China's Crypto Economy Thrives Amidst Regulatory Ban on Digital Assets

China’s underground crypto economy is increasingly thriving, generating an estimated $176 billion in crypto activity over the past year, according to Chainalysis. This growth is largely attributed to a significant shift towards peer-to-peer (P2P) stablecoin payments, despite the government's long-standing restrictions on digital assets.

Chainalysis reports that 59.1% of this activity occurred through domestic P2P transfers rather than centralized exchanges, marking a notable increase from previous periods. The trend diverges from most major crypto markets, where exchanges typically serve as the primary access points for users.

Stablecoins Gain Popularity

The rise in stablecoin usage has been particularly significant, with activity accelerating since March 2025. Monthly stablecoin transactions surged from approximately $240 million to nearly $5 billion within a year. This growth has been driven by smaller transactions, indicating a shift in how individuals and small businesses are utilizing these digital assets.

• Transfers below $100 increased by 996%.
• Transactions between $100 and $1,000 rose by 1,057%.
• Transfers ranging from $1,000 to $10,000 grew by 1,321%.

Chainalysis suggests that the integration of China’s social-credit system with financial infrastructure may be influencing users to transact outside traditional payment channels, particularly for those facing restrictions in accessing conventional financial services.

High Turnover Rates Indicate Active Use

Stablecoins in China exhibit a high turnover rate, with self-custodied holdings turning over 33.2 times annually, significantly exceeding the global average of 9.3 times. This indicates that stablecoins are being used as active liquidity rather than sitting idle in wallets. The average stablecoin balance in China was around $3.1 billion, with $104.1 billion transferred across 18.1 million transactions during the period analyzed.

As China’s regulatory environment continues to push crypto activity towards decentralized networks and private transfers, the challenge for Beijing will be managing the growing circulation of dollar-linked value outside of its financial oversight.