China's cryptocurrency pile is growing as the world's second-largest economy continues to crack down on illegal transactions, but local governments are reportedly selling their seized digital assets to dispose of their ballooning piles.
There is ongoing debate on how authorities should handle seized Bitcoin and other cryptocurrencies, and with a lack of a standard approach, there is also growing fear that corruption and law-breaking may be fostered along the way.
There have been reports that Chinese President Xi Jinping may be softening up his stance on Bitcoin, but the country has yet to officially change its views on crypto trading, which is banned in the nation.
Local Chinese Governments Selling Seized Crypto
China has banned Bitcoin and crypto trading, and digital coins are not approved as a form of an asset in the Asian powerhouse.
On the other hand, operations continue on seizing assets deemed by authorities as having been used in illegal transactions, and local governments are moving to dispose of them.
Local governments have been using private companies to dispose of their seized crypto in exchange for cash, Reuters reported Wednesday, citing transaction and court documents the outlet reviewed.
The selling of crypto for cash via private companies was reportedly implemented as part of local governments' efforts to replenish public coffers that were affected by a slowing Chinese economy.
Conflict Arising from Local Governments' Approach
Chen Shi, a professor at the Zhongnan University of Economics and Law, told the outlet that such a way of disposing of crypto assets is "not fully in line with China's current ban on crypto trading."
Guo Zhihao, a Shenzhen-based lawyer who attended a January seminar that discussed the issue with various Chinese officials, said the Chinese central bank is in a much better position to handle the seized digital assets, instead of local governments.
Crypto Users Troll Chinese Governments' Move
News of the approach to dispose of seized cryptocurrencies has reached "Crypto Twitter," where crypto users discuss the latest prices and developments around the booming sector.
Many users pointed out that selling digital assets at this point could be a huge mistake.
"Germany type move," said one user, referring to last year's dump of Germany's massive Bitcoin stash that rocked the crypto market at some point and caused prices to tumble significantly.
Many crypto holders believe Germany's sell-off spree didn't end so well, given how it sold its seized BTC worth around $3 billion in mid-2024. If it dumped its stash in the weeks after U.S. President Donald Trump won the presidency, it would have been a very different story.
"Not smart selling," said another user, seemingly referring to how long-time crypto holders, especially those who hold BTC, believe that they should hang on to their coins as long as possible to really see their investments' worth.
"Paper hands," said one user, referring to the term crypto holders use when describing individuals or entities that sell their coins based on market sentiment or negative news.
For one user, the dumping of seized assets among local governments only shows "how serious the economic slowdown is" in the country that has challenged the United States on various fronts over the years.
It remains to be seen whether local governments will continue to sell their seized digital assets, but for now, it could be their lifeline, especially as the U.S.-China trade war intensifies.
Originally published on IBTimes
