How to legally deal with virtual currency in criminal cases?

In current judicial practice, how to deal with virtual currencies seized for suspected criminal offenses is a very controversial issue. On the one hand, in the eyes of judicial organs, especially public security organs, in order to fix the property involved in the case and determine the amount of the suspected crime, timely disposal of the virtual currency involved is crucial to the investigation of the case; on the other hand, from the perspective of my country's current supervision of virtual currency transactions, any method and any institution to exchange virtual currency for legal currency is prohibited. The conflict between these two aspects is so serious that it inevitably makes people feel split. Lawyer Liu also wrote this article based on this to explore the dilemma of handling virtual currency in criminal cases in current judicial practice.

How will virtual currency be handled in criminal cases?

After the "Card Cutting Operation", telecommunications, banking and other institutions have increased their supervision of phone cards and bank cards. Virtual currency has been favored by traditional "black and gray" industries due to its anonymity. Criminals such as fraud, gambling, money laundering, and pyramid schemes have begun to use virtual currency to carry out illegal activities.

It should be noted that this does not mean that people who engage in virtual currency business are engaging in illegal activities, but that people who are already committing crimes choose to use virtual currency. Many of the friends in the cryptocurrency circle that Lawyer Liu has come into contact with are idealistic, passionate, and hardworking.

For criminal cases involving virtual currency, there are two common practices of judicial organs: one is to entrust a third-party company to dispose of and realize the virtual currency during the public security investigation stage. Of course, in practice, there are also suspects or suspects' families who entrust third-party companies to dispose of virtual currency and realize the virtual currency. However, given that suspects in current virtual currency criminal cases are generally detained or placed under residential surveillance at a designated location, the suspects themselves cannot take the initiative to contact the third-party company during this period. They must have the permission or even "guidance" of the public security organs; the second is that the virtual currency involved in the case is only seized at the public security and procuratorate stage, and the court execution bureau will dispose of and realize the virtual currency after the case is judged. The specific method can only be to entrust a third-party company (most of which appear in the form of xxx technology companies on the market) to dispose of and realize the virtual currency.

Therefore, under the current regulatory policies, judicial authorities also understand that they cannot actively participate in the disposal process of virtual currencies. Whether the judicial authorities proactively entrust a third-party company to dispose of it, or the parties involved in the case or their families entrust a third-party company to dispose of it, the exchange between the virtual currency involved and the legal currency currently seems to be able to be carried out only through third-party companies. But is this legal?

Is it legal for a third-party company to dispose of the virtual currency involved in the case?

The so-called third-party company disposing of the virtual currency involved in the case on behalf of the judiciary is the act of a domestic company accepting the commission of the judicial authority to realize the virtual currency involved in the case and then transferring it to the account designated by the judicial authority. There are two common ways of entrustment:

1. Directly accepting personal commissions

In the case where the disposal company accepts the entrustment of the parties or their families to dispose of the virtual currency involved in the case, it is generally sufficient for the parties or their families to directly sign an agreement with the disposal company, and there is no direct and obvious trace of judicial intervention. In this case, the disposal company has the greatest legal risk, because the "Notice on Further Preventing and Dealing with the Risks of Virtual Currency Trading Speculation" (hereinafter referred to as the "9.24 Notice") issued by ten ministries and commissions including the "two high courts and one ministry" clearly stated that "carrying out legal currency and virtual currency exchange business , exchange business between virtual currencies, buying and selling virtual currencies as a central counterparty, providing information intermediary and pricing services for virtual currency transactions, etc. " are illegal financial activities. At this time, for the disposal company, it is a violation of regulatory regulations at the least, and a crime (such as illegal business operation) at the worst.

(II) Accepting the entrustment of judicial organs

Regarding the situation where the judicial authorities (mainly the public security authorities) entrust the disposal company to realize the virtual currency involved in the case, although this entrustment behavior itself has a legal basis (such as Article 236 of the "Procedures for the Public Security Organs to Handle Criminal Cases" and Article 34 of the "Regulations on the Application of Seizure and Freezing Measures by the Public Security Organs in Handling Criminal Cases"), the content of the entrustment obviously does not meet the requirements of the 9.24 Notice, that is, as long as the disposal company conducts the exchange business between legal currency and virtual currency in mainland China, it is considered to be engaging in illegal financial activities. As for whether the purpose of disposal for the service of judicial authorities can prevent or offset the illegal financial activities specified in the 9.24 Notice, Lawyer Liu believes that from the perspective of legal sentiment or moral sense, it is worthy of recognition to provide assistance to the judicial authorities to realize the virtual currency involved in the case so as to promote the smooth progress of judicial activities; but strictly from the perspective of legal provisions or current regulatory provisions: no matter what the purpose is, as long as the exchange business between virtual currency and legal currency is carried out, it is prohibited. In practice, Lawyer Liu has also encountered a case where Company B (a virtual currency disposal company) entrusted by the public security of A was visited by the public security of C after it disposed of the virtual currency. The reason was that part of the cash collected by Company B during the disposal process involved fraud funds. The reality is so divided that many disposal companies like Company B cannot guarantee 100% safety even if they are endorsed by the public security organs of the entrusted place.

Therefore, in the current judicial environment, who the third-party company accepts the commission from is not the essential element of compliance judgment. The only basis for judgment is what kind of behavior the third-party company performs after accepting the commission. For third-party companies to exchange virtual currency and legal currency, whether for the purpose of profit by collecting handling fees or for the purpose of serving judicial authorities, they cannot escape the regulatory provisions of the 9.24 Notice, that is, they are all illegal financial activities.

Conclusion

At present, although the exchange of virtual currency and legal currency is an illegal financial activity in mainland China, the judicial authorities have to realize the virtual currency based on the actual needs of judicial activities (and it is a rigid demand). Where there is demand, there will be a market, even if this market is prohibited by regulatory policies. In addition, there are not too many cases in practice where people are held accountable for helping judicial authorities to dispose of virtual currency, which also gives many third-party disposal companies a certain sense of "security" and makes them feel that they will not be held accountable. But what Lawyer Liu wants to say is that even if a third-party company accepts a commission to dispose of virtual currency for the needs of the work of the judicial authorities, it must always pay attention to the latest regulatory trends and keep sufficient and complete business materials, so that even if it is held accountable by other judicial authorities, it can protect itself to the greatest extent.