Chinese Officials Advocate for Cryptocurrency Regulation Amid Asset Seizures
Chinese authorities are increasingly calling for regulatory measures regarding cryptocurrencies, particularly in light of the growing number of seized digital assets. Despite an existing ban on cryptocurrency trading, local governments in China have been reportedly liquidating confiscated crypto assets via private companies. While mainland China maintains its stringent stance against cryptocurrencies, the region of Hong Kong is actively working to establish itself as a significant cryptocurrency center. Once a dominant force in cryptocurrency trading and mining, China has seen its lead diminish, primarily due to a series of oppressive regulations, including a comprehensive ban introduced in 2021. Nearly four years later, the Asian powerhouse seems to be contemplating a potential easing of its cryptocurrency policies, though the motivations may not align with common expectations.
Push for Judicial Recognition of Cryptocurrencies
Recent reports indicate that Chinese law enforcement officials, legal professionals, and members of the financial sector are advocating for a formal acknowledgment of cryptocurrencies as legitimate assets. This could represent a significant shift for the country’s cryptocurrency landscape. The push for recognition has arisen as China experiences an increase in the seizure of cryptocurrency assets linked to criminal activities. The absence of clear regulations governing these seizures has raised concerns about potential corruption. To address their financial needs during an economic downturn, Chinese local governments have been selling these confiscated cryptocurrencies for cash through private firms, converting the proceeds into yuan before depositing them into public fund accounts.
Inconsistent Methods and Opaque Sales
Local technology firm Jiafenxiang has reportedly facilitated the sale of over 3 billion yuan (approximately $41 million) in cryptocurrency assets on behalf of several local governments, including Xuzhou, Hua’an, and Taizhou, since 2018. However, many officials contend that the existing processes are inconsistent and lack transparency, with some experts arguing that these sales contradict the national ban on cryptocurrency trading. During a January seminar addressing these issues, officials proposed a range of solutions, from establishing clear guidelines to creating a strategic reserve similar to that of the Trump administration, which could potentially foster greater acceptance and integration of cryptocurrencies into the economy.
Debate Over Government Cryptocurrency Holdings
The extent of cryptocurrency assets held by the Chinese government remains a subject of debate. According to Bitbo Treasuries, China is estimated to possess 194,000 BTC valued at over $16 billion, largely acquired through seizures from the PlusToken scam. Conversely, Bitcoin investment firm River claims that the government only holds around 15,000 BTC, worth approximately $1.4 billion. The discrepancy in these figures has led some analysts to speculate that China may have disposed of Bitcoin obtained from the PlusToken Ponzi scheme. This conflicting information positions China as either the second-largest or the fourteenth-largest holder of Bitcoin globally.
Hong Kong’s Push for Cryptocurrency Adoption
While mainland China remains firm in its prohibition of cryptocurrencies, Hong Kong is actively pursuing initiatives to establish itself as a leading cryptocurrency hub. The special administrative region has already authorized several spot Bitcoin and Ethereum exchange-traded funds and granted licenses to various cryptocurrency exchanges. Whether mainland China will eventually adopt a similar approach, especially in light of the U.S. aiming to assert its dominance in the sector, remains uncertain. However, granting legal recognition to cryptocurrencies could represent a positive initial step toward broader acceptance.
