June 10, 2025
By Anjali Kochhar
In a surprising turn of policy, mainland China has discovered a legal way to cash in on cryptocurrency without changing its stance on trading or mining. By partnering with Hong Kong’s regulated crypto infrastructure, Beijing can now convert seized digital assets like Bitcoin and Ethereum into fiat currency, turning previously untouchable tokens into state-controlled revenue.
The shift stems from a formal agreement between the Beijing Public Security Bureau and the China Beijing Equity Exchange (CBEX). The agreement, titled Framework Agreement on Handling Seized Virtual Currencies, outlines a legal procedure through which crypto assets seized during criminal investigations in the mainland are transferred to Hong Kong for liquidation.
Here’s how the process works. Once digital assets are confiscated, they are transferred to CBEX. The exchange then partners with licensed third-party custodians and service providers based in Hong Kong. These providers handle the storage, verification, and sale of the crypto assets through regulated platforms. The proceeds are exchanged into Chinese yuan using legal foreign exchange channels and then deposited into official government accounts.
The system was recently tested in a high-profile case led by authorities in Beijing’s Shunyi District. The entire process from custody to liquidation and fund repatriation was completed within 24 hours. To minimise risks from price volatility, the mechanism includes features such as reserve price protections and a 110 percent performance bond requirement from service providers. All steps are recorded digitally and monitored by supervisory authorities.
This solution addresses a critical gap. Although China has enforced strict bans on crypto trading since 2021, it continues to seize large volumes of digital assets during criminal investigations. By 2024, Chinese law enforcement had reportedly seized over 15,000 Bitcoin, valued at more than 1.4 billion US dollars. In 2023 alone, crypto-related financial crimes were estimated to exceed 430 billion yuan or approximately 60 billion US dollars. Until now, these assets remained legally frozen, with no proper mechanism to convert them into usable state funds.
For Hong Kong, this framework further strengthens its reputation as Asia’s emerging crypto capital. The city has introduced clear licensing requirements for exchanges and custodians and is already home to various Web3 pilot programs, including stablecoin-based payment systems and tokenized financial products. Now, it is becoming a vital part of China’s enforcement machinery without altering mainland policy.
This move does not signal a shift in China’s core crypto policy. However, it reflects a strategic compromise.
About the author
Anjali Kochhar covers cryptocurrency and blockchain stories in India as well as globally. Having been in the field of media and journalism for over four years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
