Peer-to-Peer Crypto Trading in China After the 2021 Ban: How It Still Works

Ben Bevan 30 October 2025 22 Comments

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China banned cryptocurrency exchanges in September 2021. Banks were told to cut off services. Mining rigs were shut down. Official platforms disappeared overnight. But if you look at the data, crypto didn’t die-it went underground. Today, despite the ban, Chinese users still trade billions in peer-to-peer crypto every year. How? And why does it still work?

It’s Not About Ownership-It’s About Transactions

The Chinese government didn’t outlaw owning crypto. Courts in Shanghai, Hangzhou, and Shenzhen ruled as early as 2018 that digital assets are legal property. That’s key. You can hold Bitcoin. You can store it in a wallet. But you can’t buy it on Binance China anymore. You can’t use a domestic exchange. You can’t use a bank to directly swap RMB for crypto through an official channel.

So people found a loophole: peer-to-peer trading. Instead of using an exchange, you find someone else who wants to trade. You send money directly. They send you crypto. No middleman. No record on a regulated platform. Just two people, a bank transfer, and a WhatsApp message saying “payment sent.”

This isn’t illegal by itself. The ban targets platforms, not private deals. That’s why it’s so hard to stop. You can’t shut down every individual who texts a friend saying, “I’ll give you 10,000 RMB for 0.3 BTC.”

How It Actually Works Today

Most traders use one of three methods:

Stablecoins like USDT: Because Bitcoin’s price swings too much for daily trading, most people use USDT. It’s pegged to the dollar. You pay someone 6,500 RMB. They send you 1,000 USDT. Simple. Fast. Less risky.
Encrypted apps: WeChat and Telegram are the main tools. Trading groups use coded names like “Green Dragon Logistics” or “Mountain Water Transport.” No one says “crypto.” They say “transfer,” “goods,” or “service fee.”
VPN + international platforms: You install NordVPN or ExpressVPN to bypass the Great Firewall. Then you log into LocalBitcoins, Paxful, or Bisq. You filter for sellers in China. You pick someone with 100+ successful trades. You pay via Alipay or bank transfer. They release the crypto.

A typical transaction looks like this:

You open a VPN and log into Paxful.
You find a seller in Beijing offering USDT for Alipay.
You message them on WeChat to confirm they’re real.
You send 50,000 RMB (just under the bank’s automatic alert threshold).
You send a screenshot of the transfer.
They release 7,600 USDT to your wallet.

The trick? Keep it small. Transactions under 50,000 RMB rarely trigger bank flags. Anything bigger? You risk having your account frozen.

Why People Risk It

Why bother with all this hassle? Three reasons:

Capital flight: China has strict limits on how much money you can take out of the country. $50,000 per year, per person. But crypto? No limits. People use P2P to move money overseas-buying USDT, then sending it to a relative in Singapore or Canada who cashes it out.
Investment: Many Chinese investors still believe in Bitcoin. They see it as a hedge against inflation or a way to protect savings from a weakening yuan.
Business needs: Some traders work with overseas clients. They get paid in crypto. They need to convert it to RMB to pay local suppliers. No other way.

A 2022 study from Peking University found that 78% of active P2P traders had family or business ties abroad. This isn’t just speculation-it’s survival.

Transparent wallet prototype with compartments for RMB, USDT, NFT, and gold bar symbols.

The Hidden Costs

It’s not free. And it’s not safe.

Fees jumped from 1% to 5%: Before the ban, traders paid 0.5-1% in fees. Now, because of risk, scams, and bank freezes, sellers charge 3-5%. You lose 5% just to move money.
Scams are common: Fake screenshots. Fake bank confirmations. “Flash freezing”-where a scammer sends you a payment, you release crypto, then they report the transfer as fraud and get your account locked. One Reddit user lost $25,000 this way in 2022.
Bank freezes: 38.7% of users reported having their accounts frozen after a crypto-related transfer. Sometimes it takes weeks to get your money back. Sometimes, you never do.

Paxful’s rating in China dropped from 4.3 stars in 2021 to 2.7 stars in 2022. Why? Because people got burned.

How the Government Is Fighting Back

China didn’t give up. In 2023, the People’s Bank of China issued new rules targeting “any form of decentralized transaction.” Banks now monitor for patterns: multiple small transfers to the same recipient. Frequent Alipay payments to unknown names. Wallet addresses linked to known crypto addresses.

In 2022, Chinese authorities investigated 1,247 crypto cases. 895 people were convicted. Over $150 million in fines were handed out.

But here’s the catch: they can’t catch everyone. The system is too decentralized. You can’t arrest every person who texts a friend on WeChat.

Instead, they’re pushing new tools:

AI that flags suspicious payment patterns
Cooperation with international exchanges to identify Chinese users
Pressure on app developers to block crypto-related content

Still, Chainalysis found a 300% increase in P2P volume from Chinese IP addresses in early 2022. That’s not a glitch. That’s demand.

What’s Next?

Traders are getting smarter. New tricks are emerging:

Crypto barter: You trade USDT for a designer watch, a laptop, or even gold bars. The item is shipped internationally. No digital trail.
NFTs as money: Some traders now buy NFTs with crypto, then sell the NFT for RMB. Since NFTs aren’t classified as currency, they slip under the radar.
Transaction splitting: Instead of sending 200,000 RMB in one go, you send four payments of 49,000 RMB. Each looks like a normal personal transfer.

Binance Research predicts P2P volume in China will stay between 3-5% of global activity through 2025. That’s down from 23% in 2020, but still massive.

HSBC’s 2023 report put it bluntly: “The cat is out of the bag.” China can’t fully stop P2P crypto without crushing its own economy. Millions of people use digital payments daily. You can’t police every single transfer.

Foldable transaction card with crypto rates and abstract figures exchanging goods across borders.

Who’s Still Doing It?

It’s not just speculators. It’s:

Young professionals with overseas income
Small business owners paying suppliers abroad
Families sending money to children studying overseas
Investors who lost faith in the yuan

Most are urban, educated, and tech-savvy. They’re not breaking the law for fun. They’re solving real problems the system won’t let them solve.

Can You Do It Too?

If you’re outside China, you can’t legally participate. If you’re inside, you can-but it’s risky.

Here’s what you need if you’re trying:

A reliable VPN (NordVPN, ExpressVPN)
A non-Chinese email (Gmail, ProtonMail)
A wallet that doesn’t show Chinese language (Trust Wallet, Exodus)
A burner phone or secondary SIM card
Patience. You’ll make mistakes. You’ll get scammed. You’ll get frozen.

Most people take 3-4 weeks to learn the basics. Experienced traders say it takes 100-150 hours to get good at avoiding detection.

And even then, you’re always one transaction away from trouble.

The Bigger Picture

China’s ban didn’t kill crypto. It exposed something deeper: decentralized networks can’t be controlled by borders.

The government thought shutting down exchanges would end the problem. But people didn’t stop wanting crypto. They just got creative.

This isn’t just about China. It’s about what happens when a nation tries to control money that was designed to be free.

The answer? You can’t stop it. You can only make it harder, more expensive, and more dangerous.

And for now, that’s exactly what’s happening.

Is peer-to-peer crypto trading illegal in China?

Owning crypto is not illegal in China. Courts have recognized it as private property. But trading through exchanges is banned. Peer-to-peer trading exists in a gray area-it’s not explicitly illegal, but it’s heavily monitored. If you’re caught, you could face fines, account freezes, or even criminal charges if authorities believe you’re facilitating capital flight.

Can I use WeChat or Alipay to trade crypto in China?

You can’t use WeChat or Alipay to directly buy crypto, but many traders use them to send RMB to peers in exchange for crypto. The apps don’t block the payments-they just flag suspicious patterns. Small, frequent transfers under 50,000 RMB are less likely to trigger alerts. Still, using these platforms for crypto trades carries risk. Your account could be frozen without warning.

Why do people use USDT instead of Bitcoin for P2P trading?

Bitcoin’s price swings too much for daily trading. If you agree to trade 0.1 BTC for 6,000 RMB, but Bitcoin spikes 10% before the transfer, one person loses money. USDT is pegged to the U.S. dollar, so 1 USDT = $1. It’s stable, easy to value, and widely accepted. That’s why over 80% of P2P trades in China use USDT.

How do I avoid getting scammed on P2P platforms?

Only trade with users who have 100+ completed trades and high ratings. Never release crypto before you see the payment cleared in your bank. Use WeChat to confirm the sender’s identity. Avoid anyone who pressures you to act fast. If a deal looks too good to be true-like 1 USDT for 6,000 RMB-it’s a scam. Most scams involve fake screenshots or “flash freezing” after you send crypto.

What happens if my bank account gets frozen for crypto trading?

You’ll likely get a notice from your bank saying your account is under review. You may need to visit the branch in person to prove the transactions were legitimate. If you can’t prove it, your account could stay frozen for weeks or months. In some cases, you lose access permanently. There’s no appeal process. Banks follow PBOC guidelines-they don’t ask questions.

Will China ever allow crypto exchanges again?

It’s unlikely in the near term. The government sees crypto as a threat to financial control and capital regulation. Instead of legalizing exchanges, they’re investing in blockchain surveillance tech to track and shut down P2P activity. Their goal isn’t to regulate crypto-it’s to eliminate it as a financial alternative.