China’s Cryptocurrency Dilemma: Seizures Without a Legal Framework

In 2023, China seized over $59 billion in crypto crimes, holding around 15,000 Bitcoin. Local governments are selling confiscated tokens abroad, generating cash for their budgets. Despite its vast crypto holdings, China lacks a national regulatory framework. Two emerging strategies for managing these assets are either to exploit them for state benefits or to formalise legal structures for oversight. Such decisions may impact global crypto markets significantly.

In 2023, China has seized over $59 billion related to cryptocurrency crimes. Despite an official ban on cryptocurrency trading and a lack of legal recognition for digital tokens, authorities are converting these assets into cash. An increase in cybercriminal activities such as scams and money laundering has prompted extensive legal actions against over 3,300 individuals involved in these crimes this year alone.

As a result of these seizures, local governments are taking measures to manage confiscated cryptocurrencies. Some have partnered with private companies to liquidate Bitcoin and other tokens in international markets, generating substantial revenue. Since 2018, one firm has liquidated more than $400 million in crypto, aiding local budgets amid economic downturns.

China currently holds approximately 15,000 Bitcoin, worth around $1.4 billion, which positions it as one of the largest holders of cryptocurrencies globally. Despite this significant trove, the country lacks a cohesive legal framework for utilising these assets. This scenario leaves local authorities with considerable discretion over the handling of seized cryptocurrencies.

There are two principal strategies China might pursue regarding these crypto assets. The first is to continue leveraging seized cryptocurrencies for state benefit without offering equivalent freedoms to domestic citizens. Alternatively, China may choose to develop a comprehensive legal framework to manage and regulate its crypto holdings, promoting transparency and accountability.

As the landscape evolves, it is clear that China’s amassed crypto assets are increasingly important and may shape future economic policies. The government’s decisions regarding these holdings could also influence global cryptocurrency markets, particularly Bitcoin’s valuation.