In the judicial disposal of virtual currency, there is a legal risk point that is easily overlooked by judicial organs and disposal companies: public opinion risk. As a lawyer who specializes in the judicial disposal of virtual currency involved in the case, Lawyer Liu will share with you through this article the types of public opinion risks that all parties may face in the judicial disposal business and the corresponding measures.

1. What is public opinion risk?

In a broad sense, public opinion risk refers to the possibility that negative public opinion or social emotions may be caused by the attention and reaction of the public, media or other social forces in specific events, policies or actions, which may in turn have an adverse impact on individuals, organizations or countries.

Specifically in the context of this article, the public opinion risk of judicial disposal refers to the negative public opinion and dissatisfaction towards the judicial organs caused by improper operations of the judicial organs during the judicial disposal of the virtual currency involved.

In the current case management system for Chinese court judges, one of the case assessment indicators is whether the cases handled by the judges have aroused public opinion. It can be seen that the judicial organs still attach great importance to public opinion.

2. What are the public opinion risks in judicial proceedings?

According to Lawyer Liu’s practical experience in criminal cases in the cryptocurrency industry, there are several types of public opinions caused by the disposal of virtual currencies involved in the case:

1. Disputes over applicable law

At present, my country does not have any specific regulations regarding virtual currency at the legal and regulatory level. Virtual currency-related businesses are only regulated by national ministries and commissions through the issuance of regulatory policy documents individually or jointly.

As a result, courts across the country have different conclusions on how to characterize virtual currencies in criminal cases: some identify them as property, some identify them as computer information system data, and some identify them as both of the above, etc. Then, after the court's judgment (some disposals are carried out before the court's judgment), it is easy to cause disputes when disposing of the virtual currencies involved.

2. Protection of the Rights and Interests of Victims

In crimes involving virtual currency fraud, theft, and illegal fundraising, even if the property involved is virtual currency, it should eventually be returned to the victim; however, in cases of casino opening, pyramid schemes, illegal business operations, and other crimes that are prevalent in the cryptocurrency circle, in theory there is no such thing as a "victim", and judicial authorities are not required to return the seized virtual currency involved.

When the virtual currency involved in the case is disposed of and converted into cash and returned to the state treasury, in some cases (mainly pyramid schemes), a large number of grassroots investors/participants will ask the judicial authorities or defendants to return their investment funds in the name of the "victims" of the case. Once their purpose is difficult to achieve, it is often easy to trigger public opinion.

3. Fluctuations in the market value of virtual currencies

In addition to stablecoins, the value fluctuations of virtual currencies are very common. The impact on criminal cases involving currency that have been judged is still small (although in practice, there is also a lot of controversy about how to determine the amount involved in virtual currency cases that have not been disposed of and liquidated); in the case of a case that has not yet been judged and is disposed of in advance, if the price of the currency involved in the case at the time of the court's judgment in the future is significantly different from that at the time of filing the case, whether it is the public prosecutor, the court, or the suspect/defendant, or even the victims of the case, the family members of the parties, etc., at this time, they will have their own expectations for the outcome of the case, and the controversy between the opposing parties may be as big as the difference between heaven and earth. For example: when the value of the seized virtual currency plummets and almost returns to zero, the suspect/defendant will definitely claim innocence; but the prosecutor and the victim will definitely claim that the market price at the time of filing the case shall be the basis for convicting and sentencing the suspect/defendant.

At this point, the timing of judicial disposal will play a decisive role in the direction of the case. However, it is also prone to lead to a possible public opinion crisis.

4. Dealing with Compliance Disputes

According to the "9.24 Notice" and other regulatory provisions, my country currently does not allow the exchange of virtual currency and legal currency in mainland China. At present, the compliant disposal entity must be disposed of and cashed out overseas, but there are still some disposal companies that use the name of overseas disposal to actually exchange virtual currency and RMB in mainland China.

This month, Lawyer Liu just opened a pyramid scheme case involving currency in a county in the west. At the opening of the court, we specifically mentioned that the disposal of virtual currency in this case was entrusted by the disposal company to Zhang, a domestic resident, to pay more than 20 million yuan of "disposal funds" directly to the local county finance department through Zhang's personal bank card. This behavior is essentially Zhang and the disposal company behind him directly purchased the virtual currency involved in the case from the local public security bureau through RMB. The behavior of Zhang, the disposal company, and the local public security bureau is an illegal financial activity.

If this information were to spread online, it could very well lead to a public opinion crisis.

Friends who are familiar with disposal must have heard about the incident in which a senior executive of a disposal company in Chengdu used virtual currency seized by judicial authorities to speculate on contracts and suffered losses. This is also an incident that can easily trigger public opinion.

The essential problem of these incidents is that the disposal companies are not professional enough and the disposal models are not compliant.

5. International Public Opinion Pressure

China's policy on virtual currencies is a strong regulatory type globally. Although the United States also regulates virtual currencies, it is not as strong as China. Coinbase Exchange is a virtual currency exchange in the United States and has a considerable influence in the world. However, China has not allowed any virtual currency exchange to operate in the country since 2017, and foreign virtual currency exchanges are not allowed to provide services to mainland residents.

Recently, there are rumors that the Chinese government will use Bitcoin as a national strategic reserve to compete with the United States. However, Lawyer Liu believes that this is false news. It is foreseeable that in the next few years, it is impossible for my country to publicly recognize and accept virtual currency.

As a result, the position of China's judicial authorities in dealing with the virtual currency involved in the case is very awkward. They neither recognize virtual currency nor want to dispose of it.

If relevant information on judicial disposal spreads internationally, it is entirely possible to generate public opinion that is unfavorable to China's judicial organs and even the Chinese government.

III. How to deal with public opinion risks during the handling process

In fact, it is very simple to deal with public opinion crises that require judicial disposal. The main thing is to focus on prevention and nip the crisis in the bud. The main thing is that judicial authorities that have disposal business needs must choose a reliable disposal company to handle it.

The disposal business has gone through the disposal 1.0 era (before 2021), disposal 2.0 era (before 2023), and disposal 3.0 era (from 2023 to now), and has long evolved from an extensive and wild mode to a professional and compliant mode. Especially with the involvement of professional web3 and virtual currency lawyers, they can provide disposal companies and judicial organs with full-process compliance demonstration, and play a significant role in the application of laws and regulations on judicial disposal, the protection of the legitimate rights and interests of all parties, the review of the disposal link, the resolution of public opinion crises, etc.

4. Final Thoughts

China’s regulation of virtual currencies may change in 2025, but Liu expects that such changes will first take place in the judicial field, especially in the judicial evaluation, price appraisal, and judicial disposal of virtual currencies involved in cases, which need to be resolved urgently. As for opening up private virtual currency investment, or even allowing the establishment of virtual currency exchanges in China, it is still difficult to achieve at present.