Chiara Bianchi
Despite China’s nationwide ban on cryptocurrency trading and mining, local governments have been discreetly converting seized digital assets into fiat through third-party firms, according to a new Reuters investigation.
Amid economic headwinds, regional authorities are leveraging crypto seized from illegal operations to boost government revenue. Legal analysts warn that such unofficial liquidations—often involving private tech companies—could create legal gray areas and increase the risk of corruption, the report noted, based on judicial and financial documents.
Offloading Crypto in a Legally Murky Environment
Although direct crypto trading is outlawed for individuals in mainland China, government partnerships with businesses to manage and sell confiscated cryptocurrencies remain legal. This loophole has opened the door for a rising number of enterprises to profit from state-sanctioned crypto liquidations.
One such example is Jiafenxiang, a tech company headquartered in Shenzhen, which has reportedly facilitated over 3 billion yuan (~$408 million) in offshore crypto sales since 2018. These transactions were carried out on behalf of municipalities like Xuzhou, Hua’an, and Taizhou in Jiangsu province.
Financial trails suggest that proceeds from these crypto sales, initially in U.S. dollars, were converted into yuan through local banking channels before being deposited into accounts held by regional financial bureaus.
China Emerges as a Major Bitcoin Holder
According to data from BitcoinTreasuries.net, China currently possesses approximately 190,000 BTC, positioning it as the second-largest national holder of Bitcoin globally—just behind the United States, which holds 198,012 BTC.
Legal Community Grapples With Crypto’s Role in Court Cases
The growing presence of digital assets in criminal cases has pushed Chinese judicial authorities to address the legal status of cryptocurrencies. In February, a high-level seminar was held in Beijing featuring officials from the Supreme People’s Court, legal scholars, and university representatives. The discussions centered on judicial research and policy for handling crypto-related matters in court.
PBOC Focuses on Crypto Oversight in Stability Report
China’s central bank, the People’s Bank of China (PBOC), reiterated its focus on cryptocurrency regulation in its latest annual financial stability report. The document emphasized the need for a stronger international regulatory structure for digital assets, signaling Beijing’s ongoing involvement in global crypto policy despite its domestic ban.
