China is attacking an old crypto reputation. For its Ministry of State Security, using bitcoin or other digital assets is not enough to disappear from the radar. Public transactions remain on the blockchain, exchanges often know their customers and conversions into traditional currencies can leave new traces. Beijing talks about fraud, money laundering, ransoms and even espionage. The observation holds up quite well for Bitcoin. For all crypto, it’s already less simple.
In brief
- China says the anonymity offered by crypto is vastly overrated.
- Bitcoin allows movements between addresses to be publicly tracked for years.
- Monero and Zcash were designed to hide much more information.
Beijing attacks the myth of crypto anonymity
The first part of Chinese reasoning is quite classic. A Bitcoin address has no name, but transactions remain traceable on the blockchain. Amounts, addresses used and movement history can be viewed in an explorer.
China’s Ministry of State Security, or MSS, relies on this feature to warn against criminal use of crypto. He cites in particular telephone fraud, online gambling and certain cross-border trafficking. Ransomware is also on the list. The ministry also claims that foreign intelligence services can use digital assets to pay agents without going directly through the traditional banking system.
Crypto then complicates the work. It does not necessarily make it impossible. A freshly created address may very well reveal almost nothing about its owner. The funds arrive, leave for a second wallet, then a third. No names appear in the registry. This can last a long time. The problem begins when one of these movements crosses information located elsewhere.
Bitcoin doesn’t forget transactions
Bitcoin has a rather annoying feature for someone looking for absolute anonymity: its history remains there. A crypto transaction made today can still be reviewed several years later. The tools available at that time may not even be the same anymore.
A bitcoin can pass through several addresses. These movements do not disappear, however. It is very different from liquid. A $100 bill passes through a store, returns to a cash register, is deposited in a bank and then eventually comes out elsewhere. He does not carry with him a public record containing each of these steps.
On Bitcoin, the ledger exists. This doesn’t mean it automatically shows who owns each address. This is where you need to avoid mixing two things. Blockchain allows funds to be tracked. Identifying the person usually requires something else. Crypto analysis companies are trying to reconcile several addresses, identify recurring behaviors or identify wallets belonging to certain known services. An investigation can also start with an address already identified and go back to old movements.
The user who thought they were safe because no name appeared next to their wallet may then have an unpleasant surprise. Beijing therefore speaks of an “illusion”. For Bitcoin, the term is not absurd if we are talking about complete anonymity. The network is pseudonymous. It’s not exactly the same thing.
Identity often returns through exchanges
The most interesting moment comes when bitcoins simply leave the blockchain and hit a company that knows its customer. Consider a person who uses ten different addresses. She receives BTC, moves them several times and avoids publishing her wallets. Seen only from the blockchain, putting a name behind each movement can remain difficult.
Then it sends part of the funds to a large centralized exchange. This crypto platform may have already asked for their passport, address, phone number and other information during KYC verification.
The decor changes. Same thing with a conversion to a bank account. The Chinese ministry also mentions other information that may accompany these operations, such as IP addresses or data linked to the devices used. Investigators are therefore not condemned to only looking at a series of transactions in an explorer.
They can cross-reference sources. This is often where the image of completely anonymous crypto falls apart. A user can be very careful on the blockchain and much less when connecting to a centralized service. He can also reuse an address, publish it on a social network or associate it himself with an identifiable activity. A single mistake can be enough to provide a starting point. Then there remains the history. Not necessarily all of the user’s personal history, but sometimes much more than they imagined.
Monero and Zcash seriously change the equation
It is here that Chinese speech becomes too wide. Not all cryptos work like Bitcoin. Monero is probably the most obvious example of this. The protocol uses several technologies intended to hide transactional information, including ring signatures and stealth addresses. Confidentiality is part of normal network operation.
Zcash uses a different approach with zero-knowledge proofs. Some transactions can hide information while allowing the network to verify that they remain valid.
It’s no longer the same playing field. The subject falls at a time when privacy coins are experiencing a spectacular comeback. In five months, Zcash and Monero have contributed to a $24.5 billion increase in the valuation of this crypto segment.
The privacy-focused coin market was worth around $11.97 billion as of early April.
End of September: 36.51 billion. Zcash rose from around $319 to over $1,500 over the period studied. Monero rose from $330 to around $555. Not really a little forgotten market. This does not mean that a Monero user becomes invisible as soon as they open their wallet.
If he buys his XMR on a platform that knows his identity, initial information already exists. If he exposes his IP address, then converts the funds through a regulated intermediary, or makes an operational error, other traces may emerge. Protocol privacy does not automatically protect everything that happens around it. Same observation with Zcash.
Crypto privacy isn’t just about criminals
This is also where I distance myself from the Beijing speech. The MSS essentially presents crypto privacy through fraud, laundering, ransoms and espionage. This is not very surprising. China has maintained a particularly harsh policy towards private digital assets for years and has further strengthened its control over crypto in 2026.
But there is nothing criminal about wanting to keep your finances private. A merchant paid in bitcoin does not necessarily want a customer to be able to consult the balance of their wallet. A business does not necessarily want to show its competitors the payments sent to its suppliers. An employee paid in crypto may simply prefer that their employer does not then see where their money is going.
In the traditional banking system, this confidentiality seems normal. A payment made to someone does not open your entire account history to them. On a public blockchain, an identified address can sometimes reveal much more. It’s almost the paradox of the debate.
For a long time, bitcoin was presented as an ideal currency for hiding. In reality, its registry is extremely transparent. Part of the industry is now seeking to fix exactly the opposite problem: how to use a blockchain without making your entire financial life observable?
Monero provides an answer. Zcash brings another one. Zero-knowledge technologies are also progressing well beyond just privacy coins. Investigators continue to improve their tools. Nobody really won this race. And probably no one will definitely win it. China therefore hits the mark on an essential point: an address made up of numbers and letters must never be confused with a guarantee of anonymity.
For bitcoin, this is a basic rule. But crypto is no longer limited to Bitcoin. Between a public BTC transaction, a stablecoin transfer on Ethereum, a protected transaction on Zcash and a Monero payment, the level of confidentiality varies considerably. Putting everything in one basket makes for an effective slogan, but not a complete vision of technology. Moreover, some researchers are already exploring solutions to make Bitcoin more confidential, like Zcash.
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