Trends in Judicial Disposal of Virtual Money: The Supreme People's Procuratorate has begun to initiate research.

Introduction

The judicial disposal of involved virtual currencies has become increasingly concerning. Judicial authorities and local property departments want to liquidate the seized virtual currencies to conclude cases and boost finances; disposal companies aim to profit from disposal services; and Renmin University of China has also held a "Senior Training Course" on the judicial disposal of involved virtual currencies.

On August 23, 2024, the Supreme People's Court announced the "2024 Annual Major Research Topic Bidding Announcement," designating the "Research on the Disposal of Virtual Currency Involved in Cases" as a "Key Funding Topic." As one of the early web3 lawyers in China focusing on the judicial disposal of virtual currency, Lawyer Liu wrote an analysis titled "New Trends in the Disposal of Virtual Currency Involved in Cases, Which Has Become a Key Research Topic for the Supreme Court." Now, nearly a year has passed, and it is still unknown whether there have been any results from the Supreme People's Court's research.

Today, the Supreme People's Procuratorate (hereinafter referred to as "SPP") published the "Announcement of Project Establishment for the Research Topics of Prosecutorial Application Theory in 2025" on its official account, which includes six topics related to virtual currency. Among these six topics, four are related to the judicial disposal of virtual currency.

It is evident that the judicial handling of the virtual currency involved in the case has already attracted strong attention from the Supreme Procuratorate.

1. Specific situation of the Supreme Procuratorate's project research

According to the introduction of the article by the Supreme People's Procuratorate, there are a total of 234 research topics on prosecutorial application theory established by the Supreme People's Procuratorate in 2025, with 110 topics funded by grants and 124 topics funded by self-raised funds.

The six topics related to virtual currency mentioned above are all projects funded by the Supreme Procuratorate.

2. Why are the Supreme Court and the Supreme Procuratorate paying close attention to judicial disposal?

From the Supreme Court last year taking the judicial disposal of the virtual currency involved in the case as a research topic, to the Supreme Prosecutor's Office following up nearly a year later, this fully demonstrates that the importance of judicial disposal of virtual currency is becoming increasingly prominent.

However, what is somewhat subtle is that, as of today, based on my own actual contact and the practical situation I have come to understand, no court or procuratorate in the country has disposed of the virtual currencies involved in the case. Instead, it has always been the public security organs acting as the entrusted agency for judicial disposal to carry out the actual disposal.

Actually, according to the normal criminal procedure, the disposal of the property involved in the case is generally carried out by the court. But why is it currently mainly handled by the public security organs in the country? I have discussed this in my previous article "At what stage should the involved virtual currency be disposed of? Police or Court" from two perspectives:

In practice, it is precisely because virtual currency is too special that the court personnel do not know how to handle it. However, the police do understand a little bit.

There are three regulations based on legal grounds.

First, Article 447 of the Interpretation of the Criminal Procedure Law stipulates that for case-related property transferred with the case, or property involved in the case that has been sealed or seized by the court, all shall be handled by the court after the first-instance judgment becomes effective; (Note that this only mentions property that is transferred with the case or directly seized by the court, and does not mention property seized by the public security but not transferred with the case.)

Second, the provision in Article 278 of the Regulations on the Procedures for Handling Criminal Cases by Public Security Organs states: "For items that are not suitable for transfer, a list, photos, or other proof documents should be transferred with the case." In current judicial practice, virtual currencies involved in the case are clearly among those that are "not suitable for transfer."

Third, "Regulations on Several Issues Concerning the Implementation of the Criminal Procedure Law" (issued by the "Two Highs and One Ministry" and other departments, December 26, 2012) Article 36 stipulates that for confiscated property involved in the case, except for property that should be returned to the victim according to law or prohibited items that need to be destroyed, all must be turned over to the national treasury. For property involved in the case that is not transferred in accordance with the law, it should be turned over to the national treasury by the authority that sealed or seized the property after the court has made an effective ruling, and the sealing or seizing authority should submit an execution receipt to the court.

The summary of the three points above is that if the virtual currency involved in the case has been held by the public security bureau, even when the investigation is concluded and the case is transferred, it will still be the written evidence such as the seizure list that is handed over; therefore, in the final disposal, according to the procedural regulations, it is the court that notifies the public security agency to remit the proceeds from the disposal of the virtual currency to the national treasury.

However, as knowledge of virtual currencies becomes more widespread, there is an increasing amount of research on judicial disposal from various parties in practice. The attention and even "thirst" for judicial disposal rights from both the prosecution and the judiciary are also growing.

3. Is there the most compliant path for judicial disposal?

The "9.24 Notification" in 2021 ("Notice on Further Preventing and Handling Risks of Virtual Currency Trading Speculation") placed a stranglehold on all cryptocurrency-related businesses in mainland China, prohibiting all entities, including the judicial authorities themselves, from engaging in the exchange of virtual currencies and fiat currencies within the country.

The current mainstream disposal model is the "joint disposal model" of domestic entrustment + overseas disposal (detailed models can be found in Lawyer Liu's previous articles on judicial disposal of virtual currencies). However, there are also some overseas bank disposal models, auction disposal models, and recovery models from virtual currency issuers (centralized virtual currencies), etc. However, no entity within China can directly engage in the exchange of virtual currencies and fiat currencies, which is a regulatory red line. Therefore, in practice, we encounter some judicial leaders who intend to carry out disposal and are very concerned about whether domestic third-party disposal agencies have the "qualifications." In fact, this is a false proposition, because no entity within China can directly carry out disposal; at most, they are just a "transfer entrustment agency," possibly with an additional function of responsible for converting overseas disposal funds into domestic currency (which to some extent can also be considered a "qualification" of domestic disposal entities, because the vast majority of third-party disposal companies in the market do not have the ability and channels for compliant currency conversion).

We should be more concerned about whether the disposal and realization business abroad is compliant and meets local regulations. For example, if a judicial disposal business in the mainland actually takes place on a platform in Hong Kong or Singapore, then whether that platform complies with the regulatory requirements of its location (Hong Kong or Singapore) and whether it has the qualifications to convert virtual currency into fiat currency.

IV. Conclusion

With the Supreme Procuratorate's focus and research on judicial disposal, along with the fact that the Supreme Court has already studied the topic for nearly a year (although it is unknown when the results will be released), there will definitely be new changes in the judicial disposal of involved virtual currencies in the country—whether in practical disposal or legal guidance. It is possible that a new disposal pathway may emerge as well.