China Considers Strategies for Handling Seized Cryptocurrency from Criminal Cases

Authorities in China are assessing how to handle billions of dollars worth of seized cryptocurrency assets from criminal investigations.

The national crypto trading ban has not stopped local governments from partnering with private entities to convert seized digital assets into cash. The current system of disposing of seized digital assets evolved because national policies remain unclear. Public funding pressures compel local authorities to explore crypto fund confiscations as a financial resource for supporting their budgets.

Local Governments turn to private firms

Municipalities have formed partnerships with private firms through transaction and court documents for disposing seized cryptos. The seized assets received by private firms become fiat money which provides funding for local budget operations. Since 2018 the Chinese company Jiafenxiang has converted digital assets worth 3 billion yuan for all cities within Jiangsu province through their processing services.

This method, however, exists in a legal gray area. According to Chen Shi, a Zhongnan University of Economics and Law professor, this strategy is not entirely aligned with China’s strict crypto ban. The practice is seen as a temporary fix without centralized guidelines.

Crypto crime on the rise

The debate about confiscating assets has emerged during increasing crypto-related criminal activities. Ilicit cryptocurrency transactions reached 431 billion yuan, equating to $59 billion in 2023. The yearly cryptography crimes rose by a factor of ten to reach a new total of nearly $59 billion USD. The Chinese authorities investigated and prosecuted over 3000 individuals for money laundering cases involving cryptocurrencies during this time. 

The growing number of cases in China has strengthened the legal system while significantly increasing the seized digital assets. Local budgets in China now heavily depend on seizure and penalty income, reaching 378 billion yuan in the previous year.

Calls for centralized oversight

Legal experts and financial advisors demand that central government authorities assume total control of confiscated cryptocurrency assets. Lawyer Guo Zhihao proposes the People’s Bank of China obtain control over crypto assets and develop a national reserve instead of carrying out immediate sales. Some experts point to Hong Kong’s regulated crypto environment as a possible model. HashKey co-CEO Ru Haiyang has proposed a sovereign crypto fund based in Hong Kong. Former China Investment Corporation executive Winston Ma also supports central oversight, arguing it would reduce risks and increase efficiency.

The post China Considers Strategies for Handling Seized Cryptocurrency from Criminal Cases first appeared on Coinfea.