Despite its strict ban on cryptocurrency trading, China is quietly finding ways to turn seized digital assets into cash — and it’s raising eyebrows.
According to a new Reuters report, local governments across China are relying on private companies to help convert confiscated cryptocurrencies into fiat money. These assets are often gathered during investigations into illegal financial activity. But with no clear legal process in place for handling them, officials are working in a legal gray area.
Chen Shi, a professor from Zhongnan University of Economics and Law, says this workaround isn’t exactly in line with China’s official stance on crypto. “It’s more of a temporary fix than a real solution,” he explained, pointing out the growing need for formal rules as crypto-related crimes continue to rise.
Legal experts are now calling for clarity. Guo Zhihao, a lawyer based in Beijing, believes the current system is contradictory. On one hand, crypto trading is banned. On the other, authorities still need to sell or manage digital tokens they’ve seized. He suggests the central bank — the People’s Bank of China — should step in to take the lead, either by creating a national crypto reserve or by finding legal ways to liquidate assets internationally.
Interestingly, there are already companies involved in this behind-the-scenes crypto conversion business. One blockchain firm, Bit Jungle, claims that private players can safely handle seized tokens — as long as they follow rules, protect user funds, and use licensed offshore exchanges.
Sun Jun, a senior partner at a law firm in Shanghai, adds that this kind of work is becoming increasingly profitable. He warns, however, that without stronger regulations, the government risks losing control of a fast-growing and highly valuable market.
For context, China banned local crypto exchanges back in 2017 and later introduced a full trading ban in 2021. But with more digital currencies being seized in law enforcement operations, the country may now need to rethink how it handles this growing pile of assets.
As other countries — like the U.S. under Trump — explore the idea of building national crypto reserves, experts say it’s time for China to step up and set clear rules of its own.
