Chinese local governments are selling around $1.4 billion worth of confiscated cryptocurrencies, exposing regulatory gaps that may foster corruption. This activity lacks national oversight, raising concerns among experts. The volume of confiscated assets coincides with rising related criminal activity, urging reforms. Legal experts suggest a controlled approach by the central bank, while China’s position on crypto remains complicated amid trade tensions with the U.S.
Chinese local governments have been engaged in the sale of approximately $1.4 billion worth of confiscated cryptocurrencies, operating under a regulatory loophole that could potentially lead to corruption and challenge the nation’s prohibition on crypto trading. Reuters reported that regional authorities are collaborating with private firms to liquidate seized digital currencies, transforming them into cash to support cash-strapped local budgets.
Experts are increasingly concerned about these sales, which seem to violate the existing crypto trading ban in China. Chen Shi, a professor at Zhongnan University of Economics and Law, remarked that such practices pose significant risks given the lack of national guidelines regarding the management of confiscated digital assets.
The volume of confiscated cryptocurrencies has surged alongside rising crime associated with digital assets in China. As of 2023, the country reportedly possessed around 15,000 Bitcoins valued at $1.4 billion, although blockchain analytics firm Bitbo suggests the actual figure could be as high as 194,000 Bitcoins, equating to approximately $16.3 billion, placing China just behind the U.S. in government-held Bitcoin assets.
This scenario illustrates China’s intricate dynamics with cryptocurrencies. Despite imposing a trading ban in 2021, the government now holds significant crypto reserves accumulated from crackdowns on fraud, gambling, and money laundering activities. To mitigate potential misuse, legal experts advocate for reforms, with suggestions for China’s central bank to manage these assets, either through overseas sales or establishing a national crypto reserve similar to proposals previously made by U.S. leadership.
With the rise of crypto-related criminal activities — which, according to blockchain security firm SAFEIS, increased tenfold to approximately 430.7 billion yuan ($59 billion) in 2023 — the scrutiny over digital assets in China is intensifying. Last year, the courts prosecuted over 3,000 individuals for crypto-related money laundering crimes, highlighting a growing concern.
Analysts perceive that Beijing may be enhancing its oversight of crypto assets to avert capital flight amid escalating trade tensions with the U.S. Recently, former BitMEX CEO Arthur Hayes speculated that impending American tariffs could lead to a shift from the Chinese yuan into Bitcoin.
