Exploration of New Models for Judicial Disposal of Virtual Money

Recently, the Beijing Municipal Public Security Bureau's Legal Affairs Division published an article regarding the disposal of virtual money involved in cases, which has garnered widespread attention in the industry. As a legal professional who has long studied the judicial disposal of virtual money, I believe it is necessary to provide some clarifications and interpretations on this matter.

The Beijing Model is not a pioneer

The Beijing Municipal Public Security Bureau signed a cooperation agreement regarding the disposal of the involved Virtual Money with a certain property exchange. The specific model is as follows: the public security agency entrusts the exchange to dispose of the involved Virtual Money, the exchange selects a third party for inspection and transfer, and cashes it into fiat currency through an overseas compliant exchange, which is then converted and transferred to the public security account after approval from the foreign exchange administration.

However, this joint model of domestic entrustment and overseas disposal is not the first of its kind. In fact, as early as 2023, some disposal companies began to adopt a similar approach.

The Evolution of China's Virtual Money Disposal

The judicial disposal of virtual money in our country has roughly gone through three stages:

1. Disposal Period 1.0 ( 2018-2021: Mainly realized through exchanges OTC or private channels, with compliance risks.

2. Disposal during the 2.0 period ) 2021-2023: Affected by policies, it has shifted to overseas disposal and then converted back into the country, but there are still compliance risks associated with the conversion method.

3. Disposal in the 3.0 period ( from the end of 2023 to now ): adopting a domestic and overseas joint disposal model, that is, domestic entrustment, overseas cashing, and compliant settlement in a closed-loop operation.

Therefore, the model in Beijing is not the first of its kind in the country, as many places have already begun to practice it.

Issues with the Beijing Model

A careful analysis of Beijing's disposal plan reveals some issues worth discussing:

1. The exchange is essentially an intermediary that needs to delegate substantive handling to a professional institution again.

2. A 110% performance bond requirement is too high and does not conform to practical operational conventions.

3. There may be misunderstandings regarding the provisions on service fees. The disposal of virtual money on overseas exchanges is not a public auction and is not subject to the reserve price provisions in the confiscated property management measures.

In contrast, the relevant regulations in Shandong Province are more reasonable, clearly stating that the recovery price of virtual money should not be less than 80% of the face value or balance.

Conclusion

The judicial disposal of virtual money has been ongoing and has not been prohibited. Judicial authorities in various regions have been exploring since 2017, gradually forming the current model of joint domestic and foreign disposal. However, this does not mean that the country will open up virtual money trading. It is expected that in the next two to three years, China will still maintain a strong regulatory stance and will not fully open up citizen participation in virtual money trading.