Chinese authorities have started selling confiscated cryptocurrency to supplement the budget

What’s new? Municipal governments in China are eager to get rid of confiscated cryptocurrency, but are facing difficulties due to the country’s crypto trading ban. In addition, the lack of clear orders on how to manage seized digital assets poses risks of corruption, Reuters reports.

Material by Reuters

What else is known? For example, authorities are resorting to private companies to sell seized cryptocurrency on offshore markets in exchange for cash to replenish the budget, journalists report, citing transactions and court documents.

At the end of 2023, local governments owned approximately 15 000 bitcoins worth $1,4 billion, and the sales have become a significant source of revenue.

According to Bitbo, China owns a total of 194 000 BTC worth $16 billion and is the second largest asset holder among nations after the United States.

Zhongnan University of Economics and Law professor Chen Shi said in comments to Reuters that these sales are a “makeshift solution that, strictly speaking, is not fully in line with China’s current ban on crypto trading.”

The problem has been exacerbated by the rise of cryptocurrency crime in the country, from online fraud to money laundering and gambling. In 2024 alone, more than 3000 people were prosecuted for money laundering through cryptocurrencies.

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Shenzhen-based lawyer Guo Zhihao believes the central bank is better equipped to handle confiscated digital assets and should either sell them abroad or set up a crypto reserve.

Ru Haiyang, co-CEO at Hong Kong crypto exchange HashKey, also noted that federal authorities may want to keep confiscated bitcoins as a strategic reserve, as US President Donald Trump is doing.

In addition, a sovereign crypto fund could be launched in Hong Kong, a special administrative region of the PRC where cryptocurrency trading is legal.

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The issue of bitcoin sales by local governments has attracted attention amid the escalating trade war between the US and China, by mutually increasing tariffs on imports.

According to some industry experts, China’s tariff response could lead to a devaluation of the local currency, which in turn would cause capital to flow into cryptocurrency as a means of preserving value.