China banned crypto exchanges in 2021 - but people are still trading
China shut down all licensed cryptocurrency exchanges in September 2021. Banks were told to block transactions linked to crypto. Miners were forced to shut down. The government claimed it was to stop financial risk and capital flight. But here’s the thing: crypto trading didn’t disappear. It just went underground. Today, despite one of the strictest crypto bans in the world, peer-to-peer (P2P) trading in China is still alive - and it’s bigger than most people realize.
Why the ban didn’t work
The Chinese government thought shutting down exchanges like Huobi and OKX would end crypto trading. It didn’t. Why? Because P2P trading doesn’t need an exchange. It just needs two people with phones and bank accounts. One person sends RMB through Alipay or WeChat Pay. The other sends Bitcoin or USDT directly to their wallet. No middleman. No paperwork. No government oversight - at least, not until it’s too late.
China’s courts have actually ruled that owning crypto is legal. In 2018, courts in Shenzhen, Hangzhou, and Shanghai all said cryptocurrency counts as “virtual property.” That means you can’t be arrested just for holding Bitcoin. But trading it? That’s where the trouble starts. The ban targets transactions, not ownership. That legal gray zone is what keeps P2P trading alive.
How people actually trade
It’s not glamorous. It’s not easy. It’s risky. But it works.
Most traders use encrypted apps like Telegram and WeChat to find buyers and sellers. They don’t use public forums. They don’t post on social media. They join private groups with names like “Green River 7” or “Dragon Vault” - names that mean nothing to outsiders. Once they connect, they arrange a trade: RMB in, crypto out.
Stablecoins are the secret weapon. USDT (Tether) is the most popular. Why? Because it’s worth $1. No wild swings like Bitcoin. If you want to move money out of China without raising red flags, USDT is the cleanest way. You convert RMB to USDT with someone in Guangdong, then send the USDT to a wallet in Singapore or the U.S. From there, you cash out normally.
They use VPNs to access international platforms like LocalBitcoins, Paxful, and Bisq. These sites aren’t banned in China - they’re just blocked. A good VPN bypasses the Great Firewall. Traders also use burner phones and temporary bank accounts. Some even open accounts under family members’ names.
The hidden costs
There’s no safety net. No customer support. No chargebacks. If someone sends you a fake screenshot of a bank transfer - and you send the crypto - you’re out of luck. Scams are common.
According to Trustpilot data, Paxful’s rating among Chinese users dropped from 4.3 stars in 2021 to 2.7 stars by late 2022. Why? Because fraud went up. One Reddit user, ShanghaiTrader88, said he did 147 trades totaling $170,000 without getting scammed. But another user, BeijingCryptoLoser, lost $25,000 in one day because the other person faked a bank receipt.
Transaction fees have jumped from under 1% before the ban to 3-5% now. That’s the “risk tax.” Traders pay extra because the deal is risky. Banks are watching. The government is watching. And if your account gets flagged, it freezes. One 2022 survey found that nearly 40% of P2P traders had their bank accounts frozen at least once.
How they avoid detection
China’s banking system is built to catch suspicious activity. Any transfer over 50,000 RMB ($7,000) gets flagged. So traders split big amounts into smaller pieces. Five transfers of 40,000 RMB? That’s $200,000 - and the system doesn’t blink.
They use Alipay’s “friend transfer” feature. It’s meant for splitting dinner bills, not crypto trades. But it doesn’t trigger the same alerts as a bank wire. It’s slower, yes. But it’s quieter.
Some traders use “transaction bridges.” A trusted third party holds the crypto while the RMB clears. If the payment fails, the bridge returns the crypto. If it clears, the crypto is released. It’s like escrow, but done privately.
Even more creative? Crypto barter. Someone trades USDT for a laptop, a designer handbag, or even gold bars. The item is shipped abroad. The crypto is gone. No digital trail. No bank record. Just a package in the mail.
Who’s doing this?
It’s not college kids. It’s not miners. It’s professionals. A 2022 study by Peking University found that 78% of active P2P traders in China are between 25 and 45. Most have university degrees. Many work in international business, export-import, or tech. Some have family overseas. Others want to protect savings from inflation or currency devaluation.
China’s middle class has grown fast. But the yuan isn’t stable. Property prices are falling. Stock markets are volatile. Crypto, even in a banned country, looks like a safer bet. Especially when you can’t easily move money out of the country legally.
The numbers don’t lie
China used to be home to 65% of the world’s Bitcoin mining. After the ban, that dropped to zero. But P2P trading? It didn’t vanish.
Chainalysis reported that in 2022, China still accounted for 4.2% of global cryptocurrency transaction volume - down from 23% in 2020, but still massive. In Q1 2022 alone, P2P volume through Chinese IP addresses jumped 300% year-over-year.
LocalBitcoins saw a 63% increase in Chinese users in 2022. And despite the crackdown, USDT trading volume in China remained among the highest in the world.
That’s not because people are stupid. It’s because the need is real. People want to move money. They want to protect wealth. And when the government shuts the front door, they find a window.
What’s next?
The government isn’t giving up. In January 2023, the People’s Bank of China issued new rules targeting “any form of decentralized transaction.” They’re using AI to scan bank records, WeChat messages, and even QR codes for crypto-related keywords.
But traders are adapting faster. Some are using NFTs as value carriers - buying a digital art piece with crypto, then selling it overseas. Others are turning to hardware wallets with no internet connection, transferring value through physical devices.
HSBC Research says it best: “The cat is out of the bag.” China can’t shut down P2P trading without turning the entire financial system into a surveillance state. And that would hurt real businesses, not just speculators.
For now, P2P crypto trading in China is a quiet, risky, but persistent underground economy. It’s not legal. It’s not safe. But it’s working - and it’s not going away anytime soon.
What you need to know if you’re thinking about it
- Use a trusted VPN - NordVPN or ExpressVPN are the most reliable.
- Never use your real name or bank account - Use a separate email and a friend’s or family member’s account if possible.
- Stick to USDT - It’s stable, liquid, and widely accepted.
- Split big trades - Keep each transaction under 50,000 RMB to avoid bank alerts.
- Verify before you send - Ask for multiple forms of ID. Check their history. Use a trusted intermediary if you can.
- Assume you’ll lose money - Scams are common. Only trade what you can afford to lose.
Is it illegal to trade crypto privately in China?
Yes. While owning crypto is recognized as legal property by Chinese courts, trading it - especially through P2P platforms - violates the 2021 ban issued by the People’s Bank of China. Individuals can face fines, account freezes, or even criminal charges if caught engaging in repeated or large-scale transactions. Enforcement is inconsistent, but the risk is real.
Can I use WeChat Pay or Alipay for crypto trades?
Technically, no - both platforms explicitly prohibit crypto-related transactions. But many users still do it by disguising payments as “friend transfers” or “personal gifts.” These small, frequent transfers (under 50,000 RMB) are less likely to trigger automated alerts. Still, if flagged, your account can be frozen for months.
Why do people use USDT instead of Bitcoin for P2P trades?
USDT is pegged to the U.S. dollar, so its value stays stable. Bitcoin can swing 10-20% in a day - too risky when you’re waiting for a bank transfer that might take hours. USDT lets people lock in a price and move value across borders without worrying about crypto volatility. It’s the digital equivalent of cash.
How do traders avoid getting caught by the government?
They use a mix of tactics: VPNs to hide their IP, burner phones, encrypted apps like Telegram, small transaction sizes, and avoiding any digital footprints tied to their real identity. Many also use “transaction splitting” - breaking one large trade into five or six smaller ones to avoid bank monitoring thresholds. Some even trade crypto for physical goods shipped overseas to erase the digital trail.
Is P2P crypto trading in China growing or shrinking?
It’s shrinking in volume compared to 2020, but it’s growing in resilience. Chainalysis data shows a 300% surge in P2P volume from Chinese users in early 2022. Even with stricter enforcement, demand hasn’t dropped. People still need to move money out of China. As long as that need exists, P2P trading will find a way.
Can the Chinese government shut down P2P crypto trading completely?
Not without extreme measures. To fully stop it, they’d need to monitor every bank transfer, every message on WeChat, every QR code scan, and every physical transaction. That would require turning China into a surveillance state that stifles normal commerce. So far, they’ve chosen to punish high-profile cases rather than try to eliminate every small trade - a strategy that’s proven ineffective.