Beijing’s Public Security Bureau plans to sell confiscated cryptocurrencies through licensed exchanges in Hong Kong.

The initiative is in collaboration with the China Beijing Equity Exchange (CBEX) to manage cryptoassets seized in criminal cases.

CBEX will engage third-party agencies to facilitate sales on regulated platforms.

The proceeds will be converted into yuan and deposited into designated accounts.

This marks the first time a mainland Chinese agency has outlined a process for disposing of seized virtual currencies.

While mainland China enforces a strict ban on cryptocurrency trading, Hong Kong is positioning itself as a hub for virtual assets.

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🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ China’s unprecedented crypto disposal highlights scale of seized digital assets

Beijing’s new framework represents the first formal process for handling an enormous backlog of confiscated cryptocurrencies that has been accumulating since China’s crypto ban.

The value of cryptocurrencies awaiting disposal by Chinese authorities exceeded several billion dollars by the end of 2022, with a dramatic surge to 430.7 billion yuan ($60 billion) in 2023—a twelvefold increase from the previous year 1.

This aligns with global trends in cryptocurrency seizures, with the U.S. government now holding approximately 200,000 Bitcoin worth around $16 billion and the U.K. possessing over 61,000 Bitcoin from fraud investigations 2.

China reportedly holds close to 194,000 Bitcoin and 833,000 Ethereum, placing it among the largest government holders of cryptocurrencies globally, despite its public stance against crypto 2.

The massive volume of seized assets presents both a challenge and opportunity for authorities, who must balance market impact concerns with the need to convert illicit gains into legitimate state resources.

2️⃣ “One country, two systems” emerges in crypto regulation

Beijing’s decision to liquidate seized cryptocurrencies through Hong Kong exchanges reveals a pragmatic dual approach to digital asset regulation within China’s territories.

While mainland China maintains one of the world’s strictest cryptocurrency bans, prohibiting exchanges, ICOs, and mining since at least 2017 3, 4, Hong Kong has been actively positioning itself as a cryptocurrency hub with regulations designed to attract institutional investors 5, 6.

Chinese officials have been quietly attending cryptocurrency events in Hong Kong and allowing the city to develop as a testing ground for digital asset policies that mainland China isn’t ready to implement 5.

This arrangement allows Beijing to maintain control over mainland financial systems while simultaneously exploring cryptocurrency’s potential through Hong Kong’s regulatory sandbox.

The partnership between Beijing’s security bureau and Hong Kong exchanges creates a formal channel between China’s strict control system and the global crypto economy, potentially setting a precedent for other jurisdictions with restrictive crypto policies 7.

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