China’s cryptocurrency crackdown has not eliminated crypto activity. Instead, new data shows that a growing share of the country’s crypto economy is moving through peer-to-peer transactions and self-custodied stablecoin wallets, creating a market that is increasingly difficult to track through traditional exchange data.
According to Chainalysis, China’s crypto economy was worth at least $176 billion during the 2026 study period, despite the country’s longstanding restrictions on cryptocurrency services. The actual figure could be higher because China’s regulatory environment makes domestic crypto flows difficult to measure.
The most striking development is the rapid expansion of P2P stablecoin activity. The number of unique wallets sending P2P stablecoin transactions from China increased 43-fold between the first quarter of 2024 and the second quarter of 2026.
That figure needs some context. The 43× increase refers to the number of participating wallets, not a 43× increase in transaction volume. It nevertheless points to a substantial expansion in the number of users engaging in stablecoin transactions outside traditional centralized exchanges.
China’s Crypto Economy Is Moving P2P
China’s crypto market looks different from many other major markets. With centralized crypto services heavily restricted, users have increasingly relied on self-custody and direct transactions between individuals.
Domestic P2P activity accounted for 59.1% of China’s overall crypto economy during the study period, a roughly 3.5-fold increase in its share compared with the previous period.
Stablecoins appear to be at the center of this shift.
A significant change in domestic stablecoin P2P activity emerged around March 2025. Monthly activity began accelerating after relatively weak January and February figures and continued increasing for 13 consecutive complete month-over-month periods.
The growth was visible across several transaction sizes. Transfers below $100 increased by roughly 996%, while transactions between $100 and $1,000 rose about 1,057%. Transfers between $1,000 and $10,000 increased approximately 1,321%.
The pattern suggests that stablecoins are being used for more than large-scale investment transactions. Smaller transfers point toward potential payments, business transactions and transfers between individuals.
The Social Credit Connection
The timing has also raised questions about China’s expanding social credit infrastructure.
In March 2025, Chinese authorities released new guidelines aimed at improving and expanding the country’s social credit system. The system has increasingly intersected with financial and regulatory infrastructure, raising the possibility that greater monitoring of economic activity could influence how some individuals conduct transactions.
One possible explanation is that people facing restrictions or greater scrutiny in traditional financial channels could turn to alternative payment mechanisms. Stablecoins, particularly when held in self-custody, can provide a way to transfer value without relying directly on conventional banking or centralized crypto platforms.
However, the connection remains unproven.
The timing of the two developments is notable, but there is no evidence establishing that the expansion of the social credit system directly caused the surge in P2P stablecoin activity. Other factors, including the growing availability of stablecoins, demand for dollar-denominated assets and the need for alternative payment channels, could also be contributing to the increase.
Stablecoins Are Moving Fast
Perhaps the clearest indication of how these assets are being used comes from their velocity.
China’s self-custodied stablecoin holdings turned over at an estimated 33.2 times per year, compared with a global average of approximately 9.3 times.
Average holdings were around $3.1 billion, while approximately $104.1 billion moved across 18.1 million transfers during the study period.
That level of turnover suggests that stablecoins may be functioning less as passive investments and more as working capital or a payment mechanism.
In other words, users appear to be moving stablecoins repeatedly rather than simply holding them for long-term appreciation.
China’s experience highlights an important consequence of cryptocurrency restrictions: banning centralized exchanges does not necessarily eliminate demand for digital assets. Instead, activity can migrate toward self-custody, P2P networks and stablecoins, where transactions are harder to measure through conventional financial data.
The bigger question is whether this represents a temporary workaround to China’s crypto restrictions or the early development of a parallel digital payment economy operating largely outside traditional financial channels.
If China Banned Crypto Then Why Is Its Stablecoin Economy Exploding was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.