Focus on the disposal of virtual currencies involved in the case: Nearly 60 experts and scholars discuss the regulatory and practical problems

Original article: Jiang Anjie , omnimedia reporter of Legal Daily

In order to implement the spirit of the Third Plenary Session of the 20th CPC Central Committee and give full play to the supporting and guaranteeing role of the rule of law in the modernization of the national governance system and governance capacity, a seminar on "Disposal of Virtual Currency Involved in Cases" co-organized by the Law School of Renmin University of China, the Criminal Law Science Research Center of Renmin University of China and Beijing Zhongyin Law Firm was held in Beijing on January 19. Nearly 60 representatives from the Legal Affairs Commission of the Standing Committee of the National People's Congress, the Supreme People's Court, the Supreme People's Procuratorate, the Ministry of Public Security and other practical departments, as well as representatives from the legal theory community, the lawyer community, and corporate representatives attended the meeting.

Current status and prospects of virtual currency legal regulation

The first unit, “Current Status and Outlook of Legal Regulation of Virtual Currency”, was hosted by Cheng Lei, Vice Dean and Professor of the School of Law of Renmin University of China.

Yang Dong, Dean and Professor of Law School of Renmin University of China, expressed his views on the development of virtual currency and the experience and practices of virtual currency supervision in various countries. He pointed out that emerging virtual assets such as virtual currency and the legal issues involved are hot areas of international exchanges and are also issues that my country should focus on in building foreign-related rule of law. In recent years, my country's virtual currency supervision capacity and supervision system have made great progress, and the development prospects are broad, which deserves in-depth and full research.

Shi Yan'an, director of the Criminal Law Science Research Center of Renmin University of China, spoke from three aspects: the definition of the legal nature of virtual currency, the construction of the regulatory system, and the overseas recovery of stolen money in virtual currency cases. He believes that in judicial practice, virtual currency should be regarded as a general equivalent in consideration of the convenience of case handling and the simplicity of relevant procedural design. The supervision of virtual currency should take into account its coordination with the legal currency regulatory system. On the issue of recovering stolen money in virtual currency cases, the existing thinking should be changed. On the basis of clarifying that virtual currency is a general equivalent, attention should be paid to the development and application of new legal tools.

Xue Haibin, General Counsel and Chief Compliance Officer of Hexagon Group Greater China, expressed his views on the definition of virtual currency and related professional issues based on his overseas practice experience. He believes that virtual currency has the characteristics of decentralization and anonymity. At present, the total market value of mainstream virtual currencies has exceeded hundreds of millions of US dollars and has huge development potential. Countries have different definitions of their nature, ranging from legal tender, legal payment methods, virtual goods, digital assets, financial products to a complete ban. China should pay attention to the positioning of virtual currency from the perspective of development, inclusion and improving international competitiveness in light of its own characteristics.

Ms. Yang Xia, Chairman of Chengdu Lian'an Technology Co., Ltd. and Associate Professor of the University of Electronic Science and Technology of China, combined her own practical experience in co-investigating virtual currency crime cases, summarized and shared the main types of virtual currency-related crimes, the main problems existing in the current regulatory provisions, and put forward relevant countermeasures and suggestions in a targeted manner.

Liu Xiaoyu, Chairman of the Management Committee and Senior Partner of Zhongyin Law Firm, reviewed the virtual currency regulatory policies of major countries and regions in the world, such as the United States, the European Union, and the United Kingdom, and summarized the legal attributes of virtual currency, including virtual property theory, digital commodity theory, securities theory, currency theory, etc. He pointed out that the discussion on virtual currency regulatory policies should not be separated from its underlying blockchain technology. my country's current "prohibitive" regulation is not conducive to participating in the global Web3.0 competition and the industrial development of the digital economy. On the basis of preventing risks, the existing regulatory policies should be appropriately adjusted.

Yu Haisong, deputy director of the Research Office of the Supreme People's Court, served as the panelist for this session. He pointed out that in my country, discussions on issues related to virtual currencies must be based on current regulatory policies. At present, my country's regulatory policies on virtual currencies are gradually becoming clear. In practice, there is a real need to deal with the virtual currencies involved in the case, but how to deal with them in accordance with the current regulatory policies is actually worthy of further study. Overall, the handling of the virtual currencies involved in the case needs to be further regulated:

First, further clarify the legal boundaries of virtual currency disposal methods at the policy level;
Second, further optimize specific issues such as the timing and procedures of disposal at the technical level.

Practical Difficulties and Countermeasures in Dealing with Virtual Currency (I)

The second unit, “Practical Difficulties and Countermeasures in the Disposal of Virtual Currency (I)”, was hosted by Zhang Xiaojun, member of the Management Committee and senior partner of Zhongyin Law Firm.

The relevant person in charge of the Property Management Brigade of the Beijing Municipal Public Security Bureau's Legal Affairs Corps pointed out that virtual currency crimes have become an important manifestation of cybercrime, which are specifically divided into fraud crimes in the name of investing in virtual currency, theft, fraud and other property crimes committed with virtual currency as the target of crime, and illegal transactions using virtual currency as a tool. Due to the decentralized nature of virtual currency, anonymous transactions and transnational characteristics, there are a series of law enforcement difficulties in practical case handling, mainly including difficulty in characterization, difficulty in collecting evidence, difficulty in custody and difficulty in disposal.

Guo Shuo, a professor at the Institute of Litigation Law of China University of Political Science and Law, explained different solutions for the disposal of virtual currency by citing specific cases. The nature of virtual currency and related businesses currently determines that there are no effective regulatory measures on this issue, which has led to great controversy in judicial practice. He believes that other issues should also be focused on, such as the return of victim's property and virtual currency intermediaries.

Chen Shi, deputy dean of the School of National Governance at Zhongnan University of Economics and Law, pointed out that currently, virtual property has not been legally defined, and there is no legal basis for whether virtual currency is property involved in criminal cases. In judicial practice, there is a normal trend of pre-emptive disposal of virtual currency involved in cases, which is not in line with current legal provisions. In judicial practice, the method of entrusting a third party to dispose of virtual currency for cash lacks legal supervision, which may trigger new crimes. Therefore , the nature of virtual property involved in the case, including virtual currency, the subject, method and procedure of disposal, the requirements and legal responsibilities of disposal should be clarified to promote the legalization and standardization of the disposal of virtual property involved in the case.

Liu Renqi, deputy dean of the School of Criminal Law at Northwest University of Political Science and Law, shared his views on the topic of "Rules for Victims' Participation in the Disposal of Virtual Currency Involved in Cases."

On the one hand, the current disposal method of the virtual currency involved in the case is basically for the public security organs to entrust a third party to realize it, but the participation of the victim is basically excluded;
On the other hand, to improve the path for victims to participate in the disposal of virtual currency, the victims' participation methods can be classified according to whether they make a profit. Some disposals that allow victims to participate should comply with the rules of legality, knowledge, consent, public order and good morals, and interest maximization.

Wang Tuo, head of the financial case handling team of the Fourth Procuratorate of the Supreme People's Procuratorate, and He Ting, vice president and professor of the Institute of Criminal Law Science of Beijing Normal University, had a discussion with the professor. Wang Tuo believes:

First, we must face up to history and reality and not ignore the decisive role of regulatory documents in curbing cryptocurrency speculation. At the same time, we should speed up the top-level design to address various current issues involving virtual currency crimes.
Second, we must strengthen the coordination between criminal justice and administrative supervision and abide by the principle of unity of law and order.
Third, we must strive to reach a consensus on the nature of virtual currency, especially that civil and criminal determinations cannot contradict each other.
Fourth, scientific and reasonable procedural norms should be established to prevent various risks in judicial disposal.
Fifth, we must pay attention to the complementary relationship between technology and case handling.

He Ting proposed that the disposal of virtual currency should focus on solving the problems of its characterization, classification, supervision and procedural norms. Virtual currency is not a prohibited item and can be used as the object of property crime. There is room to treat it as a special property involved in the case and regulate how to deal with it. It is necessary to distinguish the different categories and different roles of virtual currency in different types of crimes, and then adopt different disposal paths, regulate the disposal of virtual currency involved in the case through the effective interaction of technology and legal norms, and comply with the requirements of substantive fairness and justice.

Practical Difficulties and Countermeasures in Dealing with Virtual Currency (Part 2)

The third unit, “Practical Difficulties and Countermeasures in the Disposal of Virtual Currency (II)”, was hosted by Li Zheng, Party Secretary and Senior Partner of Zhongyin Law Firm.

Dong Kun, a researcher at the Institute of Law of the Chinese Academy of Social Sciences, pointed out that compulsory disposal of objects is usually regarded as evidence preservation rather than property preservation, but evidence preservation may obscure the nature of property, leading to problems such as prior disposal of evidence and infringement of property rights. At present, the law has no clear provisions on the disposal of virtual currency, but the disposal methods in practice, especially entrusting third parties to dispose of it, not only involve legal issues, but may also lead to serious consequences such as illegal entry of funds and long-arm jurisdiction. In addition, the participation of citizens in the entire disposal process is low, and the law needs to be further improved. At the same time, there is a paradox in the early disposal of virtual currency, and it is necessary to weigh the losses of the state and the rights and interests of the parties to ensure that the final disposal conforms to the rules of litigation.

Zhu Tonghui, associate professor at the School of Law of Nankai University, said that despite the current strict legal restrictions on the disposal of virtual currency, there are still companies exploring legal ways to dispose of it. He shared four methods to prove the connection between virtual currency and the suspect's property: electronic evidence identification technology, judicial agency evidence collection, remote inspection, and two-way correlation technology.

Nie Youlun, associate professor at the School of Law of East China Normal University, believes that the essence of virtual currency disposal is the intervention and protection of property rights. From the perspective of the Constitution, virtual currency disposal involves the intervention of property rights, which should be applied with legal reservations. However, since the Criminal Procedure Law does not make provisions, it is necessary to solve the basis problem at the legislative level, clarify the specific basis and relevant measures, and ensure that they comply with the principle of proportionality.

Guo Zhihao, partner at Yingke Law Firm's global headquarters, believes that the primary difficulty in handling virtual currencies is the vague definition and scope of application of virtual currencies, and that law enforcement agencies often confuse blockchain-based virtual currencies with ordinary virtual currencies. He proposed that virtual currencies have dual legal attributes: one is network property attributes, and the other is that some virtual currencies have securities attributes, and different types of virtual currencies should be distinguished.

Li Wei, associate professor of the School of Law of the Central University of Finance and Economics, and Zhang Yuxiang, a cadre of the Criminal Law Office of the Legal Affairs Commission of the Standing Committee of the National People's Congress, had a discussion. Li Wei believes that the so-called "disposal of virtual currency" should be discussed from the perspective of objects rather than currency. From the perspective of objects or assets, it can avoid the entanglement of its own legality, and then construct relevant rules for preservation and disposal; under the current regulatory framework, it can be uniformly disposed of through the coordination of judicial and financial departments, such as through confiscation to become state-owned assets, and then establish a central or local platform or set up an overseas asset management department, and realize the effective disposal of assets through financial instruments; considering the national strategy of digital assets in the future, blockchain data assets can be managed accordingly as restricted circulation items.

Zhang Yuxiang believes that in practice, judicial organs have certain difficulties in handling virtual currencies involved in cases, and there is a need for policy and system supply. Various parties have different understandings of virtual currencies, including the legal attributes of virtual currencies, the disposal procedures and custody of virtual currencies, etc. We are also paying close attention to this. Improving the system of compulsory measures such as seizure, detention and freezing and the system of handling property involved in cases are major topics in the improvement of the criminal procedure system. How to deal with the virtual currencies involved in the case is also an important issue. We will continue to follow up on relevant policies, judicial practices and opinions from all parties, and promote the improvement of relevant systems in a timely manner.

Proof and Identification of Virtual Currency

The fourth unit, “Proof and Identification of Virtual Currency”, was hosted by Zheng Jia, partner of Zhongyin Law Firm.

Gao Tong, a professor at the School of Law of Nankai University, believes that virtual currency is difficult to prove mainly because the direct correlation between virtual currency and the facts of the crime is weak, and the flow of currency has transnational factors, making it difficult to track the complete flow of funds, determine the amount of the crime, and determine the suspect's subjective intent to commit the crime. Therefore, the key to proving virtual currency lies in a sound proof mechanism for the virtual currency involved in the case:

Strengthen the evidence base of virtual property involved in the case, use advanced technologies such as blockchain analysis tools to track it, and cooperate with cryptocurrency organizations, taxation, banks, etc. across departments;
Strengthen the review of the capital flow process between legal tender and virtual currency; conduct diversified evidence chain analysis using confessions, electronic data, and professional technical means of third-party institutions that record transaction records;
Simplify the proof model of cybercrime facts, comprehensively identify the virtual currency involved in the case, and adopt different proof standards to distinguish their litigation value. For example, the virtual currency used as the basis for conviction and sentencing must meet the standard of being sufficient, while the standard of proof for the disposal of the property involved only needs to meet the standard of preponderance of evidence.

Liu Yang, senior partner of Deheng Law Firm, said that the judicial authorities’ disposal of virtual digital currencies is legitimate and can entrust professional institutions to dispose of virtual currencies. Lawyer Liu suggested that state-owned banks be the main parties to the asset disposal. State-owned banks themselves bear the capital and have overseas branches, which can ensure the asset security issues in the disposal of virtual currencies.

Pan Xia, associate professor at the Law School of Ocean University of China, pointed out that cross-border virtual currency transactions also involve judicial jurisdiction and cross-border judicial cooperation:

The first is the issue of criminal law and procedural law, including the criminal jurisdiction of the case and criminal procedures such as seizure, freezing, and detention. Therefore, the legislature needs to make detailed provisions for the jurisdiction of such cases.
The second is whether the issues involving virtual currency can be linked to my country's laws and regulations related to data security, and whether the existing data security regulations can be used to introduce expedient measures;
Or sign a limited-scope cooperation agreement with other countries to jointly handle cross-border virtual currency cases.

Wang Yijue, a lecturer at the School of Law of Beijing Jiaotong University, pointed out that the current disposal of virtual currencies involved in criminal cases faces both technical and legal dilemmas. The former has made a series of progress with the improvement of investigative technology, while the latter faces the problem of how to optimize the interpretation of relevant criminal law provisions under the existing regulatory policies.

Gao Xiansong, director of the Information Security Emergency Response and Disposal Center of the Beijing Internet Industry Association, and Chen Jianjun, a lecturer at the School of Criminal Law of Northwest University of Political Science and Law, had a discussion. Gao Xiansong pointed out that gambling, illegal fundraising, fraud, pyramid schemes, money laundering and other illegal and criminal activities have generated a large number of virtual currencies involved in the case, and have also spawned a large number of virtual currency disposal companies . The methods of disposing of virtual currencies, such as direct hedging of domestic and foreign funds, are not completely legal and compliant from the means of disposal to the collection of service fees. The current difficulty in the seizure, control and disposal of virtual currencies lies in the lack of official channels and excessive reliance on third-party disposal companies.

Chen Jianjun proposed that the first thing to do in legislation is to clarify the nature of virtual currency, that is, virtual currency belongs to virtual property. As far as the investigation of virtual currency is concerned, on the one hand, it is necessary to strengthen technical means and strengthen international technical exchanges and cooperation; on the other hand, for cases involving virtual assets, it is possible to consider flexibly applying the existing relatively mature system of confession and leniency, encourage criminal suspects to voluntarily confess the property involved in the case, or provide potential and more serious clues of virtual currency crimes, and reduce the pressure of virtual currency tracking and proof on public security and judicial organs. In addition, the determination of the facts of conviction and sentencing of virtual currency can also be achieved by updating the connotation of confession and acceptance of punishment.

Cheng Lei and Li Zheng gave a summary. The experts at the meeting discussed the disposal of the virtual currency involved in the case from multiple dimensions, covering the concept of virtual currency, legal attributes, the current status of foreign legislation, and disposal practices in various places. However, in the process of virtual currency disposal in China, there are problems such as imperfect legislation and lack of legal interpretation space, which makes the disposal of virtual currency face greater legal risks and practical difficulties. As an emerging asset class, virtual currency urgently needs to be improved through legislation to ensure its legality and security. At the same time, cross-border cooperation and supervision can be strengthened to provide practical legal guarantees for the standardized disposal of virtual currency involved in the case.