Crypto: Beijing Shatters One of the Industry’s Biggest Myths

China tackles an old reputation of crypto. For its Ministry of State Security, using bitcoin or other digital assets is not enough to disappear from the radars. Public transactions remain on the blockchain, exchanges often know their customers, and conversions to traditional currency can leave new traces. Beijing talks about fraud, money laundering, ransoms, and even espionage. The observation holds quite well for Bitcoin. For all crypto, it is already less simple.

Beijing tackles the myth of crypto anonymity

The first part of the Chinese reasoning is quite classical. A Bitcoin address carries no name, but transactions remain traceable on the blockchain. Amounts, addresses used, and the history of movements can be viewed in an explorer.

The Chinese Ministry of State Security, or MSS, relies on this feature to warn against criminal use of crypto. It notably cites phone scams, online gambling, and certain cross-border traffics. Ransomware also enters 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 reveal almost nothing about its owner. Funds arrive, leave to a second wallet, then a third. No name appears in the registry. This can last a long time. The problem begins when one of these movements intersects with information located elsewhere.

Bitcoin does not forget transactions

Bitcoin has a quite annoying feature for someone seeking absolute anonymity: its history remains there. A crypto transaction made today can still be examined several years later. The tools available at that time might even no longer be the same.

A bitcoin can pass through several addresses. These movements do not disappear for all that. It’s very different from cash. A $100 bill passes through a store, returns in a cash register, is deposited in a bank, and then possibly comes out elsewhere. It does not carry with it a public registry containing each of these steps.

On Bitcoin, the registry exists. That does not mean it automatically indicates who owns each address. This is where one must avoid mixing two things. The blockchain allows tracking funds. Identifying the person usually requires something else. Crypto analysis companies try precisely to link several addresses, identify recurring behaviors, or spot wallets belonging to certain known services. An investigation can also start from an already identified address and work back to past movements.

The user who thought they were safe because no name appeared next to their wallet can then have an unpleasant surprise. Beijing therefore talks about an “illusion.” For Bitcoin, the term is not absurd if one speaks of complete anonymity. The network is pseudonymous. This is not exactly the same thing.

Identity often comes back through exchanges

The most interesting moment comes when bitcoins simply leave the blockchain to reach a company that knows its customer. Let’s take a person who uses ten different addresses. They receive BTC, move them several times, and avoid publishing their wallets. Seen only from the blockchain, putting a name behind each movement can remain difficult.

Then they send 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 scene changes. The same applies with a conversion to a bank account. The Chinese ministry also mentions other information that can accompany these operations, such as IP addresses or data related to the devices used. Investigators are thus not condemned to only look at a sequence of transactions in an explorer.

They can cross sources. This is often where the image of totally anonymous crypto collapses. A user can be very cautious on the blockchain and much less so when connecting to a centralized service. They can also reuse an address, publish it on a social network, or associate it themselves with an identifiable activity. A single mistake can be enough to provide a starting point. Then there is the history. Not necessarily all the user’s personal history, but sometimes much more than they imagined.

Monero and Zcash seriously change the equation

This is where the Chinese discourse becomes too broad. Not all cryptos work like Bitcoin. Monero is probably the most obvious example. The protocol uses several technologies designed to mask transactional information, notably ring signatures and stealth addresses. Privacy is part of the normal functioning of the network.

Zcash uses a different approach with zero-knowledge proofs. Some transactions can hide information while allowing the network to verify that they remain valid.

This is no longer the same playing field. The subject falls coincidentally 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 this crypto segment’s valuation.

The privacy-focused coin market was worth about $11.97 billion at the beginning of April.

End of September: $36.51 billion. Zcash went from about $319 to over $1,500 during the studied period. Monero rose from $330 to about $555. Not really a small forgotten market. That does not mean a Monero user becomes invisible as soon as they open their wallet.

If they buy their XMR on a platform that knows their identity, an initial piece of information already exists. If they expose their IP address, then convert funds via a regulated intermediary, or make an operational mistake, other traces can appear. The protocol’s privacy does not automatically protect everything that happens around it. The same observation applies to Zcash.

Crypto privacy does not only concern criminals

This is also where I depart from Beijing’s discourse. The MSS essentially presents crypto privacy through fraud, money laundering, ransoms, and espionage. This is not very surprising. China has maintained a particularly tough policy toward private digital assets for years and further tightened its control over crypto in 2026.

But wanting to keep one’s finances private is nothing criminal. A merchant paid in bitcoin does not necessarily want a customer to be able to check the balance of their wallet. A company does not necessarily wish to show 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 goes.

In the traditional banking system, this confidentiality seems normal. A payment made to someone does not open to them the complete history of your account. On a public blockchain, an identified address can sometimes reveal much more. That is almost the paradox of the debate.

For a long time, bitcoin was presented as an ideal currency to hide. In reality, its ledger is extremely transparent. Part of the industry now tries to fix exactly the opposite problem: how to use a blockchain without making one’s entire financial life observable?

Monero provides one answer. Zcash provides another. Zero-knowledge technologies are progressing well beyond only privacy coins. Investigators continue to improve their tools. No one has really won this race. And probably no one will ever win it definitively. China is thus right on one essential point: an address made 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 shielded operation on Zcash, and a Monero payment, the level of privacy varies considerably. Putting everything in the same basket makes for an effective slogan, but not a complete view of the technology. Incidentally, some researchers are already exploring solutions to make Bitcoin more confidential, like Zcash.