Key Takeaways:
Beijing’s police authority has introduced a formal process for liquidating seized digital assets through Hong Kong exchanges. The system was developed with the Beijing Equity Exchange and involves third-party custody and compliant offshore liquidation. The first test case was completed in Shunyi District, with funds transferred to the national treasury within 24 hours. Mainland companies, such as JD.com, are increasingly using Hong Kong’s regulatory structure to conduct blockchain-related pilots.Beijing’s municipal police authority has formalized a new mechanism for disposing of virtual assets seized in criminal cases, according to an announcement published by the Legal Affairs Division of the Beijing Municipal Public Security Bureau (PSB) on June 5.
Since the trading of cryptocurrencies is prohibited in mainland China, the process would involve liquidation through Hong Kong exchanges under a framework co-developed with the Beijing Equity Exchange (BEE).
Beijing Police Formalize Digital Asset Disposal Framework
Under the system, the PSB entrusts confiscated digital assets to BEE, which selects third-party providers to conduct technical inspection, custody, and liquidation.
Digital assets are then sold via a compliant exchange in Hong Kong. The proceeds, after currency conversion and regulatory review, are transferred to the PSB and eventually routed to China’s national treasury.
The new process addresses the regulatory block that currently prevents the direct liquidation of cryptocurrencies within mainland China. It also builds on Beijing’s existing “green channel” for handling physically seized assets, which was established in 2017.
Authorities said the method was tested in a recent case handled by police in the city’s Shunyi District. The process, from asset custody to final remittance, was completed within 24 hours.
A reserve pricing system based on market consultation is used to mitigate volatility risks, and service providers must post a 110% performance bond. The entire workflow is subject to real-time oversight and digital recording.
Hong Kong as Regulatory Bridge for Mainland Crypto Operations
Legal training has also been expanded to include digital asset topics. Recent sessions have featured cold wallet protocols and blockchain tracing, with guest lecturers from academic institutions and technical agencies.
Mainland-based firms have increasingly turned to Hong Kong to manage regulatory constraints around digital assets. JD.com launched a stablecoin payment pilot using Hong Kong’s licensed infrastructure, part of a broader pattern of companies using the city’s clearer crypto rules to experiment with blockchain-based services.
The use of Hong Kong exchanges to liquidate seized crypto further demonstrates how mainland authorities are treating the city’s legal structure as an operational extension for handling digital assets. While this doesn’t indicate regulatory convergence, it reinforces Hong Kong’s role as a buffer zone where mainland entities can access functions that remain restricted at home.
Frequently Asked Questions (FAQs)
While this mechanism was designed for criminal asset seizures, this structure might serve as a template for handling digital assets in broader legal contexts if the regulatory stance evolves.
For countries that ban domestic crypto trading but encounter digital assets in enforcement cases, the use of proximate, regulated offshore centers like Hong Kong could offer a legal workaround without revising core policy positions.
The Beijing Equity Exchange appoints third-party service providers, who are responsible for custody and liquidation via licensed Hong Kong exchanges.
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