China is considering introducing a nationwide policy to govern the handling of cryptocurrencies seized from criminal activities. Chinese authorities have seized a growing number of digital assets related to illicit activities such as fraud and money laundering. The absence of clear guidelines has led to varying disposal practices across regions, sparking concerns about potential misuse and corruption. Currently, China does not recognize cryptocurrencies as legal tender, but as property, allowing local regions to liquidate the assets. However, the increasing scale of crypto-related offenses is prompting authorities to rethink their approach and consider standardized regulations.
According to Reuters, 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, with authorities collecting roughly 378 billion yuan in penalties and confiscated assets. These assets are often sold by private firms, creating a gray area with little oversight. Legal advisor Liu Honglin highlighted the revenue digital assets have become for local governments but emphasized the lack of clear regulations overseeing the third-party companies facilitating these liquidations.
Debates among policymakers and industry experts in China have arisen on whether the country should adopt a centralized reserve model similar to a recent proposal in the United States. Under this model, the central government would retain confiscated assets as part of a long-term national plan, rather than immediately selling them. This shift in policy would align more closely with emerging international trends. President Donald Trump has pushed for creating a strategic Bitcoin reserve and a digital asset stockpile in the US, allowing the country to hold confiscated digital assets as part of a long-term national strategy. If China follows suit, it would reflect a global shift toward treating crypto as strategic resources rather than disposable assets.
The fragmented and opaque system currently in place for handling seized cryptocurrencies in China has raised concerns about misuse and corruption. Some argue that retaining seized digital assets instead of selling them immediately could be a more strategic approach. One firm, Shenzhen-based Jiafenxiang, has reportedly sold over 3 billion yuan worth of crypto on behalf of various city governments since 2018. Suggestions for China to adopt a centralized reserve model similar to the US have been made by industry experts, such as Ru Haiyang, co-CEO of Hong Kong’s licensed exchange HashKey.
The rise in crypto-related crimes in China has sparked the need for standardized regulations governing the handling of seized digital assets. The current practice of local governments liquidating the assets has led to a lack of oversight and concerns about potential misuse and corruption. By considering a centralized reserve model for confiscated assets, China could align itself more closely with global trends, such as the proposal made by President Trump in the US for a strategic Bitcoin reserve. This shift in policy would reflect a growing recognition of cryptocurrencies as strategic resources rather than disposable assets.
