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China selling seized crypto to top up coffers as economy slows: Report
Local governments in China are reportedly seeking ways to offload seized crypto while facing challenges due to the country’s ban on crypto trading and exchanges.
The lack of rules around how authorities should handle seized crypto has spawned “inconsistent and opaque approaches” that some fear could foster corruption, lawyers told Reuters for an April 16 report.
Chinese local governments are using private companies to sell seized cryptocurrencies in offshore markets in exchange for cash to replenish public coffers, Reuters reported, citing transaction and court documents.
The local governments reportedly held approximately 15,000 Bitcoin (BTC) worth $1.4 billion at the end of 2023, and the sales have been a significant source of income.
China holds an estimated 194,000 BTC worth approximately $16 billion and is the second largest nation Bitcoin holder behind the US, according to Bitbo.
Zhongnan University of Economics and Law professor Chen Shi told Reuters that these sales are a “makeshift solution that, strictly speaking, is not fully in line with China’s current ban on crypto trading.”
Countries and governments that hold BTC. Source: Bitbo
The issue has been exacerbated by a rise in crypto-related crime in China, ranging from online fraud to money laundering to illegal gambling. Additionally, the state sued more than 3,000 people involved in crypto-related money laundering in 2024.
China crypto reserve floated as solution
Shenzhen-based lawyer Guo Zhihao opined that the central bank is better positioned to deal with seized digital assets and should either sell them overseas or build a crypto reserve.
Ru Haiyang, co-CEO at Hong Kong crypto exchange HashKey, echoed the suggestion saying that China may want to keep forfeited Bitcoin as a strategic reserve as US President Donald Trump is doing.
Related: Bitcoin rebounds as traders spot China ‘weaker yuan’ chart, but US trade war caps $80K BTC rally
Creating a crypto sovereign fund in Hong Kong, where crypto trading is legal, has also been proposed.
This issue has gained attention amid rising US-China trade tensions and Trump’s plans to regulate stablecoins and foster growth and innovation in the crypto industry.
Several industry observers have suggested that China’s tariff response could result in a devaluation of the local currency, which may result in a flight to crypto.
Magazine: Illegal arcade disguised as … a fake Bitcoin mine? Soldier scams in China: Asia Express
Nike has been hit with a class-action lawsuit that accuses the sportswear giant of operating a rug pull for shuttering its non-fungible token (NFT) platform RTFKT in January. A group of RTFKT users led by Jagdeep Cheema claimed in the proposed class suit filed in a Brooklyn federal court on April 25 that they suffered “significant damages” as a result of Nike touting its sneaker-themed NFTs to gain investors, then shuttering the platform. The suit claimed the NFTs were unregistered securities, as Nike sold them without registering with the Securities and Exchange Commission. It accused the company of using “its iconic brand and marketing prowess to hype, promote, and prop up the unregistered securities that RTFKT sold.” “Because the Nike NFTs derived their value from the success of a given promoter and project — here, Nike and its marketing efforts — investors purchased this digital asset with the hope that its value would increase in the future as the project grows in popularity based on the Nike brand,” the lawsuit argued. The lawsuit asks for $5 million in damages, claiming Nike broke consumer protection laws and violated various state unfair trade and competition laws. A US court hasn’t definitively ruled on whether NFTs are securities. Still, in an April 9 letter to the SEC, marketplace OpenSea urged the regulator to exclude NFTs from federal securities laws, arguing they don’t meet the legal definition of a security. In its case against Nike, the class group said that the court doesn’t necessarily need to rule on the legal status of NFTs to address the complaint. In 2021, Nike acquired the NFT firm RTFKT Studios, which created virtual sneakers. According to the complaint, holders of the resulting Nike NFTs were told the tokens could be traded peer-to-peer on the secondary market and used to complete challenges and quests that could lead to rewards. Nike’s crypto kick NFT collection was changing hands for an average of 3.5 Ether (ETH), or around $8,000 when they were first listed on April 18, 2022, but were trading for around 0.009 Ether, or roughly $16 as of April 21, according to OpenSea. Nike shut down RTFKT in January, which the class suit claims decimated investors when “prices plunged and did not recover,” and also took away the chance to take part in the challenges and quests, which the group argued was a primary reason for purchasing the tokens. Related: RTFKT’s CloneX avatars reappear after issue blacks out NFTs The overall NFT market dropped sharply in the first quarter of 2025, with sales plunging 63% year-over-year, to $1.5 billion in total sales from January to March 2025, down from $4.1 billion during the same period in 2024. Nike did not immediately respond to a request for comment. Magazine: Financial nihilism in crypto is over — It’s time to dream big again Two Ethereum community members, Kevin Owocki and Devansh Mehta, proposed a dynamic fee structure for the Ethereum application layer to strike a balance between revenue generation for app builders and fairness in fee extraction. The April 27 proposal outlined a simple equation that uses a square root function that proportionally lowers the percentage of fees as the funding capital allocated to a particular project grows. Owocki and Mehta explained: “For smaller funding amounts, the fee follows a square root function (sqrt(1000 x N)), providing proportionally higher returns to make building mechanisms for smaller pools worthwhile. For example, if the funding pool is $170,000, then the root of 1000 x 170,000 equals $13,038.4 or 7% is taken as overhead.” The authors of the proposal added that fees would be capped at 1% once a particular application’s funding pool crossed the $10 million level, ensuring that small app builders can develop decentralized applications without excess fees while also encouraging project and funding growth by capping fees as developers scale their applications. Owocki and Mehta’s proposal to balance revenue generation and profitability among Ethereum’s app builders reflects the growing calls to reform fee structures and value accrual mechanisms to maintain Ethereum’s economic viability against competing networks. Related: Ethereum’s L2 approach equals many high-throughput chains — Avail exec In 2024, the Solana ecosystem onboarded more developers than the Ethereum network, attracting 7,625 new developers compared with Ethereum’s 6,456. Despite the surge in software developers building on the Solana network in 2024, Ethereum remains the dominant ecosystem for attracting developer talent, although the 2024 data shows that position is no longer uncontested. According to onchain analytics firm Santiment, Ethereum fees dropped to five-year lows in April 2025 due to low activity on the Ethereum base layer resulting from reduced demand for smart contract operations like decentralized finance. This reduced demand is leading to many institutions scaling back their Ether (ETH) holdings or selling off portions of their investment as investor sentiment toward the first-ever smart-contract platform continues to erode without any clear catalysts for a reversal. Magazine: Ethereum is destroying the competition in the $16.1T TradFi tokenization race Opinion by: Hedi Navazan, chief compliance officer at 1inch Web3 needs a clear regulatory system that addresses innovation bottlenecks and user safety in decentralized finance (DeFi). A one-size-fits-all approach cannot be achieved to regulate DeFi. The industry needs custom, risk-based approaches that balance innovation, security and compliance. A common critique is that regulatory scrutiny leads to the death of innovation, tracing this situation back to the Biden administration. In 2022, uncertainty for crypto businesses increased following lawsuits against Coinbase, Binance and OpenSea for alleged violations of securities laws. Under the US administration, the Securities and Exchange Commission agreed to dismiss the lawsuit against Coinbase, as the agency reversed the crypto stance, hinting at a path toward regulation with clear boundaries. Many would argue that the same risk is the same rule. Imposing traditional finance requirements on DeFi simply will not work from many aspects but the most technical challenges. Openness, transparency, immutability, and automation are key parameters of DeFi. Without clear regulations, however, the prevalent issue of “Ponzi-like schemes” can divert focus from effective innovation use cases to conjuring a “deceptive perception” of blockchain technology. Guidance and clarity from regulatory bodies can reduce significant risks for retail users. Policymakers should take time to understand DeFi’s architecture before introducing restrictive measures. DeFi needs risk-based regulatory models that understand its architecture and address illicit activity and consumer protection. The entire industry highly recommends implementing a self-regulatory framework that ensures continuous innovation while simultaneously ensuring consumer safety and financial transparency. Take the example of DeFi platforms that have taken a self-regulatory approach by implementing robust security measures, including transaction monitoring, wallet screening and implementing a blacklist mechanism that restricts a wallet of suspicion with illicit activity. Sound security measures would help DeFi projects monitor onchain activity and prevent system misuse. Self-regulation can help DeFi projects operate with greater legitimacy, yet it may not be the only solution. It’s no secret that institutional players are waiting for the regulatory green light. Adding to the list of regulatory frameworks, Markets in Crypto-Assets (MiCA) sets stepping stones for future DeFi regulations that can lead to institutional adoption of DeFi. It provides businesses with regulatory clarity and a framework to operate. Many crypto projects will struggle and die as a result of higher compliance costs associated with MiCA, which will enforce a more reliable ecosystem by requiring augmented transparency from issuers and quickly attract institutional capital for innovation. Clear regulations will lead to more investments in projects that support investor trust. Anonymity in crypto is quickly disappearing. Blockchain analytics tools, regulators and companies can monitor suspicious activity while preserving user privacy to some extent. Future adaptations of MiCA regulations can enable compliance-focused DeFi solutions, such as compliant liquidity pools and blockchain-based identity verification. The banks’ iron gate has been another significant barrier. Compliance officers frequently witness banks erect walls to keep crypto out. Bank supervisors distance companies that are out of compliance, even if it’s indirect scrutiny or fines, slamming doors on crypto projects’ financial operations. Clear regulations will address this issue and make compliance a facilitator, not a barrier, for DeFi and banking integration. In the future, traditional banks will integrate DeFi. Institutions will not replace banks but will merge DeFi’s efficiencies with TradFi’s structure. Recent: Hester Peirce calls for SEC rulemaking to ‘bake in’ crypto regulation The repeal of Staff Accounting Bulletin (SAB) 121 in January 2025 mitigated accounting burdens for banks to recognize crypto assets held for customers as both assets and liabilities on their balance sheets. The previous laws created hurdles of increased capital reserve requirements and other regulatory challenges. SAB 122 aims to provide structured solutions from reactive compliance to proactive financial integration — a step toward creating DeFi and banking synergy. Crypto companies must still follow accounting principles and disclosure requirements to protect crypto assets. Clear regulations can increase the frequency of banking use cases, such as custody, reserve backing, asset tokenization, stablecoin issuance and offering accounts to digital asset businesses. Experts pointing out concerns about DeFi’s over-regulation killing innovation can now address them using “regulatory sandboxes.” These dispense startups with a “secure zone” to test their products before committing to full-scale regulatory mandates. For example, startups in the United Kingdom under the Financial Conduct Authority are thriving using this “trial and error” method that has accelerated innovation. These have enabled businesses to test innovation and business models in a real-world setting under regulator supervision. Sandboxes could be accessible to licensed entities, unregulated startups or companies outside the financial services sector. Similarly, the European Union’s DLT Pilot Regime advances innovation and competition, encouraging market entry for startups by reducing upfront compliance costs through “gates” that align legal frameworks at each level while upgrading technological innovation. Clear regulations can cultivate and support innovation through open dialogue between regulators and innovators. Opinion by: Hedi Navazan, chief compliance officer at 1inch. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph. 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DeFi’s challenges and rules
Self-regulatory frameworks cultivate transparency and security in DeFi
Clear structure and governance are key
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Building bridges between regulators and innovators in DeFi
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