China’s Ministry of State Security has issued yet another stern warning about the risks associated with cryptocurrencies. According to the South China Morning Post, the agency pointed out their connection to illegal activities and emphasized that transactions are in fact not anonymous at all.
On its social media accounts, the Ministry claims that digital currencies facilitate cyberattacks, money laundering, and even aid in espionage. According to the ministry, foreign intelligence agencies try to reassure their agents by convincing them that it is practically impossible to trace cryptocurrency transfers.
However, the MGB calls anonymity in the crypto sphere a myth. The entire transaction history is permanently recorded on the blockchain, and when it comes to exchanging cryptocurrency for fiat currency or using payment services, it becomes extremely difficult to conceal one’s identity. The agency also added that hostile groups are using crypto assets to destabilize the financial system and undermine national security. It is worth noting that in China itself, any activity related to cryptocurrencies is prohibited.
While the Ministry of State Security is sounding the alarm on security issues, financial regulators are waging an even larger-scale battle against this industry. Back in February, the People’s Bank of China, along with seven other agencies—including the Ministry of Public Security and the Securities Regulatory Commission—issued a joint statement. The statement reaffirmed the need for strict oversight of the crypto market, with bans extending even to the tokenization of real-world assets. Regulators believe that speculation in digital currencies undermines financial stability and jeopardizes the savings of ordinary citizens.
Beijing began tightening the screws back in 2017 by banning ICOs and shutting down exchanges, and in 2021, it outright banned Bitcoin mining, declaring any activity in this area illegal. Some economists doubt that these measures will remain as strict, especially in light of Trump’s statements about his desire to make the U.S. the global crypto capital. However, China has no intention of softening its domestic policy, even though Hong Kong was allowed to develop its crypto business in 2022.
Andrew Faye, a partner at the King & Wood law firm in Hong Kong, noted that the MGB’s statement serves as an important reminder. The point is that in mainland China, virtual currency transactions remain banned, and governments around the world view them as a serious threat.
According to Fei, the main message here is crystal clear: one should not assume that virtual currencies can become an anonymous haven for criminals.