China Liquidates Seized Crypto Assets Amid Financial Challenges

China’s local governments are liquidating seized cryptocurrencies to augment public finances despite a national ban on crypto trading. Reports indicate that the country holds significant Bitcoin assets while selling off these cryptocurrencies through private firms raises legal concerns. Calls for regulatory reform are emerging as experts demand clear frameworks for managing confiscated digital assets.

China is increasingly liquidating confiscated cryptocurrencies amid economic difficulties. Local governments are doing this to strengthen public finances despite the nation’s comprehensive ban on crypto trading. The practice raises critical legal and regulatory issues, particularly regarding the handling of these seized digital assets in a prohibitive environment.

By the end of 2024, China reportedly held approximately 15,000 Bitcoin (BTC) valued at $1.4 billion, making it one of the largest global holders. However, local authorities are allegedly using private firms to sell these assets, contravening the national crypto trading ban. This situation may be contributing to downward pressure on crypto prices, as observed by Web3 expert Cas Abbe.

As local governments offload digital currencies, inconsistent policies surrounding crime-related seizures have emerged. In 2023, a staggering $59 billion was linked to crypto-related criminal activities in China, with over 3,000 prosecutions for offences like internet fraud and illegal gambling.

Since 2018, Shenzhen-based Jiafenxiang has sold over 3 billion yuan ($414 million) worth of digital assets, facilitating deals with local authorities in areas such as Xuzhou and Taizhou. While this approach provides a much-needed financial boost, it exists within a legal grey area that could potentially weaken the enforcement of existing crypto regulations.

Analysts have raised concerns about the transparency and legality of these practices, prompting calls for urgent reforms. Suggested reforms include legally recognising cryptocurrencies as assets and establishing standardized disposal processes. Some experts are also advocating for a national crypto reserve, similar to proposals made by the Trump administration for strategic management of seized assets.