China Uses Hong Kong to Liquidate Crypto, Shifting Market Power

• China to liquidate confiscated cryptocurrencies through Hong Kong’s licensed exchanges.
• Part of a broader strategy to establish Hong Kong as a global leader in virtual assets.

China aims to influence the global digital asset markets by liquidating seized cryptocurrencies through licensed exchanges in Hong Kong. Announced on May 27, 2025, this strategic move leverages Hong Kong's advanced regulatory framework to position the city as a dominant hub for virtual assets, according to Cointelegraph.

On June 26, 2025, the Hong Kong government released the "JUMP" Digital Assets Policy Statement 2.0. It outlined unified licensing for digital asset service providers, expanded tokenized product offerings, and promoted asset usage across multiple sectors. Complementing this initiative, a stablecoin ordinance establishing a licensing framework for fiat-backed stablecoin issuers took effect on August 1, 2025. These measures build upon earlier amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) in 2023, which mandated licensing for virtual asset trading platforms.

Within this regulatory context, China intends to channel digital assets seized during criminal investigations into Hong Kong’s regulated markets. While cryptocurrency trading is officially banned in mainland China, this strategy creates a legal pathway for liquidating confiscated assets. In June 2025, Beijing authorities confirmed plans to use Hong Kong exchanges for these transactions, injecting significant liquidity into the city’s expanding market.

This liquidity injection offers China a powerful mechanism to influence cryptocurrency prices and market stability. The United States reportedly adheres to a "sell-and-hold" policy for its Bitcoin reserves. In contrast, China’s active liquidation strategy enables direct market intervention. By controlling asset flows, Beijing seeks to stabilize prices, respond to global trends, and wield broader influence over the digital asset ecosystem.

Hong Kong’s increasingly sophisticated regulatory framework enhances its standing among financial hubs like Singapore and Dubai. By fostering tokenized asset innovation and a regulated stablecoin market, Hong Kong positions itself to attract institutional investors and assert leadership in the cryptocurrency sector.

This strategy has significant global implications for crypto trading and regulatory policies. Market participants and governments must prepare for potential volatility stemming from China’s controlled liquidation. Meanwhile, the United States and other nations may reconsider their policies for managing strategic cryptocurrency reserves.

Market Information:

As of August 2, 2025, 12:00 UTC, Bitcoin (BTC) is trading at $68,178, with a 3.5% decrease in 24-hour trading volume, according to CoinMarketCap. Ethereum (ETH) is trading at $3,450, with a 1.9% decrease over the same period.