China Quietly Converts Seized Crypto to Cash Amid Trading Ban, Raising Transparency Concerns

Despite its sweeping ban on cryptocurrency trading and mining, mainland China is quietly converting confiscated digital assets into fiat currency — a move that experts warn could open the door to corruption and unregulated practices.

Local governments in China have turned to private firms to liquidate crypto seized in criminal cases, with proceeds being funneled into public finances as the country grapples with economic slowdown. This practice, while technically legal for companies operating on behalf of the government, operates in a legal gray area that’s drawing increasing scrutiny.

One standout example is Shenzhen-based tech company Jiafenxiang, which has handled over 3 billion yuan (approximately $408 million) in crypto liquidations for authorities across Jiangsu province. According to court records and transaction data, the firm has been instrumental in offloading these assets in overseas markets, bypassing the mainland’s trading restrictions.

Once sold, the U.S. dollar proceeds are reportedly converted to yuan via local banks before being deposited into the accounts of regional financial bureaus — a system that critics say lacks transparency and standardized oversight.

This paradox — a government cracking down on crypto while quietly profiting from it — has sparked debate among legal scholars and financial observers. Authorities have begun organizing forums and legal seminars to address the evolving complexities. In February, top legal institutions including the Supreme People’s Court convened in Beijing to discuss how crypto should be handled within China's legal system.

Meanwhile, the People's Bank of China (PBOC) reaffirmed its commitment to stricter crypto governance in its December financial stability report. The central bank also expressed interest in shaping a global regulatory model for digital assets.

Despite its anti-crypto stance, China holds an estimated 190,000 BTC, ranking second globally behind the U.S. — a fact that underlines the country’s complicated relationship with the very asset it officially prohibits.