China's Crypto Seizures Surge 65% as Regulatory Debate Intensifies

China is intensifying efforts to clarify how to handle a growing stash of cryptocurrencies seized in criminal cases. The absence of unified rules has raised concerns over corruption and inconsistent enforcement. Although crypto trading is banned in China and digital assets are neither legal tender nor recognized property, local courts and governments have continued to seize Bitcoin and other tokens linked to crimes ranging from internet fraud to illegal gambling.

Legal and enforcement experts are now calling for regulatory reform to bring transparency and structure to this grey area. Without established guidelines, there are fears that the current ad hoc handling could embolden criminal networks or create opportunities for abuse within the system. Local governments, under fiscal pressure from China’s slowing economy, have enlisted private firms to liquidate seized cryptocurrencies, converting digital coins into cash to supplement government funds.

These debates come amid a rapid rise in crypto-linked criminal prosecutions. In 2023 alone, Chinese authorities filed charges against over 3,000 individuals for crypto-related money laundering, with total funds involved in such crimes surging tenfold. The financial stakes are rising alongside enforcement, with penalty and confiscation revenues collected by local governments reaching significant amounts last year, a 65% increase from 2018.

Despite Beijing’s sweeping ban on cryptocurrency trading and mining in recent years, many Chinese citizens have continued to use offshore exchanges and peer-to-peer methods to access digital assets, often routing transactions through VPNs or overseas platforms. This has complicated enforcement and blurred the line between personal use and criminal conduct.

Debates over seized crypto are escalating, and policymakers may now be forced to draft new national-level guidelines. Legal observers believe a formal regulatory response could follow soon, which may reshape how China handles digital assets caught in its legal net. The rapid rise in crypto-linked criminal prosecutions and the growing stash of seized cryptocurrencies have highlighted the need for clear regulations to manage these assets effectively.