The British government is facing a delicate diplomatic challenge as it seeks to claim around £5.5 billion worth of Bitcoin seized in one of the world’s largest cryptocurrency fraud cases.
Earlier this week, 47-year-old Zhimin Qian, also known as Yadi Zhang, pleaded guilty at Southwark Crown Court to illegally acquiring and holding cryptocurrency linked to a multi-billion-pound Bitcoin fraud. Following an investigation in 2018, UK detectives confiscated approximately 61,000 Bitcoin from Qian, who had stolen the funds from Chinese investors.
According to the *Financial Times*, Britain is now attempting to retain most of the seized Bitcoin, which could make it one of the largest government holders of cryptocurrency globally. However, the move has sparked concerns that it could trigger a diplomatic dispute with China, given the stolen funds originated there.
A former Treasury official familiar with the case told *PoliticsHome* that the government must carefully consider its next steps to avoid a rift with Beijing.
“The UK government is now one of the largest holders of Bitcoin in the world. Assuming the courts are happy, the government can potentially take a large amount of it,” the official said. “There is also a complexity of how you offload it – you would have to do it in a phased way. The market will be impacted. It’s a fascinating case and will set precedents. What will happen to the Chinese investors?”
Under British law, courts can forfeit criminally obtained assets such as cryptocurrency after conviction. Once the process is complete, the assets become government property and are handled through the Home Office. It remains unclear how much of the £5.5 billion Bitcoin haul the UK will retain or how it will be used.
Legal experts suggest that the High Court may rule that the victims are entitled only to the value of their original investments, estimated at around £640 million. The potential windfall could have implications for the Chancellor’s efforts to close Britain’s fiscal gap, estimated at £30 billion ahead of the upcoming Budget.
The UK’s Mutual Legal Assistance Treaty with China could also complicate matters. The agreement allows the two countries to exchange information and enforce criminal laws, and with an estimated 128,000 victims of the fraud, Beijing may demand that the funds be repatriated to compensate those affected.
At the same time, Britain has made improving relations with China a central part of its international trade strategy, adding further diplomatic pressure to the case.
Lord Vaizey, chair of the Crypto and Digital Assets All-Party Parliamentary Group (APPG), said the government’s situation raises philosophical as well as legal questions. “The government may acquire cryptocurrency from criminals as they would acquire currency from criminals,” he said. “Bitcoin is part of an asset class, and there is nothing wrong in principle with holding it as a strategic reserve.”
Conservative peer Lord Elliot added that transparency and planning are vital. “The government needs a plan. Is the frozen Bitcoin stored securely? How many Bitcoins are there, and what are they worth? Only when the facts are established can there be a proper debate about whether it should be saved or spent.”
The Treasury has been contacted for comment.
