China is considering introducing a nationwide policy to govern the handling of cryptocurrencies seized from criminal activities, Reuters reported on April 16.
According to the report, Chinese authorities have seized a growing number of digital assets related to illicit activities such as fraud and money laundering.
However, the absence of clear guidelines has led to varying disposal practices across regions.
This inconsistency has sparked concerns about potential misuse and corruption, prompting debates over the need for standardized regulations.
Chinese local governments are divesting crypto
China currently does not recognize cryptocurrencies as legal tender. Instead, they are treated as property.
This legal status has allowed local regions to liquidate the assets, but the growing scale of crypto-related offenses is now pushing authorities to rethink their approach.
Reuters, citing data from SAFEIS, reported that the value of crypto-linked crimes in China surged tenfold in 2023 to 430.7 billion yuan ($59 billion). Over 3,000 individuals were prosecuted for crypto-related money laundering during that period.
At the same time, authorities collected roughly 378 billion yuan in penalties and confiscated assets, a 65% rise over five years. The sale of these assets, often handled by private firms, has created a gray area with little oversight.
Liu Honglin, a legal advisor to provincial bodies, pointed out that digital assets have become a notable revenue source for local governments. Yet, he highlighted the absence of clear regulations overseeing the third-party companies facilitating these liquidations.
One such firm, Shenzhen-based Jiafenxiang, has sold over 3 billion yuan worth of crypto on behalf of various city governments since 2018. Its clients reportedly include Xuzhou, Hua’an, and Taizhou municipal administrations, all based in Jiangsu province.
Will China copy the US?
The fragmented and opaque system has sparked debate among policymakers and industry experts. Some argue China should consider retaining seized digital assets instead of selling them immediately.
Ru Haiyang, co-CEO of Hong Kong’s licensed exchange HashKey, suggested China adopt a centralized reserve model similar to a recent proposal in the United States. Under this strategy, the central government would retain confiscated assets as part of a long-term national plan.
This would mark a shift in policy and align more closely with emerging international trends.
President Donald Trump has recently pushed for creating a strategic Bitcoin reserve and a digital asset stockpile. These would allow the US to hold confiscated digital assets as part of a long-term national strategy.
If China adopts a similar approach, this would reflect a global shift toward treating crypto as strategic resources rather than disposable assets.
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