Chinese Local Governments Raise $1.4 Billion by Selling Seized Bitcoin

Chinese local governments have been discreetly liquidating seized cryptocurrencies, primarily Bitcoin, to generate significant public revenue. This practice has resulted in a $1.4 billion surge in public finances, despite the national ban on crypto trading. The seized Bitcoin, valued at approximately $1.4 billion, has been offloaded through private firms operating in offshore markets. This strategy has become a crucial source of liquidity for local governments, especially in the face of economic challenges and declining tax revenues.

However, this approach has sparked controversy due to the lack of unified guidelines on handling confiscated digital assets. The absence of clear policies has created a regulatory vacuum, raising concerns about potential abuse and corruption. The sale of digital assets through private intermediaries outside mainland China circumvents the country’s strict crypto trading ban, highlighting the need for more transparent and regulated processes.

The surge in crypto-related crime has added urgency to the issue. In 2024, the Chinese government prosecuted over 3,000 individuals involved in crypto-linked money laundering, leading to a significant increase in seized digital assets. This influx has overwhelmed existing legal frameworks, further complicating the management of confiscated cryptocurrencies.

Despite the national ban on crypto trading, China holds one of the world’s largest Bitcoin reserves, estimated to be around 194,000 BTC, valued at over $16 billion. This positions China as one of the biggest Bitcoin owners globally, second only to the United States. The contradiction between China’s public stance on crypto and its substantial digital asset holdings has fueled debates about the country’s long-term crypto strategy.

Legal and industry experts have proposed that the People’s Bank of China (PBoC) should take responsibility for managing seized digital assets. Suggestions include selling these assets in approved jurisdictions or establishing a national crypto reserve. This centralized management would provide a legal infrastructure to handle and potentially invest in digital assets without violating mainland policies. Additionally, rising geopolitical tensions with the United States have added strategic value to China’s crypto assets, emphasizing the need for a more controlled and legal system to manage them effectively.