While the Chinese government has spent years enforcing strict capital controls, the country’s money launderers have spent those same years devising means of subverting such restrictions, including the use of Bitcoin and other cryptocurrencies.

In a recent paper, Kathryn Westmore, senior research fellow at the Centre for Finance and Security, Royal Services Institute, argued that cryptocurrencies play a major part in the Chinese money laundering business model, despite Beijing’s formal hostility to digital assets.

“Increasingly, [Chinese Money Laundering Organisations] are incorporating cryptocurrencies within their operations, providing criminals with virtual assets, such as Bitcoin, or stablecoins, such as Tether USDT ($1.00), in return for their dirty cash,” Westmore said in the report published this month.

“In this case, the virtual assets serve as the vehicle for Chinese individuals to transfer their wealth out of the country, despite China’s efforts to crack down on the use of Bitcoin and other cryptocurrencies.”

Westmore’s observation doesn’t stand in isolation. Crypto crime has skyrocketed in 2025, with investor losses climbing above $2.3 billion. Meanwhile, so-called pig-butchering scams are also on the rise, with $4 billion stolen from victims in 2024, according to Chainalysis.

Chinese money laundering groups have become major launderers for Western organised crime, including the fentanyl supply chain, according to the paper. Their operation utilises cryptocurrencies to transfer funds from US street corners to offshore portfolios of wealthy Chinese clients.

Also, many Chinese sellers of fentanyl precursor chemicals accept Bitcoin and USDT, thus turning cryptocurrencies into the de facto clearing systems for key inputs in the synthetic opioid trade, the paper stated.

And there’s onchain data to support the claim.

Blockchain security firm Elliptic has published several records showing onchain payments to Chinese businesses linked to the global fentanyl trade.

With global crypto payment rails embedded in the sophisticated and transnational Chinese money laundering architecture, Westmore argues that no single jurisdiction can tackle the problem alone.

In October, Europol officials bemoaned the growing sophistication of crypto crimes, including those used to support drug trafficking, and said the policing endeavour places a “significant burden” on law enforcement.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. Got a tip? Please contact him at osato@dlnews.com.