity markets reflected deep-seated investor concerns that Beijing's uncompromising regulatory stance could severely disrupt Hong Kong's strategic ambitions to establish itself as a leading digital asset hub in the Asia-Pacific region. The city has made significant legislative progress, passing comprehensive stablecoin regulations in May 2025. Under this new regulatory framework, Hong Kong authorities have received expressions of interest from more than 40 firms seeking operational licenses, including major global financial institutions such as Circle and Standard Chartered, demonstrating the jurisdiction's initial appeal to international crypto businesses.

Liu Honglin, founder of Man Kun Law Firm and a specialist in financial regulation, provided critical analysis of the central bank's statement, noting that it "has erased any ambiguity, speculation and illusions" surrounding China's stablecoin policies. He emphasized that "regulators have drawn a concrete red line on what used to be a vague borderline," signaling that the government has moved beyond general warnings to establish explicit prohibitions with clear legal consequences for violations.

Underground Mining and Enforcement Challenges Persist

Despite China's comprehensive prohibition on cryptocurrency trading and mining activities since 2021, practical enforcement continues to face significant operational challenges across the vast territory. Recent data compiled by Luxor's Global Hashrate Map reveals that China still contributes approximately 14.05% of Bitcoin's total network computing power, equivalent to roughly 145 exahashes per second. This substantial hashrate places China as the third-largest contributor globally, trailing only behind the United States and Russia, and indicates that underground mining operations remain active despite official bans.

Chinese authorities have successfully uncovered and dismantled multiple sophisticated underground operations in recent months, demonstrating both the persistence of illegal activities and the government's determination to combat them. In February 2025, law enforcement agencies dismantled an extensive cross-border underground banking network that had successfully laundered over $136 million by utilizing cryptocurrencies to circumvent financial regulations and capital controls. This case highlighted the evolving sophistication of criminal networks that exploit digital assets for illicit purposes.

Investigators conducting comprehensive reviews of underground banking cases have documented alarming trends in the intersection of traditional financial crimes and cryptocurrency usage. Analysis revealed that 18 out of 49 underground banking cases prosecuted in 2023 involved digital currency transactions as a critical component of the money laundering scheme. This statistical evidence demonstrates how criminal organizations continuously adapt their methodologies to exploit the pseudonymous nature and cross-border capabilities of digital assets for illegal financial activities.

The People's Bank of China has expanded its enforcement efforts beyond direct financial institutions to include social media platforms and digital communication channels. In May 2025, the Cyberspace Administration of China executed coordinated actions to permanently close more than a dozen accounts across major platforms including Weibo, Douyin, and WeChat. These accounts had been actively spreading false information and deliberately inducing Chinese citizens to participate in virtual currency transactions through offshore exchanges, effectively circumventing domestic prohibitions.

In a parallel enforcement action during August 2025, Chinese regulatory authorities issued explicit instructions to securities brokerages and financial research institutions, mandating them to immediately halt the publication of analytical studies and cease hosting seminars focused on stablecoins or related digital asset topics. This directive aimed to prevent the normalization of cryptocurrency discussions within mainstream financial circles and reduce public interest in these prohibited assets.

Local government authorities in major economic centers including Beijing, Suzhou, and Zhejiang Province have issued multiple public warnings about illicit fundraising schemes linked to virtual currencies, targeting retail investors who might be vulnerable to fraudulent investment opportunities. Despite these extensive regulatory efforts and public awareness campaigns, over-the-counter cryptocurrency trading volumes reached an estimated $75 billion during the first nine months of 2024, indicating that demand for digital assets persists among certain segments of the Chinese population through underground channels.

Stablecoins Draw Intensified Regulatory Scrutiny

Chinese officials have expressed increasingly acute concern about the rapid global expansion of dollar-backed stablecoins, which they perceive as a strategic threat to the renminbi's internationalization efforts and China's monetary sovereignty. The stablecoin sector has experienced explosive growth, with its total market capitalization now surpassing $300 billion. Leading stablecoin issuers Tether and USD Coin have collectively processed over $27 trillion in transaction settlements over the past year, demonstrating their significant role in global cryptocurrency markets and cross-border payment systems.

Pan Gongsheng, governor of the People's Bank of China, has publicly articulated concerns about the systemic risks posed by privately-issued stablecoins. He previously warned that these digital assets "have amplified weaknesses in the global financial system" and fundamentally fail to meet basic regulatory requirements for customer identification procedures and anti-money laundering controls. From the Chinese government's perspective, stablecoins represent unregulated shadow banking instruments that operate outside traditional financial oversight mechanisms.

The central bank has taken proactive measures to prevent major Chinese technology companies from participating in stablecoin issuance, even in the more permissive regulatory environment of Hong Kong. Authorities have explicitly blocked prominent firms including Ant Group and JD.com from launching stablecoin products in Hong Kong, maintaining the fundamental principle that currency issuance must remain an exclusive monopoly of the state. This position reflects deep-seated concerns about private entities wielding monetary power that could potentially compete with or undermine sovereign currency systems.

Wang Yongli, former deputy governor of the Bank of China and a respected voice in Chinese financial policy circles, published an influential analysis in June 2025 addressing the strategic implications of stablecoin dominance. He argued that the overwhelming prevalence of USD-pegged stablecoins "poses a strategic challenge" to the renminbi's internationalization objectives. Wang warned that China's extensive efforts to promote its currency in international trade and finance could face "serious obstacles" without the development of competitive state-backed digital alternatives that can match the convenience and global acceptance of private stablecoins.

The November meeting concluded with officials making firm commitments to deepen coordination mechanisms across all relevant government agencies, substantially improve monitoring capabilities through enhanced technological systems, and severely crack down on illegal activities to protect citizens' property rights and maintain overall economic order. Beijing continues to actively promote its state-backed digital yuan, officially known as e-CNY, as the only legitimate alternative to private cryptocurrencies. The government maintains a policy of zero tolerance for unauthorized digital assets while simultaneously advancing its own central bank digital currency as a controlled and regulated digital payment system that serves state interests and maintains financial stability.

FAQ

Why does China ban cryptocurrency trading? What are the main reasons?

China prohibits cryptocurrency trading to maintain financial stability, prevent money laundering, protect consumers from speculative risks, ensure capital flow control, and strengthen monetary policy effectiveness. These measures aim to safeguard the national financial system and regulate illicit fund transfers.

China's cryptocurrency ban has what impact on the global crypto market?

China's enhanced crypto ban reduces domestic trading volume and may shift markets to other regions. It strengthens regulatory scrutiny globally, potentially accelerating mainstream adoption in crypto-friendly jurisdictions. The decentralized nature of crypto ensures continued global market resilience despite regional restrictions.

After China's cryptocurrency ban, can Chinese users still trade cryptocurrencies?

Chinese users can trade cryptocurrencies through offshore platforms and decentralized exchanges using VPN or international accounts. However, this operates in a legal gray area, as China's regulatory stance remains strict. P2P trading and self-custody wallets remain technically accessible to users.

Will China's strengthened crypto ban affect the price of Bitcoin and Ethereum?

Yes, China's enhanced crypto restrictions typically create short-term selling pressure, causing price declines for Bitcoin and Ethereum. However, the impact is often temporary as global markets absorb the news and continue trading unaffected by regional regulations.

How to understand the 'new trading activity' detected by China? What does it mean?

China's detection of new trading activity refers to increased cryptocurrency transaction volume and trading amounts occurring within or through its territory. This indicates continued crypto trading despite regulatory restrictions, suggesting users employ new methods to circumvent bans, such as decentralized platforms or peer-to-peer transactions.

China's crypto ban differs from other countries' policies in what ways?

China implements a comprehensive prohibition on all crypto trading and mining activities, whereas most countries adopt regulatory frameworks allowing limited trading. China's stance is notably stricter, banning financial institutions from crypto services entirely, making enforcement more absolute than selective regulation seen globally.