China’s Crypto Ban Pushed $104 Billion in Stablecoin Payments Outside Regulated Firms

When a Chinese supplier or customer asks to settle an invoice in stablecoin – a crypto asset pegged to a fiat currency – no regulated firm in mainland China currently sits between the two sides of the payment. Since September 2021, China has treated all crypto transactions as illegal, so there are no licensed exchanges or payment firms in place to verify who is paying or where the money came from.

A new report by Chainalysis published in October shows just how large that unchecked channel has become. The report has two main findings. In mainland China, where crypto is banned, people moved $104.1 billion in stablecoins in the year to June 2026. They did it through their own wallets, so no bank or exchange handled or checked the payments.

In Hong Kong, where crypto firms are licensed, the money went through those firms instead, bringing a net $17.4 billion into the city by mid-2026. China’s ban removed the regulated firms that would normally check these payments, but the payments continued.

For U.S. and European companies that are paid in stablecoins by Chinese partners, the checks now fall on them.

The Ban Moved Payments Into Personal Wallets

The report showed that the number of unique wallets in mainland China sending stablecoins peer to peer grew 43-fold between the first quarter of 2024 and the second quarter of 2026. Between July 2025 and June 2026, self-custodied wallets attributed to China moved $104.1 billion in 18.1 million transfers. Users hold these wallets directly, without an exchange or bank keeping the funds for them.

The money is being used, not stored. Wallets in China held about $3.1 billion in stablecoins on average, and Chainalysis calculates that those holdings turned over 33.2 times a year, against a global average of 9.3. Chainalysis says this is consistent with users treating stablecoins as working capital rather than savings, and with an asset becoming a domestic payment rail.

“A coin that changes hands 33 times a year behaves like cash in a busy market, so the wallet paying you is rarely where the money started,” Raj Kamal, founder and CEO of payments company TransFi, told International Business Times. He noted that the transfers averaged about $5,750 each, which he said “looks a lot like everyday trade and working capital.”

The growth came while Beijing tightened its rules. In February 2026, the People’s Bank of China and seven other government bodies reiterated the illegality of all virtual-currency business. None of this has stopped individuals from holding stablecoins issued abroad in their own wallets and sending them to one another, which is the activity Chainalysis measured.

That legal position becomes part of the risk for a foreign company on the receiving end. “If the money comes from a mainland company, it is settling in an instrument that Beijing reaffirmed in February cannot be used as money, which leaves you exposed if those funds are frozen at source or the deal ends up in dispute,” Kamal said.

Without an Intermediary, the Checks Fall on the Counterparty

Chainalysis’s published findings do not say how much of the $104.1 billion relates to cross-border trade. For U.S. and European companies with Chinese partners, though, the data describes a channel already in heavy use, and one where nobody on the Chinese side has verified the payment.

The PBOC itself said in November 2025 that stablecoins fail to meet customer identification and anti-money laundering requirements, and warned they could be used for illegal cross-border transfers.

Innokenty Isers, co-founder and CEO of crypto platform Paybis, puts wallet control first. “A new wallet address deserves the same scrutiny as a last-minute change to a supplier’s bank account,” he told International Business Times. He advises getting written confirmation, through a channel the company has already verified, that the wallet is authorized to send or receive payments. “Once the tokens go to the wrong wallet, getting them back can be extremely difficult,” he said.

Kamal said he would confirm that the paying entity matches the invoice, screen the sending wallet and its recent counterparties, and receive funds through a licensed provider. Because the money moves so quickly, the sending wallet is only the starting point. “You need to trace several hops back and watch behavior,” he said.

Isers explained that high turnover across a market does not automatically make an individual payment suspicious. “A wallet’s apparent connection to the mainland doesn’t establish who controls it,” he said. If a payment arrived from a wallet that had just received several smaller transfers from different addresses, he would ask for transaction records. If the customer could not provide them, he would not approve the payment until the source of funds had been checked.

Hong Kong Shows Business Uses a Licensed Route When One Exists

The picture changes across the border. “A Hong Kong subsidiary paying through licensed channels is a very different conversation,” Kamal said.

Chainalysis’s Hong Kong figures show how that route is being used. Institutional platforms such as over-the-counter desks, custodians and market makers received 16% of the city’s service inflows, up from about 9% two years earlier. No other East Asian market exceeded 6%.

Chainalysis puts cumulative net business-to-business inflows at $17.4 billion by mid-2026. Over the same years, wallet-based flows were net negative, so money left the city through wallets while it arrived through licensed services.

Isers cautioned against reading too much into the comparison. “The city already has an established role in cross-border finance, and licensing alone cannot explain its institutional growth,” he said.

Licensing has since reached stablecoin issuers. The Hong Kong Monetary Authority granted the first two licences on 10 April 2026, to HSBC and Anchorpoint Financial, a Standard Chartered-led joint venture. Anchorpoint began a first phase of its Hong Kong dollar stablecoin for institutional distributors and professional investors on 12 August. HSBC had not issued its token as of 30 September.

For Kamal, the difference between the two markets lies in the route available to businesses. Demand for fast dollar settlement, he said, looked much the same on both sides of the border. “What differed was whether businesses had a legitimate place to take it.”

For the US and Europe, the Licensed Route Has to Compete

Chainalysis sums up the mainland result in one line: China “prohibited it and activity just moved”. The U.S. and E.U. have chosen licensing instead. The GENIUS Act, signed in July 2025, created a federal framework for payment stablecoin issuers and takes effect by January 18, 2027 at the latest. The E.U.’s MiCA rules for stablecoin issuers have applied since June 30, 2024.

Both frameworks regulate stablecoin issuers, and MiCA also covers crypto-asset service providers. Neither reaches a transfer between two personal wallets. The E.U.’s Travel Rule has required sender and recipient information on crypto-asset transfers handled by a service provider since December 30, 2024, with no minimum amount, but it covers self-hosted wallets only when a provider is involved. For transfers above €1,000, the provider must check whether a self-hosted wallet is owned or controlled by its own customer.

Isers accepts the limits of that approach. “Some transfers will still take place directly between personal wallets, beyond the reach of those checks,” he said. The Financial Action Task Force identified these peer-to-peer transfers as a key vulnerability in a report published in March.

Rules applied to every wallet-to-wallet transfer would be very difficult to enforce, Kamal said. “The workable levers sit at the edges.” He pointed to the GENIUS Act’s requirement that issuers be able to freeze tokens under a lawful order, and to a Treasury proposal from April on blocking and rejecting transactions.

Those levers work only when the money passes through a regulated firm. Kamal noted that most of it eventually needs to reach a bank account, which makes the cost of the licensed route decisive. “If a small importer finds the licensed route slower and pricier than a wallet transfer, the regulated system will capture the institutions and miss everyone else.”

What the Data Can and Cannot Show

Chainalysis’s country figures are estimates. The firm says China’s crypto economy is hard to track because of the ban, and it puts the total at a minimum of $176.3 billion for the period. Its published summary does not give the number of wallets the 43-fold increase started from, so the figure shows the speed of adoption more clearly than its scale.

Chainalysis says next year’s data will add clarity on whether licensing regimes such as Hong Kong’s draw in all kinds of activity, or whether some of it keeps moving offshore.

In the meantime, a U.S. or European company asked to accept stablecoins from a Chinese partner cannot rely on anyone on the Chinese side having checked the payment. The checks both executives describe, on who controls the paying wallet and where its funds came from, have to happen on the receiving end.