China is reportedly considering a nationwide policy to manage the handling of cryptocurrencies seized from criminal activities, according to an April 16 report by Reuters. This move highlights the increasing challenge faced by authorities as the volume of seized digital assets related to illegal activities, including fraud and money laundering, rises. The lack of standardized procedures has led to regional inconsistencies and concerns about potential misuse, igniting debates about the need for clear regulatory frameworks.
## China Grapples with Crypto Seizures Amid Rising Crime Rates
Despite China’s outright ban on cryptocurrency as a means of payment, digital assets are legally regarded as property, enabling authorities to confiscate and liquidate these assets. However, the rise in cryptocurrency-linked crimes is forcing policymakers to reassess their approach. According to the State Administration of Foreign Exchange for Investigating Securities (SAFEIS), crypto-related crimes in China skyrocketed in 2023, reaching a total value of 430.7 billion yuan ($59 billion)—a tenfold increase from previous years.
Local authorities have responded by collecting fines and confiscating cryptocurrencies worth approximately 378 billion yuan over the past five years, marking a 65% increase during this period. Despite these measures, the liquidation process—often outsourced to private firms—has become a controversial topic. Without clear regulations, experts warn that this decentralized approach could open avenues for corruption, mismanagement, and inefficiency.
Liu Honglin, a legal advisor to provincial governments, emphasized the significant revenue generated from selling seized digital assets. However, he raised concerns about the absence of oversight for third-party companies facilitating these sales. Shenzhen-based Jiafenxiang, for instance, has been involved in liquidating over 3 billion yuan worth of confiscated crypto assets for municipal governments across Jiangsu province since 2018, exposing potential risks tied to profit-driven handling of digital assets.
| Title | Details |
|---|---|
| Market Cap | $1.2 Trillion |
| Crypto Crimes in 2023 | $59 Billion |
| Confiscated Assets | $52 Billion |
## Domestic and International Models for Managing Seized Crypto
The lack of a standardized approach to disposing of seized digital assets has fueled discussions among Chinese policymakers about adopting a centralized model. Drawing inspiration from international practices, experts propose that China retains confiscated cryptocurrencies instead of liquidating them. This strategy could align China with global trends in crypto management and increase oversight over fluctuating regional practices.
One proposal gaining traction is modeled after a plan discussed in the United States: the establishment of a centralized reserve for confiscated crypto. In 2023, the U.S. suggested using seized Bitcoin and other digital assets to create a national cryptocurrency stockpile. Such reserves could be utilized as strategic resources, similar to how countries manage physical commodities like gold. By transitioning to a reserve system, China could maximize the value of confiscated assets and mitigate the risks associated with their immediate sale.
Supporters of this approach argue that it positions cryptocurrencies not merely as seized property for liquidation but as national assets pivotal to long-term economic strategy. Ru Haiyang, co-CEO of Hong Kong’s licensed crypto exchange HashKey, has urged Chinese policymakers to consider blending seized crypto into the national economy. This strategy, he suggests, would bring long-term stability to China’s growing yet fragmented crypto handling system.
## The Future of Cryptocurrency Regulations in China
As debates surrounding seized crypto assets intensify, questions remain over whether China’s emerging policies will foster innovation or tighten restrictions on the digital economy. Policymakers find themselves at a crossroads—balancing the need for effective crime prevention with the potential strategic value of retained cryptocurrency reserves. International comparisons suggest China may simultaneously crack down on illegal crypto activities while embracing crypto as an indispensable element of the digital financial future.
China’s evolving stance on crypto asset management highlights a global shift in how governments perceive digital assets. Beyond their role in criminal investigations, cryptocurrencies are increasingly valued for their economic and strategic potential. Whether China adopts international best practices or forges its own path, the coming years will undoubtedly shape its role as a regulatory force in the global crypto ecosystem.