China Plans to Sell Seized Crypto via Hong Kong Exchanges

China plans to sell its seized cryptocurrencies through Hong Kong exchanges, collaborating with the China Beijing Equity Exchange. This initiative aims to manage and liquidate confiscated assets, with proceeds converted into yuan. This marks a significant shift in policy as mainland China remains opposed to crypto, while Hong Kong seeks to be a crypto hub. The move reflects the immense value of seized assets and opens conversations about differing regulations within China.

Beijing’s Public Security Bureau has announced plans to sell seized cryptocurrencies through licensed exchanges in Hong Kong. This initiative involves collaboration with the China Beijing Equity Exchange (CBEX), which will manage cryptoassets confiscated in criminal activities. To facilitate the sales, CBEX will partner with third-party agencies on regulated trading platforms. The proceeds from these sales will be converted into yuan and allocated to specific accounts, marking a significant development for crypto management in China.

This move represents the first official process established by a mainland Chinese agency to dispose of seized virtual currencies, showcasing a unique approach given China’s strict ban on cryptocurrency trading. Meanwhile, Hong Kong is working to position itself as a notable hub for virtual assets, setting the stage for an intriguing regulatory dynamic in the region.

China’s new framework for crypto disposal highlights the scale of digital assets that have been seized since the ban. By late 2022, the value of these confiscated cryptocurrencies had reached several billion dollars. Astonishingly, in 2023 the estimated worth ballooned to about 430.7 billion yuan—approximately $60 billion—a twelvefold increase compared to the prior year. This aligns with a global trend where countries like the U.S. and the U.K. have also accrued vast amounts of seized cryptocurrencies.

Reports suggest that China holds about 194,000 Bitcoin and 833,000 Ethereum, making it one of the largest state holders of these digital currencies globally, despite its outwardly negative stance on cryptocurrency. Such a volume of seized assets presents both obstacles and opportunities for the authorities, who must weigh concerns over market interference against the imperative to convert illicit funds into legitimate state resources.

The decision to liquidate these digital assets through Hong Kong exchanges embodies a dual regulatory strategy within China. While mainland China enforces one of the strictest bans on cryptocurrencies, preventing exchanges and initial coin offerings since 2017, Hong Kong has been actively crafting a regulatory environment aimed at attracting institutional investors.

In a somewhat unconventional approach, Chinese officials have been attending cryptocurrency events in Hong Kong. This has allowed the city to serve as a testing ground for digital asset policies that are not yet embraced by mainland authorities. This relationship lets Beijing retain control over financial systems in the mainland while leveraging Hong Kong’s more flexible regulatory framework to explore the potential benefits of cryptocurrencies.

The partnership between the Public Security Bureau and Hong Kong exchanges manifests a formal connection between China’s rigorous control mechanisms and the global cryptocurrency economy. This may set important precedents for other regions with restrictive crypto policies, showcasing how one country can navigate different regulatory architectures within its own territories.