China sells seized cryptocurrencies amid debate over strategic bitcoin reserve

Reuters reports that China has seen an increase in cryptocurrencies seized from illegal transactions. The ban on token trading on the mainland and the lack of clear legislation on handling confiscated cryptocurrencies prompted local governments to use private companies to sell forfeited assets. The cash received this way is then transferred to the accounts of local finance bureaus.

According to investment company River, at the end of last year, China’s local governments owned 15,000 bitcoins worth $1.4 billion, making the country the world’s 14th largest cryptocurrency holder. 

Selling these assets has the potential to spark notable short-term volatility in the cryptocurrency market. It might also both increase liquidity and put downward pressure on prices.

Still, the situation with confiscated tokens could be a turning point for China’s crypto industry. Ru Haiyang, co-CEO at Hong Kong's licensed crypto exchange HashKey, believes the Chinese government may adopt measures similar to Donald Trump's plan to keep seized bitcoins in a strategic reserve.