China Considers Regulation of Seized Cryptocurrencies Amid Surging Criminal Cases
SHANGHAI, April 16, 2025 – A growing accumulation of cryptocurrencies confiscated during criminal investigations is leading to an urgent discussion in China about how to appropriately manage these digital assets. With increasing pressures on local governments to generate revenue amidst economic slowdowns, authorities are turning to private firms to sell off the seized cryptocurrencies for cash. However, the lack of clear regulations regarding such sales has raised significant concerns among legal experts, judges, and police officials.
The Rise of Seized Cryptocurrencies
China’s ban on cryptocurrency trading has not deterred criminal activities involving digital currencies, leading to a notable increase in the seizure of cryptocurrencies linked to crimes such as money laundering, internet fraud, and illegal gambling. As reported by blockchain security firm SAFEIS, the value of money involved in crypto-related crimes skyrocketed to approximately 430.7 billion yuan (around $59 billion) in 2023. Following this surge, local governments have seen penalties and confiscation revenues climb, amounting to a record 378 billion yuan last year, representing a 65% increase over five years.
Despite the ban, local authorities have discovered a path to financial relief through the liquidation of seized digital currencies. Utilizing private companies, some local governments have sold cryptocurrencies worth billions, converting the proceeds into cash to fund public services. This practice, while financially expedient, conflicts directly with China’s strict cryptocurrency trading prohibitions.
Calls for Regulation and Transparency
At a recent seminar regarding the handling of seized cryptocurrencies, a consensus appeared to emerge among attendees—including lawyers, judges, and law enforcement officials—on the need for better regulation. They called for clearly established procedures for how confiscated cryptocurrencies should be treated legally and economically.
“Seized cryptocurrencies have become a major contributor to local finances, yet we lack any rules guiding their disposal,” commented Liu Honglin, a lawyer advising local government entities. Experts argue that without formal regulations, the current liquidation practices risk creating opportunities for corruption and abuse.
Guo Zhihao, a Shenzhen-based lawyer, advocated that the central bank in China should take charge of cryptocurrency management, potentially selling seized assets overseas or establishing a reserve of cryptocurrencies—a strategy reminiscent of proposals made in U.S. discourse about cryptocurrency management.
Private Firms and Their Roles
Private companies have increasingly been engaged in the process of selling seized cryptocurrencies. Jiafenxiang, a technology company based in Shenzhen, reportedly sold cryptocurrencies valued at more than 3 billion yuan on behalf of local governments in Jiangsu province. The process typically involves selling the digital assets offshore and converting the resulting U.S. dollars into yuan at local banks.
Despite the financial benefits these arrangements provide, the involvement of private firms in the disposal of seized cryptocurrencies has been labeled a "makeshift solution." Experts stress that regulations governing these transactions are urgently needed to ensure compliance and transparency.
Looking Ahead
The discussions around cryptocurrency in China are particularly notable given the country’s current political landscape, including its relationship with the United States. As the global dialogue about cryptocurrencies evolves—including regulatory approaches to their management—China’s decisions regarding the handling of seized digital assets could signal broader policy shifts.
Participants at the seminar expressed a desire for judicial recognition of cryptocurrencies as legitimate assets, suggesting that establishing a standardized procedure would modernize the country’s approach to digital currencies and align it with international practices.
As the debate continues, the central government’s next steps will be closely watched, as they may provide more clarity on the future of cryptocurrency in China.
The implications of these discussions could be far-reaching, affecting not only the legal landscape within China but also the broader global discourse on cryptocurrency regulation.
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