China’s Ministry of State Security (MSS) warned that cryptocurrencies circulating online are not beyond the reach of the law, and that their perceived anonymity is merely an illusion. In a statement published on its WeChat account on Monday and reported by Global Times, the ministry said the decentralized and peer-to-peer nature of digital currencies has led some users to believe they can hide their identities when moving funds overseas.
The MSS said that this perceived anonymity can expose users to legal and financial risks. Cryptocurrencies can also be used for money laundering, cybercrime, espionage funding, and other unlawful activities.
Why China’s MSS Says Crypto Is Not A Safe Haven
As per MSS, some people unknowingly believe that using crypto instead of traditional bank cards will help them evade the connection and break the link between transactions and their personal identities. The ministry said perceived anonymity has contributed to the belief that users can conduct transactions without being recognized. It is also perceived that they can evade legal consequences by relying on the perceived blockchain security and anonymity.
The MSS said the concealed nature of some cryptocurrency transactions and the difficulty of regulating them have made digital currencies a medium for criminal activities. One of the risks mentioned is money laundering. Criminals can use crypto to hide and transfer proceeds from telecom fraud, online gambling and cross-border smuggling.
By breaking down illegal funds into smaller transfers and moving them through digital currencies, perpetrators try to obscure the funds’ origin and move money across regions. The ministry linked these activities to risks involving foreign exchange management as well as economic and financial security.
The MSS also pointed to ransomware and other cyberattacks. Cybercriminals can ask for cryptocurrency payments following ransomware attacks, using the assets to hide their identities and complicate investigations. The ministry said crypto can be used by foreign intelligence agencies to fund espionage. As per MSS, perceived anonymity of tracing cryptocurrency transactions could be used to ease the concerns of people being recruited or coerced into espionage, and to move espionage funds.
How The MSS Says Blockchain Records Expose Users
The MSS argued that cryptocurrency anonymity is based on a misunderstanding of how blockchain technology works. Although wallet addresses appear as strings of characters rather than users’ names, the ministry noted that blockchain networks maintain a transparent and immutable record of transactions.
It said transaction records are permanently retained on the blockchain and can be traced through fund flow. According to the MSS, cryptocurrency transactions are recorded on the relevant virtual currency’s public ledger, regardless of the amount involved or when and where the transaction takes place.
The ministry said distributed ledger technology means that once transaction data is recorded, it cannot be altered. It added that address-based anonymity obscures the connection between a wallet and an individual’s identity, temporarily, rather than providing true identity concealment. The MSS also pointed to activity outside the blockchain itself, exchanges between cryptocurrencies and fiat currencies, as well as exchanges between cryptocurrencies and fiat, along with payment interfaces.
What China’s Crypto Warning Means For Wallet Holders
These activities can leave digital footprints such as device details and IP addresses. The ministry said professional organizations can blend on-chain analysis with big data comparisons to recognize users or assets associated with wallet addresses and reconstruct the fund movement. The MSS also emphasized drawbacks associated with cryptocurrency custody. Self-held private keys generally have no recovery mechanism, so lost or stolen keys can result in the loss of control over virtual assets.
China’s Ministry of State Security (MSS) warned on Monday that cryptocurrencies circulating online are not beyond the reach of the law and their perceived “anonymity” is merely an illusion, adding that the risks they pose should not be overlooked. https://t.co/4gbnrjwGI6 PIC.TWITTER.COM/GRVNKZA5VB
— Global Times (@globaltimesnews) SEPTEMBER 28, 2026
Users who instead place their private keys with trading platforms may have options to recover account access through appeals, the ministry said, but that introduces other risks, including the possibility that a platform becomes unreachable or goes bankrupt. The warning, therefore, focused not only on the currency’s potential use in illegal activities, but also on the limits of the anonymity associated with blockchain transactions and the risks users face when controlling and entrusting their virtual assets.
