China Sells Seized Bitcoin to Boost Economy
China Liquidates Seized Bitcoin to Bolster Economy
Reports indicate that Chinese local governments are selling off significant amounts of seized Bitcoin to replenish public funds amid a slowing economy. This comes despite China's ongoing ban on cryptocurrency trading and exchanges.
The lack of clear regulations on handling confiscated cryptocurrency has led to inconsistent and opaque practices, raising concerns about potential corruption, according to a recent Reuters report. Local authorities are reportedly using private companies to sell the Bitcoin in offshore markets.
Scale of the Liquidation
At the end of 2023, local governments held approximately 15,000 Bitcoin (BTC), valued at $1.4 billion. These sales have become a substantial source of revenue for these governments.
Estimates suggest China holds a total of approximately 194,000 BTC, worth roughly $16 billion, making it the second largest Bitcoin holder globally, after the United States.
Legal and Economic Implications
Professor Chen Shi of Zhongnan University of Economics and Law notes that these Bitcoin sales are a "makeshift solution" that contradicts China's official ban on crypto trading. The surge in crypto-related crime in China, including fraud, money laundering, and illegal gambling, has exacerbated the issue. In 2024 alone, the state prosecuted over 3,000 individuals involved in crypto-related money laundering.
Proposed Solutions: Centralized Management or Strategic Reserve?
Experts suggest several alternatives to the current ad-hoc approach. Shenzhen-based lawyer Guo Zhihao proposes that the central bank manage seized digital assets, either selling them overseas or establishing a national crypto reserve. This mirrors suggestions from others to create a sovereign crypto fund in Hong Kong, where crypto trading is legal.
Ru Haiyang, co-CEO of HashKey, a Hong Kong-based crypto exchange, supports the strategic reserve idea, drawing parallels to potential US strategies.
Geopolitical Context and Market Impact
These developments occur against a backdrop of rising US-China trade tensions and President Trump's plans to regulate stablecoins and encourage crypto innovation. Some analysts suggest that China's potential tariff responses could devalue the yuan, potentially leading to increased capital flight into cryptocurrencies.
Codeum: Your Partner in Blockchain Security
Navigating the complex regulatory landscape of the crypto industry requires expertise and vigilance. Codeum provides comprehensive blockchain security and development services, including smart contract audits, KYC verification, custom smart contract and DApp development, tokenomics and security consultation, and partnerships with launchpads and crypto agencies. Contact us today to secure your blockchain project.