When withdrawing funds from the cryptocurrency market, funds or bank cards are frozen by the police or banks. The core reason is the illegality of virtual currency transactions and the risks involved in the flow of funds (especially those related to illegal crimes). Specifically, this can be analyzed from two perspectives: police freeze and bank freeze, combined with legal provisions and actual scenarios:

First of all, it needs to be made clear: According to the (Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation) issued by the People's Bank of China and other departments in 2021, virtual currency is not legal tender and does not have the same legal status as legal tender; any organization or individual that engages in virtual currency token issuance financing, trading speculation, exchange, intermediary and other businesses are all illegal financial activities.


This characterization determines that all "withdrawals" involving virtual currency (essentially, exchanging virtual currency for legal tender) are already within the regulatory red line, and the flow of funds is naturally included in the key risk monitoring scope of banks and public security.

The freezing of bank cards/funds by the public security department is essentially a criminal investigation measure. This is usually because the capital chain during the withdrawal process is linked to "involved funds" in a criminal case (such as fraud, money laundering, gambling, telecommunications fraud, etc.). Specific scenarios include:

1. The upstream funds are “proceeds of crime” (the most common reason)

In cryptocurrency transactions (especially C2C transactions, i.e., person-to-person exchanges), the "withdrawal funds" you receive after selling virtual currency may come from the criminal proceeds of others:


  • Example 1: Someone defrauds a victim of funds through telecom fraud and then uses the funds to purchase your virtual currency on the platform ("laundering" the criminal funds). The "withdrawal funds" you receive are actually the proceeds of the fraud.

  • Example 2: An online gambling platform splits gambling funds across multiple accounts and uses them to purchase virtual currency. The funds you receive as the seller are considered gambling funds.

  • Example 3: Hackers steal company funds and transfer them through virtual currency transactions. The funds you receive may involve embezzlement or theft.


When the police investigate the aforementioned criminal cases, they will trace the flow of funds back to your bank card and freeze it according to law (Article 144 of the Criminal Procedure Law: Investigative agencies may seal, seize, or freeze property related to the case). The purpose is to secure evidence and recover the stolen funds. 2. You are suspected of aiding and abetting fraud or money laundering. If you are aware that virtual currency transactions may be used to transfer criminal funds and still frequently withdraw funds or provide your bank card to facilitate transactions, you may be suspected of a criminal offense:

  • Aid to information network crime: providing payment and settlement assistance for crimes (e.g. using one's own bank card to receive funds involved in the case and then transferring them away), punishable by up to three years in prison;

  • Money laundering: Knowing that the funds are proceeds of crimes such as drugs, organized crime, fraud, and smuggling, but still "covering up and concealing" the source of funds through virtual currency transactions, may result in a maximum sentence of 10 years in prison.


At this time, the public security freeze is not only "freezing funds", but may also launch an investigation into you.

3. Bank freeze: This is due to a transaction triggering "compliance risk control" and is classified as "administrative freeze/control"

Bank freezes (or restrictions on bank card functions) are not directly related to criminal cases. Instead, they are preventative controls on "abnormal transactions" based on compliance requirements such as Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT). Specific reasons include:

1. The transaction characteristics meet the "suspicious transaction" criteria

According to the Measures for the Administration of Reporting Large and Suspicious Transactions of Financial Institutions, the following withdrawal behaviors will trigger an early warning in the bank's risk control system:


  • Large/Frequent Transactions: Multiple withdrawals in a short period of time (e.g., multiple transfers of over 50,000 yuan in a single day), large single withdrawal amounts (e.g., over 500,000 yuan), and an inability to reasonably explain the purpose of the funds;

  • Abnormal fund flows: Withdrawals originate from multiple unfamiliar individual accounts (rather than legitimate companies/platforms), or funds are immediately transferred to other accounts upon receipt ("quick in, quick out"), consistent with "splitting funds to circumvent regulation";

  • The account usage does not match your identity: Your bank card is usually used for daily consumption (such as a monthly flow of several thousand yuan), but suddenly there are hundreds of thousands of yuan in virtual currency withdrawals, which is seriously inconsistent with your occupation and income level.


Upon discovering the above situation, the bank will first restrict non-over-the-counter transactions on your bank card (no transfers or withdrawals, only over-the-counter transactions). If you cannot provide proof of the legal source of your funds, they may further freeze your account. 2. The bank identifies the "virtual currency transaction" attribute. Currently, banking systems can identify your funds as being related to virtual currency through transaction notes (such as "Bitcoin withdrawal" or "USDT exchange"), counterparty accounts (such as other personal accounts that frequently participate in cryptocurrency transactions), and platform funding links (such as funds originating from third-party payment channels of virtual currency trading platforms).
Since virtual currency transactions are clearly defined as "illegal financial activities", banks will take control measures on accounts involving virtual currencies (such as freezing and providing explanations within a specified period) in accordance with regulatory requirements to avoid being held responsible for "failing to fulfill anti-money laundering obligations" (if banks fail to identify suspicious transactions in a timely manner, they may be fined by the central bank or even have their licenses revoked).

4. Key Difference: Public Security Freeze vs. Bank Freeze

The two are essentially different in the reasons for freezing, duration, and unfreezing methods, which can be distinguished by the following table:


Dimensions: Public Security Freeze (Judicial Freeze) Bank Freeze (Compliance Control) Triggering Reasons: Funds are related to criminal offenses (stolen funds, funds involved in the case) Abnormal transactions trigger anti-money laundering risk control Freeze Subject: Public Security Bureau (such as the Economic Investigation Detachment, the Criminal Investigation Detachment) Commercial Bank (such as ICBC, CMB, etc.) The freezing period is generally 6 months, which can be extended (no upper limit) Short-term control (such as 3-7 days), and the user must provide proof before the freeze is lifted Unfreezing Conditions: The case investigation is completed and it is confirmed that the funds are not related to the crime; or after you cooperate in returning the stolen funds, the public security will issue an unfreezing document Provide the bank with proof of the legal source of the funds (such as transaction records, platform instructions, but if virtual currency is involved, the proof may be invalid)

5. Important reminder: What should I do if my withdrawal is frozen?

  1. First, confirm the freezing entity: check the freezing agency (whether it is a public security bureau or a bank) through the bank app or at the bank counter, and obtain a freezing notice (the public security bureau will issue a (deposit freezing notice), and the bank will inform you of the control reason);

  2. Cooperate with the investigation (Public Security Bureau Frozen): If the funds are frozen by the public security authorities, proactively contact the investigating authorities (contact information is provided on the notice), explain the withdrawal details (e.g., provide virtual currency transaction records, platform account numbers), and prove your ignorance (e.g., you were not aware that the funds were stolen). If the funds were indeed legally obtained, you can apply for unfreezing after the case is concluded;

  3. Explain the purpose of funds (bank freeze): If the funds are under bank control, bring your ID and bank card to the bank counter and explain the source of the funds (note: you cannot directly say "virtual currency withdrawal", otherwise the bank may refuse to unfreeze the funds due to "involvement in illegal financial activities". You need to provide a reasonable explanation based on the actual situation, such as "personal idle funds turnover", but make sure not to make false statements);

  4. Beware of the "thawing scam": Anyone claiming that "money can unfreeze" or "internal connections can unfreeze" is a scam. Unfreezing can only be done through formal judicial or banking procedures.


    What are some tips to avoid pitfalls? Help you avoid 90% of freezing risks

    Preventing a problem is always better than fixing it. Remember these four tips to avoid most freezing issues:

    1. Never engage in private transactions

    Scammers often lure customers with promises of "hundreds of yuan off" by transferring funds privately. Bypassing the platform's guaranteed transactions, not only can funds be lost, but you also risk being implicated in a crime—after all, you have no idea whether the other party's funds are sourced cleanly.

    2. Keep complete transaction records

    Exchange order screenshots, transfer receipts, and chat logs with the seller—all three must be complete, preferably stored both locally on your phone and in a cloud drive. Missing any one of these items could lead to a situation where you're unable to prove your innocence when unfreezing your funds.

    3. Take immediate action if you discover anomalies

    If you haven't received your coins, the platform reports an issue with the seller's account, or the seller loses contact after a transfer... If anything seems amiss, don't hesitate to contact the platform's customer service or the police. Also, try contacting the police who froze your account to explain the situation. Being proactive is a hundred times better than waiting passively.

    4. Regular cooperation with established merchants

    Only trade with established merchants on the platform who have high ratings, a high volume of transactions, and can provide regulatory compliance credentials. Don't partner with random, unfamiliar sellers just to save a few bucks—their financial backgrounds are unclear and the risk is high.

Summarize

The core contradiction behind the freezing of cryptocurrency withdrawals lies in the conflict between the illegality of virtual currency transactions and financial regulatory compliance. Because virtual currencies are often used to transfer criminal funds, public security and banks are forced to resort to freezing measures to mitigate these risks. Essentially, the only way to avoid freezing is to stay away from virtual currency transactions (since transactions themselves are not legally protected, even if funds are frozen, they may be impossible to recover).