Local governments in China could seek ways to unload the crypto seized while facing challenges due to the country’s ban on the country’s trade and scholarships.
The absence of rules on the way in which the authorities should manage the crypto seized have caused “incoherent and opaque approaches” that some fear to promote corruption, lawyers said Reuters for a report on April 16.
Chinese local governments use private companies to sell cryptocurrencies entered on the offshore markets in exchange for liquidity to reconstruct public chests, reported Reuters, citing transactions and court documents.
Local governments would have held around 15,000 Bitcoin (BTC) worth $ 1.4 billion at the end of 2023, and sales were a significant source of income.
China holds around 194,000 BTC worth around 16 billion dollars and is the second largest Bitcoin holder in the nation behind the United States, according to at Bitbo.
Zhongnan’s University of Economy and Law of Economy and Law has told Reuters that these sales are a “makeshift solution which, strictly speaking, is not entirely in accordance with the current ban on China on cryptographic trading”.
Country and governments that hold the BTC. Source: Bitbo
The question was exacerbated by an increase in crime linked to cryptography in China, ranging from online fraud to money laundering through illegal game. In addition, the state continued more than 3,000 people involved in money laundering linked to the crypto in 2024.
Chinese crypto reserve floated as a solution
The lawyer based in Shenzhen, Guo Zhihao, estimated that the central bank is better positioned to treat the digital assets seized and should sell them abroad or build a reserve of crypto.
Ru Haiyang, Hong Kong Crypto Exchange Hashkey Co-PDG echoed the suggestion saying that China might want to continue confiscated bitcoin as a strategic reserve as US President Donald Trump.
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The creation of a sovereign crypto fund in Hong Kong, where crypto trading is legal, was also proposed.
This question drew attention in the middle of the increase in American-Chinese trade tensions and Trump plans to regulate stabblecoins and promote growth and innovation in the cryptography industry.
Several industry observers have suggested that the China’s pricing response could lead to a devaluation of the local currency, which can lead to a flight to crypto.
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