The Procuratorial Daily recently published an article (Establishing Multiple Judicial Disposal Paths for Criminal Cases Involving Virtual Currency). The article points out that a gradual establishment of multiple judicial disposal paths for criminal cases involving virtual currency should be implemented: in practice, compliant third-party institutions should be introduced to assist in completing on-chain tracking, secure custody, and compliant monetization, while preventing fund backflow and market speculation through procedures such as closed fund circulation, on-chain evidence storage, and price assessment. Additionally, it is suggested to clarify the legal positioning of third-party institutions, unify technical and procedural standards, and strengthen the full-process supervision of the procuratorial organs. In terms of disposal methods, the article recommends distinguishing between different models such as monetization, return, and destruction: priority should be given to protecting value recovery in cases that require compensation to victims; tokens used for illegal purposes and with low liquidity may be destroyed or technically sealed in accordance with the law; and for special circumstances such as stablecoins, exploration of returning the original currency may be conducted under compliant conditions.
Establish multiple judicial disposal paths for criminally involved virtual currency
The rapid development of the digital economy has brought many opportunities to social life, but has also generated a series of new problems. Currently, virtual currency has become an important funding channel and tool for crime in some criminal cases. In practice, due to the decentralized and anonymous characteristics of virtual currency, in transactions crossing the boundary between reality and digital, its flow of funds is often disassembled into several relatively independent segments, making it difficult for criminal justice to address these properties with questioned legitimacy, and procedural norms lacking. How to achieve efficient and standardized disposal of involved virtual currencies while ensuring criminal justice is just involves legal applicability issues and affects the overall national financial and property security.
The legitimacy basis for judicial disposal of criminally involved virtual currency
The legitimacy of judicial disposal of criminally involved virtual currency stems from multiple logics of legal authorization, practical needs, and risk prevention and control. Its core lies in balancing the conflict between financial regulation and property rights protection and achieving the unity of judicial purposes and regulatory goals through procedural norms.
First, the basis for disposal under the legal regulatory framework. China's regulation of virtual currency adopts a 'strict and prohibitive' model, but does not completely deny its disposal value as criminally involved property. In 2013, the People's Bank of China and five other ministries issued a notice on preventing Bitcoin risks, clarifying that Bitcoin does not have the same legal status as currency and cannot and should not circulate as currency in the market; in 2017, the People's Bank of China and seven departments issued a notice on preventing risks of token issuance and financing, further expanding the scope of restrictions and prohibiting token issuance and financing; in 2021, the People's Bank of China and ten departments jointly issued a notice on further preventing and disposing of risks of virtual currency trading speculation, defining virtual currency-related businesses as illegal financial activities. However, these regulations mainly target the 'medium of transaction' function of virtual currency, rather than its attributes as 'criminal proceeds' or 'illegal tools.' According to Article 64 of the Criminal Law, all property obtained by criminals through illegal means should be confiscated or seized. Although virtual currency has been stripped of its trading qualifications, it still belongs to the 'objects that can be confiscated.' Therefore, the disposal of virtual currency involved in criminal cases by judicial authorities is essentially the legal duty of executing criminal judgments, rather than participating in financial activities.
Second, the practical needs in judicial practice. Judicial authorities face a dual dilemma of technical thresholds and compliance risks when directly disposing of virtual currency. The decentralized and anonymous characteristics of virtual currency make it difficult for traditional investigative methods to effectively track its circulation paths; at the same time, judicial authorities lack the professional ability for safe custody and compliant realization of virtual currency, and direct disposal may lead to asset loss or compliance risks. In practice, judicial authorities adopt various methods to dispose of virtual currency. For instance, some rely on third-party cooperation models to directly transfer funds to special accounts for involved funds through detection, handover, and public realization, achieving the closure and compliance of the disposal process. Practice shows that third-party institutions, leveraging their technological advantages and resource integration capabilities, can effectively make up for the professional shortcomings of judicial authorities and become necessary aids in the disposal of criminally involved virtual currency.
Third, procedural guarantees for risk prevention and control. Doubts about the disposal model of third-party institutions mainly focus on issues such as unclear legal status, profit-seeking tendencies, and lack of supervision. However, through dual constraints of procedural norms and regulatory technology, these risks can be effectively mitigated. In practice, through the designated disposal by third-party institutions and the closed channel of bank settlement, it ensures that funds directly enter the special accounts for involved funds, eliminating the channels for fund backflow and speculative trading. Furthermore, this practice emphasizes the full participation of prosecutorial supervision throughout the process, establishing strict procedural standards and regulatory requirements from transaction isolation, fund isolation to on-chain evidence preservation and price evaluation. These procedural guarantees make the legitimacy of third-party disposal no longer rely on 'flexible breakthroughs' of financial regulatory norms, but rather return to the proportionality principle and procedural justice requirements of criminal execution law itself.
Improvement of the judicial disposal path for virtual currency involved in criminal cases
First, clarify the legal status and role positioning of third-party institutions. Under the current legal framework, the participation of third-party institutions in the disposal of criminally involved property lacks clear legal authorization. Future legislation could include third-party institutions in the category of judicial auction assistants through an authorization framework for special procedures for the disposal of criminally involved property, granting them exclusive qualifications for 'one-time, targeted, non-public bidding.' This role positioning clarifies the auxiliary status of third-party institutions while limiting their participation scope, avoiding the risks of power rent-seeking and market abuse.
Second, build a dual system of technical standards and procedural norms. To ensure the compliance and transparency of the disposal process, the Supreme Court and the Supreme People's Procuratorate should jointly issue dual standards for technology and procedures in collaboration with financial regulatory agencies. In terms of technical standards, qualification requirements for bidding platforms can be clarified, including blockchain technology capabilities, data security guarantees, etc.; in terms of procedural standards, price evaluation methods can be standardized, requiring the use of the average price of the 20 days prior to the transaction or the victim's acquisition cost as a benchmark to avoid subjective pricing; at the same time, a unified format for on-chain evidence preservation can be established to ensure the traceability of the flow paths of virtual currencies; regarding the fund clearing paths, it can be required that the proceeds from realization be directly transferred to special fiscal accounts without any third-party intermediary accounts to eliminate channels for fund backflow.
Third, strengthen the full connection of prosecutorial supervision and rights protection. Supervision of the disposal process is crucial, and prosecutorial agencies can participate throughout the disposal process to implement dynamic supervision. Specifically, prosecutorial agencies can require third-party institutions to regularly submit progress reports on disposal, including on-chain tracking records, bidding processes, fund transfer vouchers, etc.; at the same time, a rights notification and objection mechanism can be established to ensure that involved persons and good-faith third parties can timely understand the disposal situation and raise objections. For objections, expert demonstrations or independent agency reviews can be organized to ensure the fairness of the disposal results.
Fourth, explore differentiated disposal models to meet diverse needs. The disposal needs for virtual currency involved in criminal cases are diverse. In the future, differentiated disposal models can be explored, using the proportionality principle as a benchmark, and applying three disposal measures of realization, destruction, and return in a differentiated manner. For cases involving the return of victims' property, priority can be given to the targeted bidding realization model to ensure that the proceeds from realization are fully compensated. For example, for stablecoins that victims have not exchanged after being defrauded, if they are willing to return the original currency, they can be directly returned under compliant conditions to avoid exchange rate losses. For cases involving the confiscation of prohibited items, destruction or technical sealing modes can be employed to avoid re-entering the market. For tokens specifically used for pyramid schemes or gambling, if they have poor liquidity and insufficient market depth, forced realization may lead to devaluation, and they can be destroyed in accordance with the law, with destruction records noted in the judgment document. For high-value currencies where criminal proceeds have been mixed with legal investments, realization should be prioritized to maximize loss recovery. Additionally, for cases with relatively small amounts involved or where technical tracking is difficult, simplified disposal procedures can be explored, such as a comprehensive determination model, which assesses the value and ownership of involved virtual currency based on relevant evidence when the circulation path cannot be fully clarified. Prosecutorial agencies can hold hearings before prosecution, listen to opinions from victims, defenders, and financial regulatory representatives, and choose the disposal method that minimally harms the interests of the parties, minimally impacts financial order, and is most effective in combating crime, based on four factors: currency type, market value scale, victims' demands, and financial security.
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