If the finances are tight, steal the goods! China's local governments are quietly selling and seizing cryptocurrencies to fill fiscal gaps, raising corruption concerns

Against the backdrop of China's economic slowdown and rising fiscal pressures, several local governments quietly sold seized cryptocurrencies in exchange for cash to fill the fiscal gap. Even though cryptocurrency trading is still illegal in mainland China, the sale of seized assets through corporate assistance remains in a regulatory grey area, raising concerns about transparency and corruption risks.

Chinese local governments sell cryptocurrencies into 'alternative income'

Reuters reports that even though mainland China has completely banned cryptocurrency trading and mining activities since 2021, local governments are still actively supplementing local finances by selling crypto assets seized from illegal activities and converting them into cash:

This movement moves between legal boundaries, raising concerns about transparency in government operations and inadequate oversight mechanisms. Especially when economic growth is slowing and taxes are decreasing, selling cryptocurrencies has become an "extraordinary tool" for some local fiscal departments.

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Private enterprises secretly cooperated, and hundreds of millions of yuan quietly went to sea

In order to circumvent legal concerns, local governments generally entrust private companies to assist in the disposal of cryptocurrencies. Taking Shenzhen-based tech company Jiashare (Jiafenxiang) as an example, it has represented various local governments in Jiangsu Province, including Xuzhou, Hua'an and Taizhou, in seizing crypto assets since 2018 and has reportedly assisted in the sale of cryptocurrencies worth more than RMB 3 billion to date:

Most of these assets are resold to overseas markets and converted into renminbi and remitted to designated accounts of local finance bureaus.

Even if this practice is seen as legal, the lack of external oversight and public audit processes raises concerns that it could become a breeding ground for corruption and asset loss.

China cracked down harshly, Hong Kong handled it flexibly, and its attitude was very different

On the other hand, China's central government remains tough on cryptocurrencies compared to frequent local government actions. Individuals and enterprises are still prohibited from trading and mining cryptocurrencies in the mainland, while Hong Kong is opening up, actively promoting the development of the crypto industry, setting up a trading license system, and trying to build itself into an Asian crypto financial center:

This policy gap highlights the different attitudes and governance models towards cryptocurrencies inside and outside China.

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China remains the second largest bitcoin holder in the world

According to BitcoinTreasuries, the Chinese government currently holds about 190,000 bitcoins, second only to the 198,000 held by the United States, making it the second largest national holder of bitcoin in the world.

Although China's official stance on cryptocurrencies favors a prohibition, it still retains considerable influence in the global cryptocurrency market in terms of seized assets and state-level reserve figures. This also shows that the Chinese government has adopted a pragmatic and even contradictory dual strategy between "banning" and "using" cryptocurrencies.

The disposal of crypto assets has become a judicial and financial focus

In the face of the expansion of the scale of seizure of assets, the judicial and financial disposal of cryptocurrencies has become the focus of central attention. Earlier this year, the Supreme People's Court and a number of top universities held a seminar in Beijing to focus on the legal treatment model of crypto assets.

The People's Bank of China also explicitly mentioned in the Financial Stability Report released at the end of last year that it would strengthen crypto supervision and participate in the formulation of global regulatory rules, indicating that China is gradually moving from comprehensive suppression to institutionalized monitoring and governance.

This article Steal the goods if the finances are tight! Chinese local governments quietly sell and seize cryptocurrencies to fill fiscal gaps, causing corruption concerns to first appear in chain news ABMedia.