Reuters reports that China may attempt to liquidate approximately 15,000 confiscated Bitcoins, impacting market prices negatively. The ban on Bitcoin trading complicates these efforts, prompting calls for clearer regulations. The report also highlights a significant rise in crypto-related crimes in China and suggests the potential for controversial liquidations by local governments to support finances amid economic challenges, with implications for the legal status of digital currencies in the country.
A new Reuters report indicates that China is contemplating liquidating a significant amount of seized Bitcoin, which could negatively impact Bitcoin’s market price. Local Chinese governments are reportedly working with private firms to convert these confiscated Bitcoins into cash to improve public finances compromised by economic stagnation.
Chinese authorities may be poised to sell off approximately 15,000 Bitcoins, which contradicts the existing ban on Bitcoin trading. Legal experts, including Chen Shi from the Zhongnan University of Economics and Law, express concern that these actions are not compliant with current crypto regulations. This has highlighted an urgent need for a coherent regulatory framework for managing confiscated digital assets.
The opaque management of confiscated cryptocurrencies in China has led to worries over corruption and an increase in crypto-related crime. According to SAFEIS, financial crimes involving Bitcoin and digital currencies climbed to 430.7 billion yuan (approx. $59 billion) in 2023, marking a tenfold escalation. Additionally, over 3,000 individuals were prosecuted for money laundering associated with cryptocurrency last year.
Despite prohibitions on crypto trading, local governments benefit from proceeds derived from forced liquidations. For example, Jiafenxiang, a tech company in Shenzhen, has reportedly facilitated the sale of cryptocurrencies worth over 3 billion yuan for municipal authorities in Jiangsu province, converting US dollar proceeds into yuan for local financial agencies.
Current discussions surrounding regulatory reforms are intensified by the geopolitical climate, particularly the ongoing tensions with the US amid Donald Trump’s presidency, which promotes cryptocurrency deregulation. Shenzhen-based lawyer Guo Zhihao suggests that the People’s Bank of China should consider strategies similar to those advocated by Trump, potentially creating a reserve or liquidating seized assets.
Legal analysts, including Sun Jun from Shanghai Landing Law Offices, identify potential profit for private companies aiding in the disposal of these assets but demand stringent guidelines to define the legal status of tokens. Winston Ma, an NYU Law School adjunct professor, advocates for a centralized management approach to maximize the utility of seized cryptocurrencies, possibly via a sovereign fund in Hong Kong, favourable to digital trading.
The speculation surrounding China’s Bitcoin hoard is pronounced, as local governments are estimated to hold around 15,000 Bitcoins, positioning China as one of the largest institutional Bitcoin holders globally. Some of these holdings result from a crackdown on illegal operations, including the notorious PlusToken Ponzi scheme, which accounted for the seizure of 194,775 Bitcoins—currently unverified whether these assets have been sold or retained by the state.
As of the latest updates, Bitcoin is trading at $84,071, with market analysts keeping a keen eye on these developments that may influence Bitcoin’s trajectory in the near future.
