David Edwards
Despite the country’s stringent ban on cryptocurrency trading and ambiguous legal frameworks, local governments in China are increasingly using bitcoin sales to support public budgets as economic headwinds continue.
Reuters reported on April 16 that many local authorities in China have hired private companies to sell digital assets, including Bitcoin (BTC), that have been seized on overseas markets. These trades are intended to help struggling regional budgets by converting cryptocurrency holdings into fiat money, so getting around China’s official trading restriction.
According to Reuters’ study of court files and transaction records, local governments had almost 15,000 Bitcoin by the end of 2023, which is equivalent to about $1.4 billion. The lack of national regulations for handling confiscated assets and the decentralized nature of cryptocurrency have resulted in “inconsistent and opaque approaches,” according to legal experts, which raises questions about possible corruption and abuse.
These asset sales have become a substantial source of income despite the legal ambiguity. With an estimated 194,000 Bitcoin worth over $16 billion, China is currently the second-largest national holder of the cryptocurrency in the world, after the United States. This information comes from analytics platform Bitbo.
The tactic, according to Chen Shi, a professor at Zhongnan University of Economics and Law, is a “makeshift solution” that crosses the lines of China’s legal prohibitions on cryptocurrency transactions. Concerns over long-term effects, including the danger of unregulated asset management in a highly regulated financial sector, have been raised by legal professionals.
The pattern is in line with a dramatic rise in criminal convictions using cryptocurrency. More than 3,000 people were sued by the Chinese government in 2024 alone for crimes involving digital assets, such as money laundering, fraud, and unlawful gambling. The growing conflict between enforcement and financial necessity is further highlighted by these developments.
A more secure and legal method of handling confiscated cryptocurrency may be possible with centralized supervision by the People’s Bank of China (PBoC), according to a number of specialists. Guo Zhihao, a lawyer from Shenzhen, suggested that the central bank either keep the assets as a sovereign digital reserve or sell them on global markets.
