Against the backdrop of slowing economic growth and increasing fiscal pressure in China, multiple local governments are quietly selling seized cryptocurrencies to generate cash and fill fiscal gaps. Despite cryptocurrency trading remaining illegal in mainland China, selling seized assets through corporate assistance remains in a regulatory gray area, raising concerns about transparency and corruption risks.
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ToggleChinese Local Governments Sell Cryptocurrencies as "Alternative Income"
According to Reuters, even though mainland China has comprehensively banned cryptocurrency trading and mining since 2021, local governments are actively selling seized crypto assets from illegal activities to convert them into cash and supplement local finances:
This behavior, navigating legal boundaries, raises concerns about government operational transparency and insufficient oversight mechanisms. Especially in a context of slowing economic growth and reduced tax revenue, selling cryptocurrencies has become a "extraordinary measure" for some local financial departments.
Private Enterprises Secretly Collaborate, Billions of Yuan Quietly Transferred Overseas
The report indicates that to avoid legal concerns, local governments generally entrust private enterprises to assist in cryptocurrency disposal. For example, Shenzhen's technology company Jiafenxiang has been representing multiple local governments in Jiangsu Province, including Xuzhou, Huaan, and Taizhou, in handling seized crypto assets since 2018, reportedly helping sell cryptocurrencies worth over 3 billion yuan:
These assets are mostly resold in overseas markets, with the proceeds converted to US dollars and then exchanged to yuan before being transferred to designated local financial bureau accounts.
Even though this operation is considered legal, the lack of external supervision and open audit processes still raises concerns about potential corruption and asset loss.
China's Strict Suppression vs. Hong Kong's Flexible Approach, Attitudes Vastly Different
In contrast to the frequent actions of local governments, the central government's stance on cryptocurrency remains stringent. Mainland China still prohibits individuals and enterprises from cryptocurrency trading and mining, while Hong Kong is moving towards openness, actively promoting crypto industry development and establishing trading license systems to become an Asian crypto financial center:
This policy gap highlights the different attitudes and governance models towards cryptocurrencies within and outside China.
China Still Second Largest Bit Holder Globally
Data from BitcoinTreasuries shows that the Chinese government currently holds approximately 190,000 Bit, second only to the United States' 198,000, making it the second-largest Bit holder nation.
Although China's official stance on cryptocurrencies leans towards prohibition, the seized asset and national-level reserve numbers demonstrate its continued significant influence in the global cryptocurrency market. This reveals China's pragmatic and even contradictory dual strategy between "banning" and "utilizing" cryptocurrencies.
Crypto Asset Disposal Becomes Judicial and Financial Focus
Facing the expanding scale of seized assets, the judicial and financial disposal of cryptocurrencies has become a central government focus. Early this year, the Supreme People's Court and multiple top universities held a symposium in Beijing, focusing on crypto asset legal processing methods.
The People's Bank also clearly mentioned in last year's year-end "Financial Stability Report" that it will strengthen crypto regulation and participate in global regulatory rule-making, indicating China is gradually moving from comprehensive suppression towards institutionalized monitoring and governance.
Risk Warning
Cryptocurrency investment carries high risks, and its price may fluctuate dramatically. You may lose all of your principal. Please carefully assess the risks.
