Several Chinese local governments have begun selling confiscated cryptocurrency despite the country’s nationwide ban on crypto trading. This unexpected move highlights a growing contradiction between provincial enforcement actions and national policy directives.
In Hangzhou, capital of eastern Zhejiang province, authorities recently auctioned off 2,675 units of cryptocurrency seized during criminal investigations. The auction included Ethereum, Litecoin, and other digital assets, fetching approximately $1.4 million, according to court records reviewed by Epochedge.
“Local governments are navigating a complex legal landscape,” explains Wei Chen, cryptocurrency legal expert at Beijing International Law Institute. “They’re tasked with disposing of assets seized in criminal cases, but must do so within the constraints of a system that officially prohibits trading these very assets.”
This contradiction reflects China’s evolving relationship with blockchain technology. While the government banned cryptocurrency trading and mining in 2021, it continues developing a central bank digital currency (CBDC) and promoting blockchain applications in government and industry settings.
The Zhejiang auctions follow similar actions in Jiangsu province, where authorities sold approximately $2 million in confiscated Bitcoin last quarter. Both sales were conducted through government-approved auction platforms rather than cryptocurrency exchanges, creating a technical distinction from standard trading activities.
Financial analysts note these sales come during a period of budgetary pressure for local governments. “Provincial authorities face significant revenue challenges amid the property market downturn,” says Hong Zhang, economist at Eastern China Financial Research Center. “Asset liquidation, including cryptocurrency, represents an attractive revenue source during fiscal constraints.”
China’s central government has maintained an officially hostile stance toward decentralized cryptocurrencies since September 2021, when it declared all cryptocurrency transactions illegal. This comprehensive ban followed earlier restrictions dating back to 2013, when financial institutions were first prohibited from handling Bitcoin.
Despite these prohibitions, unofficial cryptocurrency ownership persists in China. A recent report from Chainalysis estimates that Chinese users still account for approximately 8% of global cryptocurrency transaction volume through virtual private networks and foreign exchanges.
The People’s Bank of China continues advancing its own digital yuan project, which provides the monetary control authorities seek without the decentralized nature of traditional cryptocurrencies. The digital yuan has been tested in numerous cities and was prominently featured during the 2022 Winter Olympics in Beijing.
“These local government sales reveal the practical challenges in implementing absolute prohibitions,” notes Wu Feng, digital economy researcher at Tsinghua University. “When valuable assets are confiscated, authorities must balance regulatory compliance with fiscal responsibility and asset disposal requirements.”
The situation has created unusual market dynamics where government bodies effectively become the only legal sellers of cryptocurrency within mainland China. This monopoly position potentially allows them to command premium prices from buyers participating in government auctions.
International observers see these developments as potentially significant. “When government entities begin participating in markets they officially prohibit, it often signals policy evolution,” suggests Morgan Stanley’s Asia-Pacific digital assets report from last quarter. “While not immediate, this could indicate gradual regulatory adjustment.”
For Chinese citizens, the contradictory messages create confusion. Official state media continue warning about cryptocurrency risks while government auctions legitimize ownership for successful bidders. This disconnect raises questions about longer-term policy direction.
Legal experts suggest that asset disposal laws are being prioritized over trading prohibitions in these specific cases. The Criminal Procedure Law requires authorities to dispose of case-related assets after investigations conclude, creating a procedural necessity that conflicts with blanket cryptocurrency prohibitions.
These developments occur against a backdrop of broader blockchain adoption in China. President Xi Jinping previously identified blockchain technology as a national strategic priority, leading to substantial investment in non-cryptocurrency applications across government services, supply chain management, and intellectual property protection.
The contrast between strict cryptocurrency prohibition and the government’s own participation
