Despite the banning of cryptocurrency trading in China since 2021, recent reports have revealed that local governments are liquidating large amounts of Bitcoin seized from illegal activities, amid the absence of a clear regulatory framework, raising concerns among courts, the legal community, and the financial sector.
According to data, by the end of 2023, Chinese local governments held approximately 15,000 Bitcoins, valued at about 1.4 billion dollars. Reports also indicated that China has sold up to 194,000 Bitcoins since 2018, with a total value of nearly 16 billion dollars, making it the second-largest country holding Bitcoin after the United States, according to the Bitbo platform.
Private Companies Handling the Liquidation of Seized Digital Assets Sales are conducted through private companies such as "Jiafen Xiang," which reports that it has managed sales exceeding 3 billion yuan in cryptocurrencies over the past few years. These proceeds are converted into the local currency and deposited into local government accounts, making seized cryptocurrencies a significant source of income for some cities.
However, these practices occur amid the absence of clear regulations governing the handling of seized digital assets, leading to variations in procedures from region to region, and raising growing concerns that the lack of regulation could lead to corruption or abuse of power.
Calls for New Legislation to Regulate Seized Cryptocurrencies Judicial and financial circles in China are witnessing intense discussions to establish a unified legal framework for handling seized cryptocurrencies. Proposals are under consideration that include selling encrypted assets abroad or creating a national reserve, as indicated by lawyer "Gu Qihao" during a legal seminar held in January.
For his part, Professor "Chen Xi" from Zhongnan University argued that the continued sale of seized currencies is a temporary solution that does not align with the current prohibition policy, stressing that the rising number of cases and the growing scale of the funds involved necessitate a clearer and more stringent legal framework.
Significant Increase in Cryptocurrency-Related Crimes in China The year 2023 witnessed a surge in crimes related to cryptocurrencies in China, particularly in the areas of cyber fraud, money laundering, and illegal gambling. Data indicates that the value of funds linked to these crimes exceeded 59 billion dollars, with over 3,000 individuals charged with money laundering.
This increase has led to a significant rise in local government revenues from confiscations, with a 65% increase compared to the previous year, reaching 378 billion dollars, reflecting the growing importance of these assets as a source of income for local authorities, while simultaneously amplifying the need for clear and comprehensive legislation.
