The local National Assembly of China has officially refused to create local regulations for handling confiscated cryptocurrencies. Instead, they call for national regulations from the Beijing government.
This reflects an unavoidable consequence of China's complete cryptocurrency ban.
Henan Province believes local laws are not appropriate
The National Assembly of Henan Province, a central Chinese province located south of Beijing with nearly 100 million people, has published a report reviewing the "Draft Regulations on Asset Management Related to Cases". The province's legal committee acknowledges that virtual currency has asset properties and is case-related property, a consensus already established in judicial practice.
However, they note that China's comprehensive ban on cryptocurrency transactions has eliminated all legal trading platforms. Agencies nationwide are still exploring handling methods. The committee concludes that local legislation is not suitable for managing this new type of confiscated asset.
They conclude that the Ministry of Public Security is studying regulations related to cryptocurrencies. They call on the central government to handle this issue to ensure policy consistency. This will avoid conflicts regarding national financial security issues.
"Managing this new case-related asset type is more appropriate when uniformly regulated at the national level."
Legal and Technical Complexities
Henan's cautious stance stems from two main challenges. First, the legal and technical complexities in managing digital assets – from safe storage, valuation to liquidation – are significant. Moreover, widespread regulatory concerns across China reinforce this view. Agencies in many provinces, including Henan, frequently warn about fraud schemes exploiting stablecoins. These illegal activities range from illegal fundraising to money laundering and highlight the high associated risks.
Second, a significant legal gap exists nationwide following China's 2021 cryptocurrency transaction ban. The ban pushed exchanges overseas and complicated asset handling for law enforcement. A Beijing judge recently confirmed this difficulty, noting that courts lack clear legal basis to perform such processing, leading to inconsistent practices.
Interestingly, local approaches are varying in this gap. In contrast, Beijing's law enforcement has pioneered a complex, cross-border asset liquidation channel through licensed exchanges in Hong Kong.
Beijing police have successfully tested a sophisticated handling mechanism. They entrust confiscated cryptocurrencies to the Beijing Stock Exchange, which works with professional service providers to detect, receive, and transfer. Assets are sold through licensed exchanges in Hong Kong, with proceeds converted to renminbi after foreign exchange approval and deposited in police accounts for legal seizure or victim compensation.
The contrast between Henan's cautious approach and Beijing's creative solution shows that while local solutions are emerging, unified national rules will make the process more predictable, transparent, and efficient across China's vast territory.
