China Has Its Sights Set On Dumping Its Confiscated Bitcoin

China has its sights set on a mass sale of a cache of Bitcoins confiscated from illicit activities, threatening to sink prices in the short term.

China's plans to sell a large cache of Bitcoins confiscated from illicit activities are threatening to sink prices in the short term. The news comes as local governments in the country are keen on selling off their Bitcoin holdings to fund operations amid a nationwide cash crunch.

According to a recent report by Reuters, Chinese authorities are sitting on 15,000 Bitcoin, which they aim to dispose of through private companies on offshore exchanges, as approved by the courts. The move has sparked debate among legal experts over its legality.

Municipal governments in China have been racking up Bitcoin from high-profile seizures since the blanket ban on cryptocurrencies in 2021. However, an absence of clear rules on the handling of seized crypto assets is creating a staccato approach in Mainland China.

Now, local governments, such as the one in Anhui province, are seeking court approvals to dispose of their BTC holdings. According to the court documents, they will tap private companies to offload up to 15,000 BTC on offshore exchanges.

The move has drawn criticism from Chen Shi, a professor at the Zhongnan University of Economics and Law, over its legality. For Shi, using private companies to sell Bitcoins offshore is inconsistent with the existing ban on cryptocurrency trading.

"It seems to be in violation of the administrative order," said Shi, adding that a specialized bitcoin reserve would be a more appropriate solution.

Shi and other legal experts are pining for a Bitcoin Reserve, urging authorities to mirror the US playbook. In the US, authorities typically transfer seized crypto assets to a centralized entity like the Treasury Department, which manages and disposes of them in accordance with federal regulations.

"A more centralized management would help China maximize the value of the seized cryptocurrencies and ensure compliance with the legal framework," suggested Winston Ma, a professor at NYU Law School.

The planned sale follows a drawn-out US-China trade war that threatens to send cryptocurrency markets under water. After former President Trump imposed tariffs on $245 billion worth of Chinese goods, Beijing retaliated with tariffs of equal measure.

The move by China to offload up to 15,000 BTC will also affect prices for the largest cryptocurrency. With the chances of BTC flooding exchanges rising, investors are bracing for a retracement for the asset.

Bitcoin price is walking a tight rope at the moment, trading at $83K after sliding by nearly 2%. Fears of a flash sale by China and other macroeconomic woes will see Bitcoin retest $80K again.

Furthermore, Trump has slammed a 245% tariff on China, triggering a broad decline for Bitcoin and other cryptocurrencies. However, if Chinese courts block the sale and authorities announce a Bitcoin Reserve, a short term price spurt is within grasp.

After a recent price drop, Bitcoin is showing signs of recovery as it trades above $80,000. The cryptocurrency is set to move even higher if the U.S. government announces a bitcoin reserve, according to macroeconomic expert Robert Kiyosaki.

Kiyosaki, the author of Rich Dad Poor Dad, said in an interview with Real Vision that the government is planning to create a bitcoin reserve, similar to the gold standard used in the past.

"The government is going to make an announcement about a bitcoin reserve. They're going to take all the bitcoin that they've confiscated from criminals and create a bitcoin standard, just like they used to have a gold standard," Kiyosaki said.

The move would come as no surprise, given that the U.S. government has been seizing large amounts of bitcoin from criminals in recent years. In 2023 alone, the government has seized over $1 billion in cryptocurrency from criminals, according to Chainalysis.

The government is also planning to sell off 15,000 bitcoin that it has confiscated from municipal governments, which could also affect the price of bitcoin in the short term.

The price of bitcoin has been volatile in recent months, falling from a high of over $100,000 in 2022 to a low of around $70,000 in 2023. However, the long-term trend for bitcoin is still up, and the cryptocurrency is expected to continue to rise in value over time.

If the U.S. government does announce a bitcoin reserve, it could lead to a short-term price spurt as investors react to the news. However, the long-term impact of the move would depend on how the reserve is managed and maintained.