Behind the Ban: Why China Is Quietly Cashing Out Its Bitcoin Holdings
Facing mounting economic pressure, China is liquidating seized Bitcoin and other cryptocurrencies via offshore markets — despite the nation’s ban on crypto trading.
In an effort to shore up depleted public funds, local governments across China are reportedly partnering with private firms to offload confiscated digital assets, notably Bitcoin, in overseas markets, according to a recent Reuters investigation.
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While these actions fall into a legal gray area under China’s strict anti-crypto regulations, they’ve become a significant revenue stream amid the country’s economic headwinds.
China Crypto Crackdown, Continued Sales
China maintains a firm stance against cryptocurrency, labeling it speculative and high-risk.
The government prohibits both trading and mining activities within its borders. Yet, by the end of 2023, Chinese authorities were believed to hold roughly 15,000 Bitcoin — valued at more than $1.4 billion — and have been gradually selling these assets abroad.
China is also estimated to be the world’s second-largest holder of Bitcoin after the United States, possessing approximately 194,000 BTC, worth about $16 billion. Much of this crypto has been seized during investigations involving online fraud, money laundering, and illegal gambling.
Countries and government that own Bitcoin (Source: BitBo)
In 2024, Chinese prosecutors charged over 3,000 individuals in crypto-related money laundering cases, underlining the widespread nature of these crimes and the state’s intensified crackdown.
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Legal Gray Zones and Rising Concerns
The surge in crypto seizures has created a legal vacuum around how digital assets should be processed or liquidated. According to Chen Shi, a professor at Zhongnan University of Economics and Law, the current workaround — using third-party brokers to sell assets overseas — doesn’t fully comply with China’s crypto restrictions.
Legal experts warn that the lack of clear guidelines could invite corruption or misuse of public assets, particularly since these transactions are often handled through intermediaries with little transparency.
To address this, several professionals have called for centralized oversight. Shenzhen-based lawyer Guo Zhihao suggested that the People’s Bank of China should take the lead, either by selling the assets in regulated international markets or by establishing a national crypto reserve.
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A Strategic Reserve?
The idea of converting seized crypto into a sovereign reserve is gaining traction, especially amid fears of a weakening yuan and escalating U.S.-China tensions.
Ru Haiyang, co-CEO of Hong Kong-based crypto exchange HashKey, noted that China could benefit strategically from retaining Bitcoin reserves — echoing U.S. initiatives under Donald Trump to bolster crypto innovation and regulate stablecoins.
Another proposal under discussion is the creation of a sovereign crypto fund in Hong Kong. Unlike mainland China, Hong Kong has legalized and regulated crypto trading, making it an ideal jurisdiction for such a reserve.
The city has already positioned itself as a global crypto hub through the launch of exchange-traded funds (ETFs) and policies welcoming international firms.
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By leveraging Hong Kong’s regulatory environment, Beijing could gain indirect exposure to crypto while maintaining alignment with its domestic policies.
Economists caution that any future devaluation of the yuan — potentially triggered by tariffs or trade disputes — could accelerate capital flight into cryptocurrencies. A well-managed national crypto reserve, they argue, might not only serve as a hedge against inflation but also act as a geopolitical financial asset.
