China Seizes $1.4 Billion in BTC, Prompts Debate on Crypto Regulation

Local authorities in China have seized 15,000 BTC, valued at approximately $1.4 billion, from illegal transactions. This seizure has prompted local officials to explore ways to dispose of these assets, with selling seized cryptocurrencies emerging as a significant revenue source for local governments. These governments have partnered with private companies to convert the seized crypto assets into cash to support public finances. However, this practice conflicts with China’s ban on crypto trading, which has raised debates over regulations and the handling of seized digital assets.

The lack of clear regulations on managing seized cryptocurrencies has led to inconsistencies and concerns about corruption. Senior judges, police, and lawyers are currently discussing potential regulatory changes to address this issue. Sources familiar with the matter suggest that China’s central bank is best suited to manage these crypto assets, either by selling them overseas or establishing a crypto reserve.

The surge in crypto-related criminal cases has further complicated the situation. In 2024, China filed lawsuits against 3,032 individuals involved in crypto-related money laundering. This rise in crypto crimes aligns with a 65% increase in government fines and revenue from consolidated assets over the past five years. As a result, seized cryptocurrencies have become a significant source of income for local authorities in regions with high crypto activity.

Despite the ban on crypto trading, a significant portion of the Chinese population owns cryptocurrencies. An estimated 5.5% of China’s population, or 78 million people, own various crypto assets. Specifically, China holds 194,000 BTC worth $16.3 billion, making it the second-largest holder behind the United States. This widespread adoption highlights the need for legal clarity and proper regulation to curb criminal activities and boost the wider crypto market. The current regulatory vacuum leaves room for more criminal activities as crypto continues to gain popularity.