China Debates Regulations for Handling Seized Cryptocurrencies Amid Surge in Crypto Crimes
Shanghai, April 16, 2025 — As China grapples with an increasing pile of cryptocurrencies confiscated from illegal activities, local governments are exploring solutions to manage their seized digital assets. This has led to a broader conversation among legal and financial experts regarding the need for regulations to properly handle these cryptocurrencies amidst rising concerns over crime and corruption.
Rising Concern Over Lack of Regulation
China’s ban on cryptocurrency trading has not diminished the rampant criminal activities associated with digital tokens. With local authorities finding themselves in possession of significant amounts of cryptocurrencies from criminal cases, there is a growing call for clearer guidelines on how to manage these assets. Currently, the absence of a unified framework has resulted in inconsistent practices, which some legal experts believe could undermine the integrity of law enforcement efforts.
Conversations have escalated involving senior judges, police officials, and lawyers, focusing on adjustments to existing regulations. They emphasize that the judicial recognition of cryptocurrencies as legitimate assets could pave the way for a uniform process in disposing of seized virtual currencies.
Economic Strain and Financial Gains
Reports indicate that seized cryptocurrencies may also serve as an unexpected solution to bolstering local government finances, which have been strained due to a slowing economy. Local governments have started utilizing private companies to sell confiscated cryptocurrencies for cash. This approach is seen as a temporary fix to meet financial needs, contradicting the current legal standing that prohibits trading in digital assets.
According to Chen Shi, a professor at the Zhongnan University of Economics and Law, this method of handling seized cryptocurrencies is at odds with China’s stringent anti-crypto regulations. Furthermore, it raises questions about accountability and corruption risks. "Better supervision is pressing as the number of cases and amounts of money balloon," Chen noted.
Surging Criminal Activities Linked to Cryptocurrencies
In recent years, there has been a significant increase in criminal cases involving cryptocurrencies in China. In 2023 alone, the value associated with crypto-related crimes skyrocketed to 430.7 billion yuan (approximately $59 billion), a tenfold increase compared to previous years. The Chinese judiciary reported over 3,000 lawsuits involving individuals linked to money laundering using cryptocurrencies.
As local governments increasingly depend on confiscated cryptocurrencies to enhance revenue, there are calls for better regulatory oversight of private firms engaged in the sale of these digital coins. Liu Honglin, a lawyer offering guidance to local governance on crypto matters, pointed out that there are currently no regulations in place to oversee private entities involved in the disposal process.
A Shift in Policy Approach?
Amidst these discussions, participants at recent seminars have considered a range of proposals to improve management of seized cryptocurrencies. Suggestions include empowering the People’s Bank of China to sell seized digital assets abroad or establishing a crypto reserve. This aligns with the strategic vision echoed by some stakeholders who advocate for a centralized approach over municipal or provincial oversight.
Prominent figures in the crypto sector, such as Ru Haiyang from HashKey, have also echoed the potential benefits of managing seized cryptocurrencies centrally, similar to the proposals made in other jurisdictions. "A more centralized management would help China maximize the value of the seized cryptocurrencies," said Winston Ma, an adjunct professor at NYU Law School and former managing director of China Investment Corp.
Conclusion
As China navigates the complexities of its cryptocurrency regulations in light of rising crime, the dialogue surrounding the handling of seized digital assets is increasingly vital. The outcome of these discussions could transform both the regulatory landscape and the future of cryptocurrencies within the nation, as authorities seek to reconcile financial demands with legal constraints.
($1 = 7.3075 Chinese yuan renminbi)
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