Despite banning crypto in 2021, China is now selling massive amounts of seized Bitcoin behind the scenesChina’s handling of seized cryptocurrency—particularly Bitcoin—has become a focal point in the evolving dynamics between economic pragmatism and ideological rigidity. Despite Beijing’s sweeping 2021 ban on crypto trading and mining, recent reports confirm that Chinese local governments have been quietly liquidating seized digital assets to alleviate mounting fiscal pressures. This practice, set against the backdrop of escalating U.S.-China trade tensions during President Trump’s second term, reveals deeper contradictions in China’s crypto policy—and raises questions about market integrity, global crypto strategy, and geopolitical risk.

A Ban in Name, a Sale in Practice

China’s official line on cryptocurrency has been consistent in tone: prohibition. The 2021 blanket ban was presented as a decisive move to protect financial stability and clamp down on illicit activity. Yet, on the ground, actions tell a different story.

Local governments are selling off seized crypto assets—including nearly 194,000 Bitcoin, worth an estimated $16–20 billion—originally confiscated from the PlusToken Ponzi scheme. These transactions, according to Reuters and on-chain data analysts like CryptoQuant, are being conducted via private firms operating in offshore markets. The proceeds are reportedly funneled back into local budgets in yuan, effectively transforming contraband into much-needed revenue.

The practice is legally murky. A 2020 court ruling allowed for seized crypto to be “processed pursuant to laws,” but it left the interpretation—and implementation—open-ended. There’s no centralized protocol or oversight for how and when to liquidate these assets. As a result, some cities have partnered with firms like Shenzhen-based Jiafenxiang to discreetly convert holdings into cash. This decentralized approach to asset disposal, while expedient, invites scrutiny over transparency and accountability.

Mixed Signals and Market Distortions

Publicly, China maintains it has transferred the PlusToken assets to the national treasury. Privately, evidence suggests otherwise. CryptoQuant’s CEO, Ki Young Ju, analyzed blockchain activity and pointed to the use of coin mixers and centralized exchanges to move the Bitcoin—signs consistent with liquidation. His findings indicate the Bitcoin may have been sold between 2019 and 2021, contradicting the narrative that the government still holds these assets.

Yet new chatter on social media, alongside a Reuters investigation in April 2025, points to ongoing sales. Some sources even speculate that China could be offloading up to 500,000 BTC. While unverified, these reports speak to a broader unease: no one outside China’s inner circle knows exactly how much crypto remains, or how it’s being managed.

This opacity carries real consequences. Large-scale sales, even rumored ones, can trigger volatility. The 2019 PlusToken liquidation was linked to a sharp price correction, and analysts warn a similar pattern could emerge if further offloading continues. However, Bitcoin’s January 2025 price resilience—buoyed by institutional support from firms like BlackRock—has shown that mature market actors may now be able to absorb such shocks more effectively than in years past.


The Trade War Factor

China’s crypto moves are happening in parallel with a fresh wave of economic friction with the U.S. President Trump’s second-term tariffs—some as high as 104%—have reignited a trade war that is reshaping global supply chains and investor sentiment. China has responded with its own tariffs, escalating tensions further.

In this environment, the decision to liquidate seized crypto assets appears less ideological and more economic. With traditional revenue sources under strain, Bitcoin provides liquidity without the need for new taxes or borrowing. However, it also puts China in an awkward position: relying on an asset it publicly disavows to stay fiscally afloat.

Meanwhile, the U.S. is moving in the opposite direction. Rather than liquidate seized crypto, it’s building a Bitcoin reserve. As of early 2025, the U.S. holds over 213,000 BTC, accumulated from law enforcement actions. A proposed bill, the BITCOIN Act, seeks to grow these reserves annually. This long-term strategy contrasts sharply with China’s short-term liquidation approach, signaling a deeper divergence in national crypto policies.

Strategic Implications

What China gains in short-term cash from these sales, it may lose in strategic positioning. Selling Bitcoin at earlier, lower valuations means potentially forfeiting billions in unrealized gains. At 2019 prices, the 194,000 BTC haul was worth under $2 billion. Today, that figure would exceed $20 billion. For a nation seeking to challenge U.S. economic dominance, liquidating a censorship-resistant, globally valued asset at a discount may prove shortsighted.

In contrast, the U.S. sees Bitcoin as a strategic hedge and tool for financial leverage. Controlled sales, like those conducted through U.S. Marshals auctions, allow Washington to influence market supply while retaining reserves. The move toward formalizing a national Bitcoin strategy suggests a belief that crypto will play a long-term role in global finance—and that being a net holder, not a seller, is the smarter play.

Conclusion

China’s crypto liquidation policy reflects a government caught between ideological opposition and economic necessity. While Beijing denounces cryptocurrency as a systemic threat, its local entities are quietly exploiting it to plug budgetary gaps. The result is a policy full of contradictions—and a market left to navigate the consequences.

The broader contrast with the U.S. is stark. As China liquidates, the U.S. consolidates. As China seeks short-term liquidity, the U.S. eyes long-term dominance. Both strategies come with risks and rewards, but only one seems to be playing the long game.

In a world where digital assets are becoming tools of statecraft, how governments manage their crypto holdings is no longer just a financial decision—it’s a geopolitical one. And for investors and policymakers alike, the stakes are only getting higher.

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