China Steps Up Crackdown On Illegal Virtual Currency Activities
- ByStartupStory | December 1, 2025
Public Security Intensifies Operations Against Fraud, Money Laundering Using Blockchain Tools
China’s Ministry of Public Security has escalated its crackdown on virtual currency-related crimes in early 2025, launching intensified special operations amid rising fraud sophistication leveraging blockchain, AI, and cryptocurrencies. Spokesperson Zhang Ming announced at a January 10 press conference that authorities will deepen “Cloud Sword,” “Stop Flow,” and “Pull Out Nails” campaigns to dismantle networks using virtual currencies for money laundering, illegal foreign exchange, and electronic scams. This follows 2024 judicial recognitions affirming cryptocurrencies’ property value while targeting their criminal misuse.
Focus On Virtual Currency As Criminal Tool
2024 data reveals virtual currencies primarily serve as conduits for illicit flows: telecom/internet fraud cases surged 30%, with blockchain obscuring trails in 70% of high-value scams. Key crimes include underground exchanges evading capital controls, OTC trading fronts, and mixer services laundering ransomware proceeds. Courts increasingly treat Bitcoin and Ethereum as “virtual property” with economic value, enabling asset freezes and seizures—up 45% year-over-year.
New regulations tightened oversight: financial institutions must block crypto-linked transfers, while platforms face real-time monitoring. Possession of private keys for domestic use risks up to three years imprisonment, with VPN circumvention triggering penalties. Overseas exchanges serving Chinese users qualify as illegal financial activities.
High-Pressure Enforcement And Seizures
Public security organs seized over 10,000 BTC equivalents in 2024, converting holdings to RMB for state use. Operations dismantled 500+ gangs, arresting 15,000 suspects in virtual currency fraud rings. AI-driven traffic analysis detects encrypted tunneling to foreign platforms, closing evasion loopholes.
The People’s Bank of China (PBOC) reinforces via the digital yuan (e-CNY), piloted across 26 cities with 1.8 billion transactions totaling RMB 100 billion. By criminalizing private tokens, Beijing funnels digital payments into controlled channels, enhancing anti-money laundering visibility.
Historical Context And 2025 Trajectory
This builds on phased bans: 2013 bank prohibitions, 2017 ICO shutdowns, 2021 mining/trading halts, and May 2025’s comprehensive decree outlawing ownership. Miners relocated to Kazakhstan/Texas, reshaping global hashrate (China’s share fell from 75% to under 5%).
2025 priorities emphasize cross-border cooperation—UK’s £5.5 billion Bitcoin seizure exemplifies pursuits—and AI/blockchain forensics. Penalties escalate: fines to RMB 1 million, criminal charges for repeat offenders.
Strategic Motivations And Digital Yuan Pivot
Authorities cite disruptions to financial order, capital flight risks, and crime facilitation as rationales, aligning with forex controls amid $3 trillion annual outflows. The e-CNY offers policy levers absent in decentralized assets, with full traceability and programmable features combating illicit finance.
Future crackdowns target emerging threats: DeFi exploits, NFT laundering, and stablecoin proxies. No reversal signals; instead, intensified monitoring and international pacts solidify the ban.
China’s stance contrasts global liberalization, positioning the digital yuan as the sole sanctioned digital currency while purging private alternatives from its ecosystem.
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