How Chinese Banks React When You Try to Withdraw Crypto to Fiat

Trying to turn your Bitcoin or Ethereum into cash through a Chinese bank? It won’t work. Not because the system is slow or broken - but because it’s designed to block you.

China’s Crypto Ban Is Absolute - And Banks Are Enforcers

Since September 2021, Chinese banks have been legally forbidden from handling any cryptocurrency transactions. That includes deposits, withdrawals, exchanges, or even processing payments tied to crypto wallets. The People’s Bank of China (PBoC), along with nine other government agencies, declared all crypto-to-fiat conversions as illegal financial activities. This isn’t a gray area. It’s a hard stop.

Banks don’t get to choose whether to comply. They’re required by law to shut down any account linked to crypto activity. If you try to send money from a crypto exchange to your ICBC or China Construction Bank account, the system will flag it - and freeze your funds before the transfer even finishes.

How Banks Detect Crypto Transactions

Chinese banks don’t rely on guesswork. They use advanced systems trained to spot crypto patterns. Here’s what triggers a red flag:

• Transfers to or from wallet addresses on China’s official blacklist of 14,273 known crypto addresses
• Money moving quickly between multiple accounts - a classic sign of crypto laundering
• Transactions originating from IP addresses tied to banned exchanges like Binance or OKEx
• Small, frequent deposits that add up to large sums - often used to avoid detection thresholds
• Cash deposits over ¥200,000 ($27,500) with no clear business purpose

These systems run automatically on 95% of transactions. The rest get reviewed by compliance officers trained in crypto patterns. Every bank employee must complete 16 hours of crypto AML training every year - a requirement since 2023.

What Happens When You Get Caught

If your account gets flagged, here’s what follows:

1. Your account is frozen within hours - no warning, no explanation.
2. Bank staff investigate for 72 hours. In 89% of cases, the freeze lasts over 30 days.
3. If they confirm crypto ties, the account stays locked indefinitely.
4. The bank reports the case to China’s Anti-Money Laundering Monitoring and Analysis Center (CAMLMAC) and the PBoC within 24 hours.

You won’t get your money back. You won’t get a refund. And you won’t get a clear reason why - banks aren’t allowed to explain the details to customers.

Real Cases: Accounts Frozen, Millions Seized

In April 2025, the Agricultural Bank of China froze 217 accounts in Guangdong Province after spotting patterns linked to offshore crypto exchanges. Investigators traced the money back to users trying to cash out crypto profits.

In the first half of 2025 alone, Chinese authorities shut down 127 cross-border crypto networks. They froze ¥2.1 billion ($290 million) in assets tied to these operations. These aren’t rare incidents. They’re routine.

Even if you think you’re being clever - using peer-to-peer trades, gift cards, or third-party intermediaries - banks are trained to spot the footprints. Money laundering networks that move crypto into cash are being dismantled at an increasing pace.

Why This Ban Exists - And Why It Won’t End Soon

China’s goal isn’t just to stop gambling or speculation. It’s about control. The government sees cryptocurrency as a threat to its monetary sovereignty. Stablecoins, in particular, are seen as dangerous tools that could bypass capital controls and undermine the digital yuan.

The PBoC has spent billions building its own central bank digital currency (CBDC) - the digital yuan. It’s designed to be traceable, controllable, and fully integrated into the state’s financial system. Crypto, by contrast, is anonymous, decentralized, and outside government reach.

S&P Global projects China’s crypto ban will remain in place until at least 2027. The only possible shift? If the digital yuan reaches 30% of retail payments - a milestone not expected before 2028.

What About Hong Kong?

Hong Kong is a different story. In August 2025, it launched a licensing regime for stablecoins - making it one of the few places in the world with legal, regulated crypto banking.

But here’s the catch: Mainland Chinese banks are strictly forbidden from doing business with Hong Kong’s regulated crypto platforms. Any transfer over HK$50,000 ($6,400) to a Hong Kong account is now flagged and reported to the State Administration of Foreign Exchange.

So even if you try to move your crypto to Hong Kong first, then cash out, the trail leads back to you. The system is designed to catch you - no matter the route.

Can You Even Own Crypto in China?

Yes - but only privately. It’s not illegal to hold Bitcoin or Ethereum in a personal wallet. You can buy it on peer-to-peer platforms, store it on a hardware device, or keep it on an offshore exchange.

But if you try to turn it into yuan through a bank? That’s where the law kicks in. The government doesn’t care if you own crypto. It only cares if you try to convert it into the national currency.

What Are People Doing Instead?

With formal channels closed, many turn to informal networks - known as CMLNs (crypto money laundering networks). These operate through trusted contacts, underground exchanges, and cash couriers. Some use gift cards, prepaid cards, or even physical goods to move value.

FinCEN estimates Chinese citizens moved $8.2 billion through these informal channels in 2024 - up from $5.7 billion in 2023. It’s risky, slow, and expensive - but it’s the only way left.

What Should You Do If You’re in China?

If you hold crypto and live in mainland China:

• Do not attempt to withdraw to a Chinese bank account.
• Do not use your real name or ID on peer-to-peer platforms linked to bank transfers.
• Do not assume offshore exchanges are safe - Chinese banks monitor transaction patterns, not just destinations.
• Consider holding crypto as a long-term asset, not a cash source.

The banks aren’t your allies here. They’re enforcement arms of the state. Any attempt to bypass their systems carries serious risk - frozen accounts, legal scrutiny, and potential criminal charges for repeat offenders.

The Bigger Picture

China’s crypto ban isn’t just about finance. It’s about control. The government wants its citizens to use the digital yuan - not decentralized alternatives. It wants to track every yuan, every transaction, every movement of value.

While crypto markets elsewhere are expanding, China is building a financial system that leaves no room for alternatives. The banks aren’t resisting. They’re leading the charge.

You can still hold crypto in China. But turning it into cash? That door is welded shut - and the key is held by the state.