The Myth of Defining the Illegal Acquisition of Virtual Currency: Judicial Disagreement Between Property and Data Attributes (Part 3)

This article attempts to respond to the aforementioned dual dilemma and explore more explanatory analytical paths in order to promote further discussion at both the practical and theoretical levels.

Author: Lawyer Shao Shiwei

In the field of criminal justice, the legal characterization of virtual currencies is gradually revealing significant practical and theoretical dilemmas. In judicial practice, different adjudicating bodies often reach significantly different conclusions in virtual currency-related cases with highly similar modus operandi, resulting in a situation of "different judgments for similar cases." This not only leads to a lack of unified standards for sentencing but may also directly affect the boundary between guilt and innocence, thereby weakening the stability and predictability of criminal judgments.

At the same time, existing theoretical discussions mostly revolve around the "property attributes" and "data attributes," lacking a systematic breakdown of the normative concept of "property in the sense of criminal law," and failing to effectively respond to complex practical forms such as meme coins, pre-issued tokens, and tokens with zero value, making it difficult for theoretical analysis to directly meet the adjudication needs of specific cases.

Based on this, this paper attempts to respond to the aforementioned dual dilemma and explore more explanatory analytical paths in order to promote further discussion at both the practical and theoretical levels.

In the previous article , we analyzed the main theoretical viewpoints such as the "data-driven theory," the "property-based theory," and the "compromise theory," and pointed out the cognitive limitations of law enforcement personnel when handling currency-related cases. At the same time, in judicial practice, theoretical and practical discussions usually regard virtual currencies as a homogeneous whole, which makes it difficult to deal with the complex reality of different types of tokens.

Therefore, this paper proposes a dual review system of "typology" and "dynamics" as a more refined analytical framework. This paper will first conduct the first review—"typological analysis." Based on the core sources of credit and operating mechanisms of virtual currencies (such as decentralized consensus, asset collateral, and specific ecological functions), we will systematically classify them into several basic types and examine whether each type meets the core elements of "property in the sense of criminal law."

The framework proposes a dual review system for the criminal law attributes of virtual currencies, combining "typification" and "dynamics."

Current legal research and judicial discussions on how to classify virtual currencies tend to treat them as a highly homogeneous whole, with analyses focusing primarily on a few mainstream cryptocurrencies such as Bitcoin, Ethereum, and Tether. While this research approach simplifies the issue to some extent, it inevitably obscures the inherent diversity and complexity within the virtual currency ecosystem.

In fact, different tokens differ in their core elements such as "source of credit," "price stabilization mechanism," "value stability," "actual use cases," and "whether they are linked to real-world assets," and their legal attributes should be examined differently. Furthermore, the specific state of the virtual currency involved—such as whether it has been delisted from exchanges, whether it has lost liquidity, whether it has never had liquidity added, or whether it is a "pending listing" token that has not yet been listed on any exchange—is a key variable affecting the characterization of each case.

Therefore, to accurately determine whether a particular virtual currency belongs to "property in the sense of criminal law" or is only protected as "data" in a specific case, it is necessary to combine the above-mentioned different types and specific states, and to conduct dynamic and individual normative evaluation based on whether it substantially meets the three core elements of management possibility, transfer possibility and value.

Next, Attorney Shao will use these three elements as an analytical framework to elaborate on the discussion along two dimensions:

First, we will analyze the types of virtual currencies based on their inherent mechanisms and credit foundations.

Secondly, based on the specific circumstances of virtual currencies in different cases, it is necessary to carefully assess whether and to what extent they possess property attributes.

Part 1: A Typological Analysis of Virtual Currencies: How Their Internal Mechanisms Determine Their Legal Attributes

In criminal cases, the characterization of the virtual currencies involved cannot be generalized. Different types of virtual currencies vary greatly in their sources of value, stability, and practical functions, which directly affects how they might be viewed in legal evaluation. We can examine them by classifying them into the following categories based on their inherent operating mechanisms and credit support.

Category 1: Native Crypto Assets – Value is built upon network consensus and functionality

This type constitutes the foundation of the crypto world, whose credibility does not come from any centralized institution or external asset, but rather from the inherent design of its protocol layer and community consensus.

• Key members :

• Payment-type cryptocurrencies , such as Bitcoin (BTC), have the core narrative of being "digital gold" and a store of value.
• Public blockchain utility tokens , such as Ethereum (ETH) and Solana (SOL), are the "fuel" of their respective blockchain networks, used to pay transaction fees (Gas) and deploy smart contracts.
• Governance tokens , such as Uniswap's UNI and Compound's COMP, grant holders voting rights in the governance of decentralized protocols.
• Meme coins , such as DOGE and SHIB, are almost entirely driven by online culture, community sentiment, and social media narratives, lacking traditional "fundamentals" to support their value.

• Credit and source of value :
  Its credit is a decentralized, cryptographic trust . Its value comes from (1) network effect : the more people use and trust the network, the more solid its value foundation is; (2) functional utility : such as the necessity of ETH as a gas; (3) governance value : such as the right to participate in deciding the future of the protocol; (4) pure community cultural consensus : such as meme coins.

• Review of the three elements of criminal law :

• Management possibility : Fully satisfied. By holding the private key, users have absolute and exclusive control over their assets.
• Transfer probability : Fully satisfied. Transfers are made peer-to-peer via a blockchain network; transactions are settled immediately and are irreversible.
• Value : This is the core of the controversy surrounding its characterization. In reality, these cryptocurrencies possess enormous market capitalization and trading depth in the public market, objectively demonstrating economic value. However, from a criminal law perspective, their value fluctuates wildly due to the lack of a stable anchor, and under China's legal framework, their transactions are not recognized, lacking a legitimate and authoritative judicial pricing benchmark . For example, if the price of Bitcoin was $100,000 at the time of the theft but had fallen to $80,000 by the time of trial, which should be used to determine the amount of the crime? There is no unified standard for judgment in judicial practice. This constitutes a fundamental obstacle to directly equating them with traditional "property" in quantitative sentencing. Especially for memes, their value is like a candle in the wind, entirely dependent on market sentiment, making "value stability" in a normative sense virtually impossible .

• Legal attribute determination :
  These assets perfectly exemplify the attributes of "virtual goods." Technically, they possess all the characteristics of a "real" commodity in circulation; however, their fluctuating value, lack of legal definition, and inability to be precisely measured by the judiciary make them unsuitable for upholding the stable and definite property rights protected by criminal law. Therefore, depending on the specific circumstances of each case, treating them primarily as computer information system data with significant economic value may be more in line with current judicial practice. Infringement (such as stealing private keys through hacking) primarily infringes upon data security rights and can be regulated under crimes such as illegally obtaining computer information system data; its market value can be considered as a factor in sentencing.

The second type: Collateralized stablecoins – their value is built on the asset reserve commitments of centralized institutions.

These tokens serve as a bridge between the crypto world and traditional finance, and their design goal is to maintain price stability.

• Key members :
  • Fiat-backed : such as USDT and USDC, which claim to be backed 1:1 by high-quality liquid assets such as equivalent US dollar deposits or short-term treasury bonds.
  • Crypto asset-collateralized : such as DAI (decentralized), which is generated by over-collateralizing other cryptocurrencies such as ETH.
  • Real-world asset (RWA) supported : such as ONDO, which aims to tokenize traditional financial assets such as government bonds and private credit.

• Credit and source of value :
  Its credit is centralized or hybrid . Fiat-backed stablecoins rely on users' trust in the audit reports and redemption promises of issuing institutions (such as Tether and Circle). RWA tokens, on the other hand, rely further on the clarity of the legal rights mapping of the underlying assets and the reliability of the custodian. Its value stems from the expectation of redeemability of the pegged asset (primarily the US dollar).

• Review of the three elements of criminal law :

• Management and transfer possibilities : Technically fully met.
• Value : This is where it most closely resembles "criminal property." Its pegging mechanism gives it a de facto stable and easily measurable economic value. Stealing 1000 USDT results in a clear loss equivalent to approximately $1000. However, its credit risk cannot be ignored. Both the long-standing questions about USDT's reserve transparency and the temporary depegging of USDC due to the Silicon Valley Bank incident expose the potential risks inherent in its "stability." Its value is based on commercial credit, not sovereign credit, and therefore, it is susceptible to collapse.
  In March 2023, the sudden collapse of Silicon Valley Bank (SVB), where its issuer Circle had deposited a portion of its $33 billion reserves, triggered market panic regarding USDC's redemption capabilities, causing USDC to briefly de-peg to $0.87. This event revealed a crucial fact: the "stability" of stablecoins depends on the proper functioning of the traditional financial system and the liquidity management of the issuing institution. Their "value" is actually intertwined with the credit and liquidity risks of traditional banks. Therefore, even if their price remains stable in most cases, this stability carries a clear external risk exposure, a stark contrast to the risk-free nature of central bank digital currencies (CBDCs), which are directly and fully backed by sovereign credit. In criminal justice, this risk constitutes a normative obstacle to fully equating them with "risk-free assets."

• Legal attribute determination :
  
  Stablecoins exist in a "gray area" of criminal law evaluation. Their de facto value stability and quantifiability lead many judicial precedents to classify them as "property." However, this is a conditional and pragmatic assessment , avoiding the normative issue of the lack of ultimate legal guarantee for their underlying promises. They are more like " quasi-property." Judicial practice often faces a choice here: should it emphasize their appearance as a widely used "medium of exchange" or acknowledge their inherent legal risks as "privately issued virtual commodities"? Consequently, the characterization of their harmful acts oscillates between property crimes and computer crimes.

The third category: utility tokens – whose value is highly tied to a specific ecosystem.

These tokens serve as a medium of value circulation and functional credentials within a specific digital ecosystem. Their value is not universal and depends entirely on the operational status and internal economic cycle of the single project or platform to which they belong.

• Key members :
  • Web3 game/blockchain game tokens : such as Axie Infinity's AXS and SLP, or the proprietary tokens of games within the TON ecosystem. Their value depends on the activity level of the game ecosystem and the token's utility.

• Credit and source of value :
  
  Its value is 100% derived from trust in the project team's ability to sustain operations and the health of the game ecosystem. This is an extremely fragile and closed consensus on utility. Once the core supporting this consensus—the game project's continued operation and the player community—collapses, the "functions" promised by the token cannot be fulfilled, and its value foundation will also be annihilated.

• Review of the three elements of criminal law :

• Management and transfer feasibility : Technically, this is generally met.
• Value : Taking Axie Infinity's game token SLP (Small Love Potion) as an example: When the game is operating healthily and the token has active internal use cases and external trading markets, SLP, due to its quantifiable and achievable purchasing power (breeding Axie) and market price, may be considered to have property value in the sense of criminal law. However, it must be recognized that this value is essentially project-dependent , and its stability is far lower than that of collateralized stablecoins. When the project team absconds, the servers shut down, or the economic model collapses, making it impossible to realize the intended use (breeding) of SLP, the token degenerates from a "functional credential" into a piece of useless on-chain data. Although its blockchain record still exists, and may even retain residual value in a very small number of speculative transactions, its core, legally protected economic interest—that is, the specific utility based on the contract (white paper) or promise—has been permanently lost . In this state, the act of illegally acquiring such tokens is difficult to determine as causing substantial infringement of property rights.
• Legal attribute determination :
  The assessment of such tokens must be highly dynamic and context-dependent. A popular blockchain game token might be considered to have property value due to its clear in-economy purchasing power; however, the same token instantly becomes worthless data after the project collapses. This requires judicial review to pinpoint the exact state at the time of the incident. The illegal acquisition of invalid tokens cannot constitute a property crime; its essence is theft or destruction of data, which should be classified as computer crime. This also reveals the fundamental difference between utility tokens and native crypto assets (such as BTC and ETH): the latter's value is based on global, decentralized network consensus and does not immediately become zero due to the survival of a single entity; while the value lifeline of the former is entirely dependent on the fate of a single centralized or semi-centralized project.

Category 4: Hybrid and complex financial derivative tokens – a composite of multiple value logics

These types of tokens have complex structures, often combining features of multiple aforementioned types, making them the most challenging aspect in legal characterization.

• Key members :
  • Algorithmic stablecoins (such as the collapsed UST) : attempt to maintain their peg through a dual-currency model (stablecoin + governance coin) and arbitrage mechanisms, with credit based on faith in a mathematical model.
  • Income tokens or security tokens (STOs) : These tokens explicitly represent equity, debt, or income rights, and their value is directly linked to cash flow or assets in the traditional financial world.
  • DeFi governance and yield hybrid tokens : Some tokens possess multiple attributes such as governance, staking interest, and fee sharing.

• Credit and source of value :
  Credit sources are mixed and nested . They could be "algorithmic models + market arbitrage" or "underlying financial asset rights + on-chain certificates".

• Review of the three elements of criminal law :
  Value is the crux of their evaluation and must be thoroughly examined . Algorithmic stablecoins attempt to create stable value through pure on-chain game theory and arbitrage mechanisms, but their credit foundation (mathematical model) is extremely fragile under extreme market pressure. The collapse of LUNA/UST in the Terra ecosystem in May 2022 is strong evidence of this: when UST lost its peg to the US dollar, the protocol's designed "death spiral" mechanism was triggered—LUNA was infinitely issued to redeem UST, ultimately causing the price of LUNA to drop to zero within days, and UST collapsed as well. This event shows that the "value" of such tokens is built on the assumption of a dynamic equilibrium. Once the equilibrium is broken, its value may evaporate instantly, lacking the stability required for the continued existence of value under criminal law. It is difficult to say that harming UST, which is in a death spiral, causes measurable property loss because its value is disappearing simultaneously. The value of security tokens (STOs), on the other hand, is closely related to the legitimacy and feasibility of the traditional financial rights they represent. If the structure is clear and the rights are guaranteed, their value is the most stable and closest to traditional "property interests."

• Legal attribute determination :
  Such tokens cannot be treated indiscriminately; a "factor-based analysis" is necessary. For example, illegally acquiring a security token offering (STO) is relatively straightforward, as it directly corresponds to tangible equity or debt, making it a violation of property interests and thus constituting a property crime. However, illegally acquiring an algorithmic stablecoin in a death spiral presents almost no property interests to infringe upon, making a data crime a more appropriate classification. Its legal nature depends on which layer of its multiple values is violated in a specific case.

Fifth category: Centralized platform ecosystem tokens – their value is built on the credit and commercial success of a single enterprise or platform.

These tokens are digital mappings of traditional company equity or rights on the blockchain. Their fate is deeply tied to the operating conditions of specific centralized entities, resulting in highly concentrated risks.

• Key members :
  • Centralized exchange platform tokens : such as FTT , the native token of the now-defunct FTX exchange, and Binance's BNB (especially in its early stages, its core value was directly related to the rise and fall of the Binance platform).
  • Ecosystem tokens issued by other centralized service providers : their core value also closely depends on the credit and business prospects of the issuing entity. For example, the governance tokens of some large decentralized autonomous organizations (DAOs) are directly related to the success or failure of the key protocols or assets managed by the DAO.

• Credit and source of value :
  Its credit is purely and singularly centralized commercial credit . Its value comes entirely from: (1) the market's expectation of the platform's continued profitability, ethical conduct, and sustainable operation; and (2) the practical benefits granted by the platform, such as transaction fee discounts, participation in IEO subscriptions, dividends, or governance voting rights. Its essence is closer to a " digital enterprise credit with practical functions" or "quasi-securities" than a crypto asset with independent value discovery.

• Review of the three elements of criminal law :

• Management and transfer possibilities : Technically, this is fully realized through a blockchain network, meeting formal requirements.
• Value : This is the Achilles' heel of its criminal law attributes. Its "value" is highly dependent, contingent, and subject to the risk of instantaneous loss to zero . Take FTT as an example: when the FTX exchange was operating normally, it possessed clear practical value and market pricing due to its provision of economic benefits such as transaction fee discounts, seemingly stable. However, after FTX's collapse in November 2022 due to the misappropriation of user assets, its corporate credit, the foundation of its credibility, instantly collapsed, causing the FTT price to plummet, and ultimately leading to its planned cancellation in bankruptcy liquidation proceedings. This profoundly reveals that the "value" of such tokens is not endogenous or supported by broad consensus, but rather entirely parasitic on the commercial reputation of a single enterprise. Once the underlying credit collapses, its market value evaporates. Therefore, it lacks the relatively independent and stable value persistence required for criminal property . When a platform faces a redemption crisis or is on the verge of bankruptcy, acts that infringe upon such tokens may be simultaneously destroying the value of the "property" they intend to infringe upon, making it extremely difficult to determine the timing and specific amount of actual property loss.

• Legal attribute determination :
  The assessment of such tokens requires a thorough "credit penetration review." Their legal attributes form a dynamic spectrum that changes according to the issuing entity's operational status .

• When a platform has a good reputation and operates steadily, it may be recognized as a virtual property or property interest in judicial practice because it carries clear and realizable economic benefits (such as tangible cost savings).

• However, once a platform experiences a major credit crisis (such as a bank run, investigation, or insolvency), the property attributes of its tokens weaken drastically. In extreme cases like the FTX collapse, the act of "stealing" FTT on the eve of the crash harms an object that is closer to an expired data rights certificate than a legally protected stable asset. In this situation, classifying the infringement as a property crime (such as theft) faces fundamental challenges because the legitimacy and certainty of the object's value have been lost . The judiciary is more likely to focus on the illegal acquisition or destruction of the token as "computer data."

This article provides a typological analysis of cryptocurrencies, systematically classifying them into five categories based on their sources of credit and core mechanisms. For each category, we have conducted a preliminary legal characterization based on three elements: "management possibility, transfer possibility, and value."

However, static categorization is only the first step in the analysis. In practice, the specific market and functional state of the virtual currency involved at the time of the incident—such as whether its value is extremely unstable or whether it has lost liquidity—directly affects its criminal law evaluation. In the next article, we will move on to the second level of review, namely "dynamic review," to explore the specific changes in the property attributes of virtual currencies under different state dimensions, in order to complete the construction of the entire analytical framework.

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