Local authorities in China face a lack of regulations regarding the handling of seized cryptocurrency, raising concerns over potential corruption.
Challenges with Seized Crypto
Chinese local authorities seek ways to sell seized cryptocurrencies through private companies in offshore markets. It has been reported that by the end of 2023, they held approximately 15,000 Bitcoin (BTC) worth $1.4 billion. Such sales become a significant source of income for local budgets. However, experts believe this is a makeshift solution that is not fully compliant with the country's ban on cryptocurrency trading.
Discussions on Creating a Crypto Reserve
Some lawyers and experts propose that the central bank of China take an active role in dealing with seized digital assets. Specifically, the suggestion to create a crypto reserve akin to what the US is doing has been raised. HashKey's co-CEO, Ru Haiyang, echoed this idea, but no official steps have been taken in this direction yet.
Rise in Crypto-Related Crime
The increase in cryptocurrency-related crime in China has also created additional pressure on authorities. In 2024, the government prosecuted over 3,000 individuals linked to crypto money laundering. This poses a threat to the financial system and highlights the necessity for clearer regulations regarding digital assets.
In light of rising crime and the absence of clear regulations regarding the handling of seized cryptocurrencies, Chinese authorities continue to search for ways to legitimize and manage these assets.
