Amid mounting economic challenges and a growing pile of confiscated cryptocurrencies, local governments in China are increasingly liquidating seized digital assets to bolster strained public finances.
The practice raises legal and regulatory questions, especially concerning China’s blanket ban on crypto trading.
China Selling Seized Crypto To Bolster Treasury
China reportedly held around 15,000 Bitcoin (BTC) worth $1.4 billion by the end of 2024. According to River, a Bitcoin investment firm, this places the country among the top 15 global holders of the asset.
However, reports suggest China’s local governments are offloading digital currencies through private firms despite the national crypto ban.
Cas Abbe, a Web3 growth manager, and Binance exchange affiliate, noted on X that the dump in crypto prices may partly stem from these offloading activities.
“Local governments in China are selling seized crypto to top up their treasury. Despite the crypto trading ban in China, local governments are using private companies to offload their holdings. This explains pretty much the dump even before tariff news hit the market,” Abbe noted.
The surge in liquidations comes as authorities grapple with inconsistent policies for handling crypto seized from criminal investigations, which spiked sharply in 2023.
Over $59 billion was tied to crypto-related crimes in China that year. Blockchain security firm SAFEIS reported that more than 3,000 people were prosecuted for offenses ranging from internet fraud to illegal gambling.
Despite Beijing’s ban, local governments have reportedly turned to private firms to offload confiscated tokens. Specifically, they are converting them into cash to fund their treasuries.
Jiafenxiang, a Shenzhen-based technology firm, has sold more than 3 billion yuan ($414 million) worth of digital assets in offshore markets since 2018. Documents reviewed by Reuters link the company to liquidation deals with local authorities in Xuzhou, Hua’an, and Taizhou.
Though practical for cash-strapped regions, the process is legal gray territory. Such practices risk undermining the country’s crypto enforcement regime without clear regulatory frameworks.
“This raises so many questions about transparency. How are they even doing this legally?” noted one analyst in a post.
Experts are now calling for urgent regulatory reforms. These include judicial recognition of crypto as assets and the creation of standardized disposal mechanisms.
Some are even floating the idea of building a centralized national crypto reserve. This mirrors Trump’s administration’s proposals to manage seized assets more strategically.
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