While the global cryptocurrency market continues to grow and some countries like the US are starting to integrate crypto into their economic strategies, China is following a contradictory path: banning domestic crypto transactions while quietly selling Bitcoin to patch the public budget.
Selling Bitcoin quietly: A stopgap solution amid the economic crisis
Since 2019, China has officially banned all domestic crypto trading activities. However, according to #Reuters , local governments are currently authorizing private companies to sell seized Bitcoin in the international market. This action is primarily aimed at addressing the public budget deficit caused by the slowing economic growth.
By the end of 2023, local governments in China were reportedly holding about 15,000 BTC, worth over 1.4 billion USD. Nationally, China currently owns about 194,000 BTC – equivalent to nearly 16 billion USD, ranking second only to the US in Bitcoin holdings.
This is a vast source of digital assets that could generate significant revenue if sold legally. However, what concerns observers is that the handling of these assets is occurring in a context lacking a clear legal framework, posing risks of corruption and abuse of power.
The ramifications of the ban have no escape route
Although China is firmly maintaining a "no" stance on domestic crypto, the consequence is a surge in crimes related to digital assets. In 2024, over 3,000 people have been prosecuted for money laundering through crypto. Illegal activities such as online fraud, illegal gambling, and cross-border money transfers through stablecoins continue to thrive, despite strict bans.
Professor Chen Shi from Central South University of Economics and Law remarked: the current sale of $BTC is a "stopgap solution" aimed only at dealing with budgetary pressures, and is not truly aligned with the crypto ban policy being implemented.
Is it time for China to have a clear crypto strategy?
Amid contradictions in policy and practice, many experts believe that China needs a clearer strategic direction for seized digital assets.
Lawyer Guo Zhihao proposed that the People's Bank of China should directly manage and handle seized crypto – instead of allowing localities to sell it off quietly. This not only ensures transparency but also helps mitigate negative fallout from the intermediary system.
Another option is to establish a strategically oriented crypto reserve fund, which could keep digital assets as a safe haven while also being used flexibly when necessary.
The US holds Bitcoin, China sells: A strategic opposition?
While China is liquidating BTC, the US is going in the completely opposite direction. President Donald Trump is currently strongly advocating for holding Bitcoin as part of the national reserve while promoting the development of stablecoins and financial innovation.
If the US legalizes stablecoin activities through the #GENIUS act, as Standard Chartered predicts, the USD will continue to reinforce its global dominance, while China may miss an important strategic opportunity if it continues to maintain a "hesitant" attitude towards digital assets.
Hong Kong – "the legal backdoor" for China?
A flexible solution proposed by many experts is to leverage #HongKong , which officially legalized crypto in 2023, as a legal intermediary channel for China to access the global digital asset market.
By establishing a sovereign crypto fund in Hong Kong, China can:
Join the global crypto market without breaking domestic bans.
Leverage crypto resources to support the budget and stabilize finances.
Protect the value of national assets against the risk of the yuan weakening.
Crypto – a safe haven in political and monetary stress?
In the context of escalating US-China trade tensions and the growing risk of yuan depreciation, observers warn that crypto may become a safe haven for personal and business assets in China. Without appropriate regulatory policies, the government may lose control of capital flows.
Notably, Russia is currently also using crypto to trade oil with major partners like China and India to evade Western sanctions. This once again shows that crypto is increasingly becoming a geopolitical financial tool, transcending traditional investment frameworks.
Conclusion: China's dilemma in the crypto age
China's quiet sale of Bitcoin reflects inconsistency in the current crypto policy and management practices. While financial powers like the US are seizing opportunities to turn crypto into a national strategic asset, China is opting for a "patchwork" budget solution by selling off seized digital assets – a choice that is both risky and unsustainable.
If China does not quickly build a clear and comprehensive crypto strategy – especially in the context of the yuan facing depreciation pressure – they may miss the opportunity to dominate a position in a new financial order that is gradually forming.
Risk warning: Investing in cryptocurrency always carries high risks and is not suitable for everyone. This article does not constitute investment advice. Binance users should exercise caution and conduct thorough research before making decisions.
