China Grapples With What to Do With Seized Crypto Stash

China is reportedly intensifying efforts to clarify how to handle a ballooning trove of cryptocurrencies confiscated in criminal cases, as the absence of unified rules triggers concern over corruption and inconsistent enforcement.

Although crypto trading is banned in China and digital assets are neither legal tender nor recognized property, local courts and governments have quietly continued to seize Bitcoin and other tokens linked to crimes ranging from internet fraud to illegal gambling.

Lawyers, judges and law enforcement officials are now urging regulatory reform to bring transparency and structure to this grey area, Reuters reported Wednesday.

Without established guidelines, some fear the current ad hoc handling could embolden criminal networks or create opportunities for abuse within the system.

China debates how to handle criminal crypto cache https://t.co/skImimgOWd pic.twitter.com/SGV9rXtuga

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China’s Crackdown on Crypto Crimes Boosts Government Confiscation Revenues

Local governments are under fiscal pressure from China’s slowing economy. In several cases, they have enlisted private firms to liquidate seized cryptocurrencies. Court documents and transaction records reviewed by Reuters show how this works. Authorities convert digital coins into cash and use the proceeds to supplement government funds.

These debates come amid a rapid rise in crypto-linked criminal prosecutions. In 2023 alone, Chinese authorities filed charges against over 3,000 individuals for crypto-related money laundering, with total funds involved in such crimes surging tenfold to 430.7 billion yuan ($59b), according to blockchain security firm SAFEIS.

The financial stakes are rising alongside enforcement. Penalty and confiscation revenues collected by local governments reached 378 billion yuan ($51.8b) last year, a 65% increase from 2018.

Chinese Citizens Evade Ban as Government Quietly Accumulates Crypto

A report from Bitcoin investment firm River estimated that China’s local governments held around 15,000 Bitcoin at the end of 2023. At current prices, the stash is worth about $1.4b. This places China among the top holders of the cryptocurrency globally.

Despite Beijing’s sweeping ban on cryptocurrency trading and mining in recent years, many Chinese citizens have continued to use offshore exchanges and peer-to-peer methods to access digital assets, often routing transactions through VPNs or overseas platforms.

This has complicated enforcement and blurred the line between personal use and criminal conduct.

Debates over seized crypto are escalating. Policymakers may now be forced to draft new national-level guidelines. Legal observers believe a formal regulatory response could follow soon. This may reshape how China handles digital assets caught in its legal net.