China Selling Seized Crypto to Top Up Coffers as Economy Slows: Report

China Reportedly Selling Seized Crypto Amid Economic Pressures and Regulatory Gaps

Facing mounting economic challenges and growing public budget needs, local governments in China are reportedly selling off large stashes of seized cryptocurrency—despite the country’s ban on crypto trading. According to an April 16 Reuters investigation, these governments are utilizing private companies to conduct offshore sales, raising legal and ethical concerns.

The lack of a standardized national policy on how to manage confiscated digital assets has led to what legal experts describe as "inconsistent and opaque approaches," potentially opening the door to misuse or corruption.

Billions in Bitcoin Held by Chinese Authorities

Reuters cited court and transaction records revealing that local governments held around 15,000 Bitcoin (BTC)—worth an estimated $1.4 billion at the end of 2023. These sales have become a notable source of revenue for local authorities.

Overall, China is estimated to control approximately 194,000 BTC valued at $16 billion, making it the second-largest national Bitcoin holder, trailing only the United States, according to blockchain analytics site Bitbo.

Countries and governments that hold BTC. Source: Bitbo

Legal and Strategic Tensions Emerge

Chinese law technically prohibits cryptocurrency trading and ownership for private individuals and entities. Yet, the handling of seized crypto assets remains in a legal grey area.

"This is a makeshift solution that, strictly speaking, is not fully in line with China’s current ban on crypto trading," said Chen Shi, a professor at Zhongnan University of Economics and Law.

This legal loophole has become more urgent due to the rise in crypto-related crime across the country. In 2024 alone, the Chinese government filed lawsuits against over 3,000 individuals involved in illegal activities such as online fraud, money laundering, and underground gambling.

Calls for Central Oversight and Strategic Reserves

Several legal and industry experts have called for a more centralized and strategic approach. Shenzhen-based lawyer Guo Zhihao suggested that the People’s Bank of China should oversee seized digital assets and either manage their liquidation offshore or hold them as part of a national crypto reserve.

Ru Haiyang, co-CEO of Hong Kong-based crypto exchange HashKey, echoed this sentiment, proposing that China consider maintaining its confiscated Bitcoin as a strategic digital reserve—similar to ideas floated by former U.S. President Donald Trump.

Others have proposed the creation of a crypto sovereign wealth fund in Hong Kong, where crypto trading is legal and more transparent regulation exists.

Geopolitical and Economic Backdrop

The debate around China’s crypto holdings is unfolding alongside heightened U.S.-China trade tensions and Trump’s renewed push for pro-crypto regulation, including plans to regulate stablecoins and encourage blockchain innovation in the U.S.

Analysts suggest that if China responds to tariffs with currency devaluation, it could spur increased capital flight into cryptocurrencies, further complicating Beijing’s stance on digital assets.

Conclusion

As China’s economy continues to slow, and with growing pressure to fill public coffers, the handling of seized crypto has become both a practical tool and a political challenge. Whether Beijing chooses to formalize crypto holdings into a strategic reserve or continue selling them through opaque channels remains to be seen—but the implications could be global.