Chinese local governments have been selling seized cryptocurrencies via private companies despite an ongoing crypto trading ban in mainland China, according to Reuters.
Amid a slowing economy, local governments have been selling crypto assets confiscated from illicit activities for cash to replenish public coffers — a practice that legal experts say could lead to opaque processes and foster corruption — Reuters reported on Wednesday, citing transaction and court documents.
China continues to ban cryptocurrency trading and mining activities on the mainland, while Hong Kong has repeatedly expressed its ambition to become a crypto hub with a trading licensing regime. The Chinese authorities, however, have enlisted local companies to help dispose of seized crypto assets. While it is illegal for individuals to trade crypto, operating a business that assists the government in selling crypto remains legitimate — which has attracted a growing number of participants — the report said.
For example, Shenzhen-based tech firm Jiafenxiang has facilitated the sale of over 3 billion yuan ($408 million) worth of cryptocurrencies in offshore markets since 2018, acting on behalf of several local governments in Jiangsu province, including the cities of Xuzhou, Hua'an, and Taizhou, according to the report.
Transaction records cited by Reuters show that U.S. dollar proceeds were first converted into yuan through local banks and then transferred to regional finance bureau accounts.
According to data from BitcoinTreasuries.net, China holds about 190,000 BTC, making it the world’s second-largest national holder of bitcoin, behind the U.S., which holds 198,012 BTC.
Handling crypto in legal cases has become a key topic in the country’s judicial system, with authorities holding multiple seminars on the issue. For example, in February, representatives from the Supreme People's Court and several other top judiciary authorities and universities gathered in Beijing for a seminar to discuss research studies and the legal treatment of cryptocurrency.
In December, the PBOC, the central bank, highlighted crypto regulation in its latest annual financial stability report, noting that it is working to improve an international regulatory framework for crypto assets.
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