BlockBeats reported on Sept. 28 that China’s Ministry of State Security published an article on its official WeChat account titled “Crypto crime can’t be traced? Think again!”, saying the idea that cryptocurrency transactions are “anonymous” and “untraceable” has been heavily promoted by bad actors as a selling point, but does not hold up from a technical standpoint.
The ministry said blockchain systems are built around core features such as transparency and tamper-resistant on-chain data. Because transaction records and related data are preserved in full, they can serve as the basis for end-to-end tracing.
Every transaction leaves a permanent public record
According to the article, every cryptocurrency transaction, regardless of size, time, or location, is permanently and publicly recorded on a shared ledger. The distributed bookkeeping structure of blockchain means that once transaction information is written on-chain, it cannot be deleted or altered.
The ministry said the anonymity effect associated with wallet addresses only creates a temporary separation between an address and the user’s real identity. It does not amount to true identity concealment.
Exchange activity can leave device and network traces
On tracing transaction paths, the article said that although wallet addresses appear as strings of characters, conversions between cryptocurrencies and fiat currencies, as well as exchanges between cryptocurrencies, must go through trading platforms and payment interfaces. In that process, traces such as device identifiers and network IP addresses can be left behind.
The ministry added that professional institutions can use on-chain data analysis and big-data comparison tools to trace the actual user behind a wallet address and reconstruct the full path of fund flows.
Private key loss and platform custody both carry risk
The article also discussed private key security. In a blockchain system, if a private key is held by an individual, it is the sole credential for controlling the related cryptocurrency, with no loss reporting or recovery channel available. If the private key is lost, leaked, or stolen, the holder loses control of the assets.
If the private key is instead kept by a trading platform, users may be able to recover account credentials through an appeal process, but they must also bear the risk that the platform could collapse or become unreachable.