China’s Bitcoin Liquidation Strategy Confronts Economic Pressures
In a controversial yet increasingly common practice, local governments in China have begun liquidating seized cryptocurrency assets, notably Bitcoin, through offshore markets and private companies, despite the nation’s ban on cryptocurrency trading. By the end of 2023, China reportedly held approximately 15,000 Bitcoin, valued at around $1.4 billion, making it the world’s second-largest national holder behind the United States. By 2025, these holdings had skyrocketed, with China possessing around 194,000 Bitcoin, worth an estimated $16 billion, primarily accumulated from confiscations tied to criminal activities involving digital currencies.
These seized digital assets are sold via third-party entities, such as the Shenzhen-based company Jiafenxiang, which has played a significant role since 2018, liquidating over 3 billion yuan ($410 million) in cryptocurrencies for various municipal authorities.
This liquidation process has become a critical revenue source for local Chinese municipalities, grappling with growing economic challenges, reduced growth rates, and burgeoning debts. Recent reports suggest that these crypto sales have contributed substantial sums towards municipal budgets, providing a lifeline amidst China’s broader economic slowdown.
“The use of private firms to liquidate state-held crypto assets represents a significant policy gap, with notable risks around transparency and oversight,” commented Professor Chen Shi from Zhongnan University.
This activity has inevitably affected the global cryptocurrency market, as evidenced by the substantial volatility triggered by sizable sell-offs. On April 16, 2025, Bitcoin’s price sharply declined from $65,000 to $63,500 following a reported liquidation, indicating heightened market sensitivity to such governmental interventions. Ethereum and numerous AI-related tokens such as SingularityNET and Fetch.ai also experienced significant downturns, highlighting broader market impacts.
Escalating Crypto Crime Amplifies Market Concerns
The backdrop to these events lies in the substantial increase in crypto-related criminal activity within China. In 2023 alone, Chinese authorities prosecuted over 3,300 individuals, handling crimes involving cryptocurrencies totaling approximately $59 billion—nearly tenfold the previous year’s figures. These criminal cases have predominantly involved activities such as internet fraud, online gambling, and extensive money laundering schemes.
The expanding scale of these illicit activities has spotlighted the fragmented regulatory landscape in China, where local governments lack unified national guidelines for managing seized digital assets. This fragmentation has led to inconsistent practices across jurisdictions, often involving unclear transaction methods, varying usage of VPNs, social media platforms, and diverse payment channels, consequently creating a significant oversight challenge and potential avenues for corruption.
“Current practices are effectively a ‘patchwork workaround’ that inadequately conforms to China’s stringent crypto trading regulations,” stated legal expert and academic Professor Chen Shi, further emphasizing the necessity for tightened regulatory oversight and standardized procedures.
This growing grey market has prompted calls from legal professionals advocating for China’s central bank to oversee asset management, potentially establishing a formalized approach or national reserve for handling seized cryptocurrencies similar to mechanisms proposed by other nations.
Regulatory Gaps Spur Urgency for Formal Guidelines
As China’s digital economy expands, the government’s handling of seized cryptocurrency becomes increasingly critical, yet remains largely unresolved. Legal analysts assert that the current informal mechanisms, primarily executed through offshore exchanges and peer-to-peer networks, accentuate China’s policy paradox: a national ban coupled with active state participation in foreign cryptocurrency markets.
The absence of clear guidelines allows for substantial discretion among local authorities, increasing risks associated with transparency and accountability. Experts warn such conditions could exacerbate corruption vulnerabilities and legal ambiguities, further complicating China’s interactions with global financial institutions and regulators.
The debate over appropriate management strategies has intensified with some suggesting the People’s Bank of China should centralize the process, providing a transparent, standardized solution that would prevent regional discrepancies and improve regulatory confidence internationally.
“China urgently requires a comprehensive, centralized system for crypto asset management to mitigate legal risks and corruption potential,” mentioned Cas Abbé, a financial regulatory advisor.
Historical context underscores the complexity of China’s relationship with digital assets. After banning cryptocurrency trading in 2021, the government continued encountering increased crypto-related crime, underlying the need for adaptive and cohesive regulatory frameworks. China’s approach contrasts with other nations, such as the United States, which maintains clearer procedures and structured auction processes for seized crypto assets.
Looking forward, China’s evolving strategy towards these asset sales could significantly influence global crypto markets, potentially shaping international approaches to the management of seized digital assets. Market watchers and regulators alike remain attentive to China’s next steps, recognizing their implications for cryptocurrency stability and broader economic impacts.