Despite a nationwide ban on crypto trading since 2021, Chinese authorities are quietly converting seized digital assets into state revenue — a surprising workaround that’s helping local governments cope with economic pressures.

According to a Reuters investigation, municipalities across China are turning to private firms to liquidate Bitcoin and other tokens obtained through law enforcement actions. These assets, seized from cases of fraud, money laundering, and online gambling, are reportedly sold on offshore exchanges, with proceeds funneled into city budgets.

This unsanctioned practice exposes a major regulatory blind spot. With no centralized policy on how to handle seized crypto, cities are operating in a legal gray area. Legal scholars warn this creates a dangerous precedent that could enable corruption and undermine the national ban.

In 2024, China was estimated to hold nearly 15,000 BTC, worth $1.4 billion at the time — a stockpile that some speculate could be the foundation for a strategic crypto reserve, echoing similar discussions in the U.S.

While China continues pushing forward with its digital yuan, these crypto sales show that Bitcoin may still play a hidden role in the nation’s financial strategy.

Investment takeaway:
China’s discreet re-entry into crypto via liquidation of seized assets is not a bullish signal per se — but it hints at growing government-level recognition of Bitcoin’s value. If China formalizes this approach, market sentiment could shift. Until then, investors should tread carefully.

This article is not financial advice.