(a). Judicial Jurisdiction Government-seized digital assets can only be disposed of after a final court ruling, either through judicial auctions or negotiated transactions. The disposal process must follow China's judicial auction and asset disposal procedures, especially the compliance protocols specific to digital assets. All transactions must be handled by licensed, designated entities within mainland China's judicial jurisdiction. Although Hong Kong is part of the People’s Republic of China, it maintains an independent judicial system. Mainland Chinese judicial enforcement cannot be carried out in Hong Kong, including the disposal of digital assets.

(b). License Validity Digital Asset Disposal (Horgos) Co., Ltd., is the only officially licensed company for handling such assets. Its licenses and qualifications are legally valid within mainland China but do not extend to Hong Kong. Hong Kong authorities would need to issue their own licenses to handle these assets, but so far, the central government has not authorized such licensing for Hong Kong in this context.

(c). Non-compliant Cases While there may have been OTC transactions in Hong Kong involving digital assets allegedly seized by Chinese public security （police）authorities, the legitimacy and legality of those cases are unverifiable. Regardless of their nature, they do not represent a compliant or recognized process for disposing of Chinese government-seized digital assets.

(a). Not a Commercial Sale Government-seized digital assets are stored in cold wallets by cybersecurity units of local police across the country under the Ministry of Public Security. These assets are not commodities acquired through economic transactions, but evidence and property seized through legal investigations. The government and judicial agencies did not “buy” these assets and thus have no obligation to maximize profits. Like judicial auctions for real estate or vehicles, digital assets are typically sold below market price as part of due legal process.

(b). Crypto Trading Prohibited in China Unlike conventional assets, digital assets cannot be listed on public auction platforms in China, nor purchased by Chinese citizens or institutions using RMB or their overseas funds. As crypto trading is banned, OTC transactions for foreign buyers under strict legal and compliance frameworks within mainland China are the only lawful path.

(c). Jurisdictional Boundaries Selling through a Hong Kong exchange would breach the judicial jurisdiction of mainland China. Judicial asset disposal is not a commercial activity—it’s a legal enforcement action. It must occur within the proper jurisdiction.

(d). Operational Infeasibility China's crypto asset seizures are scattered across thousands of local public security bureaus (local police). In 2023 alone, there were 428 such cases totaling 430.7 billion RMB (around 59 billion USD as of early May 2025). Sending judicial officers and licensed operators to Hong Kong for every single case is logistically impossible and unsustainable. Even if unlawful cases occurred—like the reported misconduct involving a provincial economic crimes officer—such actions are illegal and not representative of the compliant process. Non-official and unauthorized participants arrested in such cases are not victims of entrapment.

(e). Designated Locations for Disposal By law, OTC transactions must take place within the offices of the local public security bureaus, courts, or the licensed disposal company in Horgos, Xinjiang. If individuals previously involved in crypto violations in China, or persons wanted by authorities, come to these locations or use illicit funds, they may be detained. This is not entrapment. Chinese law prohibits entrapment, and any act of inducing a non-violating individual would itself be illegal.

(f). Fiscal Necessity and Compliance Local governments must dispose of seized assets efficiently and lawfully to convert them into non-tax fiscal income through compliant channels like SAFE (State Administration of Foreign Exchange). The goal is disposal—not baiting or trapping anyone.

(g). Not About Profit Maximization Selling assets on an exchange to maximize profit is a business mindset. The Chinese government does not pursue utility maximization or profit maximization， but prioritizes legality, fairness, and procedural transparency. Funds from disposal must be at least 80% of the appraised value and strictly recorded through official channels. Execution officers are held legally accountable for life. Rumors do not change these facts. Compliant buyers should recognize truth from noise.

(a). Different Legal Context In countries like the U.S. and Germany, crypto is legal, and seized assets are disposed of by federal-level agencies such as the U.S. Treasury or German Federal Police. In China, however, all crypto-related activities are illegal for individuals and institutions. Seizures are conducted by local public security bureaus at the county level or above, and the assets are managed by their cybersecurity divisions. Each case is treated independently, and there is no centralized government entity managing all such assets.

(b). Local Jurisdiction and Non-Commercial Nature Digital assets seized in criminal or civil cases—often linked to fraud, drugs, illegal gambling, or illegal fundraising—are disposed of post final judgment by local courts. Unlike tangible assets like vehicles or real estate properties, digital assets require special handling. As crypto trading is illegal in China, these assets cannot be publicly auctioned to local citizens or institutions. The disposal process is technical, jurisdiction-specific, and does not require involvement from high-level SOEs or financial giants. Even when large sums are involved, these are still considered local-level judicial disposals, not state-level economic operations.

(c). Cultural and Regulatory Perceptions Some foreign buyers expect crypto policies to be decided at the highest levels—like El Salvador’s presidential endorsements or Trump’s pro-crypto stance. In China, crypto is treated as a judicial asset like cars or jewelry, not a political or financial asset. Handling these through a licensed, professional, private third-party (like Digital Asset Disposal Horgos) is a deliberate administrative choice balancing local control with national regulation.

(d). Conflict of Interest Concerns Large SOEs or financial institutions are typically not granted judicial disposal licenses in China due to potential conflicts of interest. These institutions may themselves face lawsuits or be involved in sensitive cases, making it unsuitable for them to handle judicial asset disposal. Judicial independence and fairness would be compromised if large SOEs or financial institutions are granted judicial disposal licenses

(a). Administrative Penalty Law (Article 3 & 5): Article 3: Administrative penalties must follow legal procedures. Otherwise, they are invalid. Article 5: Penalties must be fair and transparent, combining punishment with education. Illegally obtained evidence is prohibited.

(b). People’s Police Law (Article 22): Police officers must not abuse their power, extract confessions through torture, or engage in corrupt conduct. Entrapment may constitute abuse of power or dereliction of duty—especially when aimed at citizens with no criminal intent.

(c). Criminal Procedure Law (Article 52): It is strictly forbidden to obtain evidence through threats, inducement, deception, or other illegal means. If entrapment is used in criminal investigations, any resulting evidence may be ruled inadmissible.

(d). Criminal Law (Article 397): Entrapment-style enforcement may constitute the crime of abuse of power or neglect of duty if it results in significant harm to public interest or citizen rights. Violators may face criminal prosecution.

(a). Legal Status Since official decisions in September 2017 and September 2021, all cryptocurrency-related activities have been deemed illegal in China. Bitcoin is not recognized as legal tender, meaning it has no enforceable value under Chinese law. For example, courts will not support a claim involving unpaid Bitcoin loans.

(b). Policy Mindset Holding crypto assets in anticipation of price appreciation reflects an investor or market-driven mentality. However, Chinese government policy does not prioritize profit maximization or adopt such a utilitarian investment approach.

(c). Historical Context & Risk Perception Prior to the 2017 ban, Chinese crypto activity was highly active and globally significant. However, increasing misuse in illegal fundraising, scams, gambling, and narcotics led to a broad societal and governmental rejection of crypto, now seen by many as a high-risk, destabilizing force.

(d). Control & Governance Cryptocurrencies, especially decentralized ones like Bitcoin, fall outside the scope of state and banking control. As long as China maintains foreign exchange controls and centralized political authority, crypto liberalization remains unlikely.

(e). Government Priorities The Chinese government focuses primarily on political and social stability rather than financial returns on specific assets. These seized cryptocurrencies were not government investments; even in the U.S., not all jurisdictions recognize Bitcoin as a reserve asset. Warren Buffett himself has been openly skeptical of Bitcoin.

(f). Speculation vs. Reality Some in the crypto community speculate that China may one day reverse its stance. However, such hopes are largely wishful thinking. While there are intelligent voices within the government, crypto policy reflects broader political calculations that often diverge from the preferences of the global crypto community.

(g). Legal Procedures for Asset Disposal The crypto assets in question are primarily confiscated from criminal cases across local and regional law enforcement agencies. Like seized property or vehicles, they are disposed of through judicial processes after final rulings. There is no centralized liquidation process under the central government for these assets.

(h). Relative Scale While the total value of these crypto holdings may seem large (e.g., RMB 1 trillion), for a national government, it's relatively insignificant. The government supports lawful judicial liquidation rather than strategic accumulation. Recovering even 80% of value is considered a satisfactory outcome.

(a). No, transactions cannot be completed in Hong Kong. All OTC settlements must occur within the jurisdiction where the case was filed, typically at the local police—the public security bureau’s cybercrime division. There are only three permissible locations: the local police bureau handling the case, the corresponding local court, or the office registered in Horgos. Conducting asset disposal outside of the designated jurisdiction—including Hong Kong—would exceed the legal boundaries of judicial enforcement. The transaction cannot even be done in a difference police office of a different jurisdiction area inside China. This is a matter of legal execution, not a commercial activity. The venue for judicial OTC transactions is strictly mandated by law and not subject to negotiation.

(a). It is generally recommended that buyers convert most of their purchased cryptos into USDT, while keeping a portion in BTC. After the transaction, once the cold wallet is received, the buyer should immediately transfer the funds to their own wallet and perform the cryptocurrency conversion if desired.

(b). Prior to payment, the buyer may verify the contents of the wallet. However, the cold wallet is handed over only after the payment is completed.

(a). Approved buyers on the whitelist will be notified in written form in advance of the composition and types of crypto assets involved. Buyers can then decide whether to proceed with the offer.

(b). Upon arrival in mainland China, the buyer signs an agreement and proceeds to the transaction site. The cold wallet is jointly managed by two separate divisions within the local police: one holds the password, while the other holds the physical wallet. During the transaction, the seller will present the wallet contents for the buyer to verify.

(c). After verification, the buyer must make a real-time, irrevocable wire transfer from a pre-approved account (cleared by AML procedures) to the officially designated receiving account (never a personal account). Funds are received and verified by Digital Asset Disposal (Horgos) Ltd.

(a). Buyers who have passed AML checks and entered the whitelist can retain legal counsel from their home jurisdiction and collaborate with a reputable Shanghai-based law firm. These firms have participated in previous transactions and will only engage if they have confidence in the legitimacy of all parties involved. If the Shanghai firm lacks experience or cannot verify the parties, it will decline to take the case.

(b). The entire transaction process is recorded and archived. Under China’s judicial disposal protocol, all officials involved bear lifelong accountability. As an authorized government-related entity, the seller does not operate like private fraud rings and will not deny delivery after receiving payment.

(c). The liquidation of crypto assets tied to criminal cases is part of a broader non-tax fiscal recovery initiative. Digital Asset Disposal (Horgos) Ltd. is not the asset owner nor the fund recipient; it is a government-licensed third-party supervisory firm that ensures proper delivery. As such, the risk of seller default is negligible.

(d). There have been rare historical instances of misconduct. For example, in one southern province, an officer named He X Gang, the head of a criminal investigation unit, illicitly sold seized crypto assets, implicating buyers. In another case, a buyer used an overseas remittance account previously flagged by authorities, triggering legal action. There are also cases involving improper procedures during judicial liquidation. In such instances, enforcement actions, including detention of responsible parties (even police officers), may occur—but this does not qualify as entrapment or breach of contract.

(a). Early Enforcement: Project-Based Seizures In the early stages of China's cryptocurrency ban, a significant portion of confiscated digital assets originated from project teams or entities that were found by the courts to have engaged in illegal fundraising activities.