Edited and excerpted by: Sun Xiaotian , Master of East China University of Political Science and Law
On February 5, 2024, the People's Procuratorate, sponsored by the Supreme People's Procuratorate, published an article entitled "Records of the Seminar on Virtual Currency Disposal". The meeting was convened by the Chongqing People's Procuratorate, which invited public security, procuratorial and judicial organs, university scholars and experts, and representatives of virtual currency disposal companies. Prior to this, although the Chongqing Procuratorate's official account had reported on it, it did not reveal much about the content of the meeting. Therefore, the author saw this article as a treasure, and deliberately selected some representative views to share with readers who are concerned about the judicial disposal of virtual currencies.
Regarding the handling of virtual currency cases, Pu Xianglin, political commissar of the Intelligence Command Center of the Tongliang District Public Security Bureau of Chongqing, pointed out that handling virtual currency crime cases requires the concerted efforts of criminal investigation, technical investigation, network security and other police types, the timely intervention of the procuratorate to guide evidence collection, and the in-depth cooperation of cross-provincial public security organs to link and merge the cases with relevant information such as the bank cards and virtual currency addresses involved in the case. It also requires strong support from technology companies to complete the traceability of virtual currency. At the same time, he raised the problems existing in the case handling: First, it is difficult to trace the facts of the upstream crimes in the virtual currency chain. This problem has been solved with the cooperation of police types and the support of technology companies. Second, it is difficult to seize and freeze virtual currency. Because the decentralized wallet address cannot be seized through legal documents to the exchange, only the virtual currency wallet address holder and key can be found, but the key is also at risk of being hacked, and there may be more than one key. The main approach currently adopted is to establish a new wallet address for the suspect to transfer the virtual currency to, which will be managed by the police. Third, it is difficult to dispose of virtual currency. Virtual currency transactions are defined as illegal financial activities by the state, and the public security organs have lost the legal basis for handling virtual currencies. In practice, the public security organs will handle virtual currency transactions after virtual currency holders sell them for RMB, or hand them over to third-party companies for handling. However, the above practices have no legal support, and it is urgent to formulate relevant laws and regulations on the disposal of virtual currencies.
Regarding the issue of disposal risks, Chen Xia, deputy director of the Second Criminal Tribunal of the Chongqing High People's Court, proposed that the subjects and processes of the seizure and disposal of the virtual currency involved in the case should be regulated. In addition, the country currently prohibits virtual currency transactions, and disposal inevitably involves transactions. There are realistic disposal needs in judicial work, especially for crimes of fundraising, where there are victims or participants in fundraising, etc. who need to return assets. For the virtual currency involved in the case, it is not necessary to conduct judicial disposal of all of them. Only when there are judicial needs and victims is it necessary to conduct judicial disposal. At the level of national benefits, it is possible to consider transferring some rights, which is more reasonable and more conducive to reducing legitimacy risks. At the same time, in order to minimize the disposal risks, multiple departments such as financial supervisors should intervene simultaneously, participate together, and supervise the disposal process.
Chen Weihuang, deputy director of the Legal Policy Research Office of the Chongqing Municipal Procuratorate, made three suggestions on the methods of disposal: First, the public security organs should find the right time node for investigation and dispose of virtual currency in a timely manner. First, the value of virtual currency varies greatly. From the investigation agency to the procuratorate and then to the trial agency, the amount of virtual currency will change in this process. Secondly, the suspect may have multiple wallet addresses at the same time. If it is not handled in time after being discovered during the investigation stage, the virtual currency may be transferred. It is recommended to fix the property first during the investigation stage, and then the procuratorate will supplement the evidence. Second, in terms of the subject of judicial disposal of virtual currency, it is recommended to entrust the virtual currency to a third-party company with disposal capabilities for disposal by purchasing services. Third, risk control should be carried out in the disposal process. Based on the particularity of virtual currency, the security of the fund pool must be guaranteed. If there is a problem with the fund pool itself, the entire judicial evidence chain will be contaminated.
Wang Yanwei from Zhongke Lian'an (Beijing) Technology Co., Ltd. pointed out that the cases involved in the investigation showed that judicial organs in various places are actively exploring and practicing the disposal of virtual currency, but there is still a lack of unified standards and procedures. The basic operation in practice is: seizure generally adopts the use of cold wallets or wallets to create a seizure address, record and video the entire seizure process, and fill in the seizure list; custody generally adopts the method of handing over mobile phones and other media to special police for safekeeping or seed phrase and passwords to multiple people for safekeeping. There are currently three principles that are more recognized in various places for disposal: the first is the "sunshine" principle, which is to hand over overseas institutions with anti-money laundering licenses for overseas transfer; the second is "informed settlement of foreign exchange", some banking institutions approved by the foreign exchange management department can engage in related business, and when the public security organs issue a notice, it is clear that the disposal is carried out for the purpose of recovering stolen goods and losses; the third is "first money and then currency", first lock the price of virtual currency, and the criminal suspect will deliver the money to the judicial organ for disposal, and then hand over the virtual currency to the disposal company. At the same time, it is recommended to carry out systematic training and exchanges on the relevant knowledge of virtual currency and disposal, so as to summarize and refine local disposal standards and specifications.
