China’s crypto ban Is failing to stop a $176 billion P2P economy

China's underground crypto economy is increasingly shifting toward peer-to-peer stablecoin payments despite Beijing's longstanding restrictions on digital assets.

Chainalysis estimates China generated at least $176 billion of crypto activity during the 12 months through June 2026, with 59.1% occurring through domestic peer-to-peer transfers rather than exchanges and other centralized platforms.

That share was 3.5 times higher than in the previous period, marking an unusual divergence from most major crypto markets, where exchanges remain the primary entry and exit point for users.

Stablecoins dominate local activity in China

The shift has been particularly pronounced in stablecoins. Chainalysis said domestic stablecoin payment activity began accelerating around March 2025 and continued expanding for 13 consecutive month-over-month periods, suggesting a gradual migration toward wallet-to-wallet settlement inside the country.

The amount of new activity added each month rose from roughly $240 million in March 2025 to almost $5 billion about a year later. Growth was also concentrated across transaction sizes consistent with individuals and smaller businesses rather than solely large institutional transfers.

Stablecoin volumes below $100 jumped 996% around the start of that shift, while transfers between $100 and $1,000 increased 1,057%. Activity between $1,000 and $10,000 climbed 1,321%, Chainalysis said.

The blockchain analytics firm said the timing raises the possibility that tighter integration of China's social-credit system with financial and internet infrastructure is encouraging some users to transact outside traditional payment channels.

China expanded aspects of the system into finance and online activity in March 2025. Chainalysis said people whose access to conventional financial services has been restricted could potentially turn to crypto, while others may use stablecoins to settle transactions outside monitored banking or e-commerce platforms.

The firm described that explanation as a working hypothesis rather than evidence of causation. Blockchain data can show when and how assets move but cannot establish why an individual chose one payment method over another.

Stablecoins begin to resemble circulating money

The way stablecoins move through China-attributed wallets also suggests users may be treating them as transactional liquidity.

Chainalysis calculated annual turnover of self-custodied stablecoin holdings in China at 33.2 times, more than triple the global benchmark of 9.3 times and far above every major regional peer included in its analysis.

Japan recorded turnover of 9.9 times, while Hong Kong stood at 6.1, South Korea at 5.1 and Taiwan at 3.5.

China-attributed wallets held an average of about $3.1 billion of stablecoins during the period but transferred $104.1 billion across 18.1 million transactions. The figures indicate that the same pool of tokens was repeatedly returned to circulation rather than remaining dormant in wallets.

High turnover is consistent with stablecoins functioning as working capital or settlement assets, Chainalysis said, a pattern that could emerge as tokens develop into a domestic payment rail.

This P2P structure distinguishes China from neighboring markets, as most crypto economies depend heavily on regulated exchanges and other centralized services, while China's restrictions have pushed more activity toward direct wallet transfers.

That creates a potential challenge for Beijing as stablecoins become easier to move without relying on domestic financial intermediaries. Restrictions on exchanges can limit formal market access, but self-custodied dollar tokens can still circulate through decentralized networks and private transfers.

For stablecoin issuers and crypto service providers, China represents a large potential source of demand that remains difficult to serve directly because of the country's regulatory restrictions. Growth may therefore continue through offshore platforms, OTC networks and self-custody rather than conventional consumer-facing crypto businesses.

The next question is whether the acceleration persists as Chinese authorities expand oversight of digital payments and financial activity.

If smaller stablecoin transfers continue increasing alongside high wallet turnover, regulators may face a growing pool of dollar-linked value circulating beyond the exchange infrastructure that earlier crypto restrictions were designed to constrain.

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