According to an article on the official WeChat account of the Xuhui District Procuratorate of Shanghai, on August 29, 2024, the Xuhui District Procuratorate and the Xuhui District Public Security Bureau jointly signed the Guidelines for the Disposal of Virtual Currency in Criminal Litigation (hereinafter referred to as the "Guidelines"), which provide specific guidance for the public security and procuratorial organs in the jurisdiction to handle criminal cases involving virtual currency, including "more detailed and clear regulations for the entire process and each link such as inquiry and evidence, seizure and custody, and transfer and disposal". For details, please see "Another innovative measure for the comprehensive performance of duties of the Internet Procuratorate! "Guangqi X Space" is officially launched". Lawyer Liu read some analytical articles on the Internet. Some headlines directly called it "China's first cryptocurrency crime handling regulations have been issued!" Some authors believe that the "Guidelines" are intended to stipulate the specific circumstances of the judicial disposal of virtual currency.
In fact, these interpretations are not completely correct. Given the convenient conditions of "the first to see the moon near the water", Lawyer Liu learned about the general content of the "Guidelines" and made a brief analysis and comment in this article.
I. The main content of the "Guidelines"
In fact, the article of the Xuhui Procuratorate also explained it very clearly. The theme is the unveiling of the Xuhui Procuratorate's Internet Procuratorial Comprehensive Duty Performance Brand "Guangqi X Space". The main role of this department is to combat and punish new types of first-case cyber crime. Crimes involving virtual currency as a new type of cyber crime were also mentioned. The specific method is the "Guidelines" signed by the public security and procuratorate of Xuhui District.
The content of the Guidelines is not much, mainly involving how to legally and compliantly query and fix evidence (mainly electronic evidence) related to virtual currency criminal cases; how to seize and keep the virtual currency involved (which has both evidentiary and property attributes); and the general requirements for the transfer and disposal of the virtual currency involved.
Second, the impact of the Guidelines on criminal defense in the cryptocurrency circle
To be honest, the Guidelines will not have much impact on the criminal defense of the entire cryptocurrency circle. This is mainly because the Guidelines are only a case-handling normative document in Xuhui District, and have no direct influence on neighboring districts, let alone the impact on Shanghai and even the whole country.
In addition to regional restrictions, the "Guidelines" are not what some articles call "China's first cryptocurrency crime handling standards." Lawyer Liu knows and has actually obtained at least five similar standards or guidelines for handling various cryptocurrency-related criminal cases. Some are at the provincial public security department level, and some are at the municipal bureau level. If we talk about district and county-level handling standards, Shanghai Xuhui should indeed be the first.
Generally speaking, the existing regulations are similar in various places. The "two highs and one ministry" have already made clear regulations on the standards of evidence and evidence collection procedures in cybercrime (such as the 2022 "Opinions on Several Issues Concerning the Application of Criminal Procedure in Handling Information Network Crime Cases"; the 2021 Supreme People's Procuratorate's "Regulations on the Handling of Cybercrime Cases by the People's Procuratorate"), and all criminal cases in the currency circle can be covered under the general concept of cybercrime. Therefore, it is difficult for the "two highs and one ministry" to issue any regulations for virtual currency criminal cases nationwide. It will be more like the previous "judicial interpretation of money laundering" and "judicial interpretation of illegal fund-raising". When revising the judicial interpretation of some crimes, the content of virtual currency will be added (two exceptions: one is that the number of criminal cases in the currency circle is large enough, and there are special changes in evidence and legal application, such as adding virtual currency content to the law; the other is to issue special regulations on the disposal of virtual currency).
3. The impact of the "Guidelines" on the disposal of virtual currency involved in the case
At present, one of the debates on the disposal of virtual currency involved in the case is the timing of disposal or the disposal agency. According to the provisions of the law or judicial interpretation, the property involved in criminal cases is generally disposed of by the court. However, in virtual currency criminal cases, the current judicial practice is mostly handled directly by the public security organs. Lawyer Liu also analyzed in a previous article that from the perspective of the public security organs, the basis for their disposal is:
(i) From the perspective of departmental regulations, there seem to be rules to follow for the disposal of virtual currency:
1. Several Provisions on the Management of Property Involved in Cases by Public Security Organs
“For bonds, stocks, fund shares and other properties due to large market price fluctuations and bills of exchange, promissory notes, checks, etc. that are about to expire, if the rights holder is clear, they can be sold or auctioned in accordance with the law with their written consent or application and the approval of the principal person in charge of the public security organ at or above the county level, and the proceeds shall be deposited into the unit’s only compliant account.”
2. Provisions on the Procedures for Handling Criminal Cases by Public Security Organs
"During the investigation, for items that are easy to damage, lose, rot, or deteriorate and are not suitable for long-term storage, or are difficult to keep, with the approval of the principal person in charge of the public security organ at or above the county level, the relevant departments may be entrusted to sell or auction them after taking photos or recording audio or video. The proceeds from the sale or auction shall be temporarily preserved and dealt with together after the conclusion of the litigation." "For frozen bonds, stocks, fund shares and other properties, the parties or their legal representatives or entrusted agents shall be informed that they have the right to apply for sale." Even for the procuratorate, when certain conditions are met, it can also dispose of the property involved in the case during the case handling process.
3. Criminal Procedure Rules of the People's Procuratorate
"When freezing bonds, stocks, fund shares and other properties, the parties or their legal representatives or entrusted agents shall be notified in writing that they have the right to apply for sale."
Specifically, after the parties apply and the chief procurator approves, the bonds, stocks, fund shares and other properties involved in the case can be sold or liquidated before the case is closed, and the proceeds shall be transferred to the special bank account of the procuratorate.
(II) From the nature of virtual currency itself, it is necessary to dispose of it in a timely manner
Virtual currency is quite different from the custody of traditional property due to its anonymity and decentralization. Cases where the suspect/defendant's virtual currency was seized and then lost have occurred more than once. The reason is that the investigating agency did not transfer the virtual currency involved in the case to a new wallet address in a timely manner. Once someone other than the suspect/defendant also has the wallet private key (mnemonic), it is easy to complete the transfer of the virtual currency involved in a very short time. In addition, the market volatility of virtual currency is extremely large, and the currency price can rise or fall like a roller coaster in a day. If the final cash price is much higher/lower than the price at the time of the incident, it will be difficult for both the public prosecutor and the defense counsel to accept (because the final sentence of the party may be extremely heavy/light, or even not guilty. For example, how to accuse when the value of the virtual currency involved is zero?), so the more timely the handling, the smaller the intensity of the prosecution and defense confrontation in future litigation.
(III) Dilemma of Disposal
However, from another perspective, the problems faced by public security organs, procuratorates, and even courts in disposing of virtual currencies involved in the case are:
First, virtual currencies are neither “remittance funds” nor “debt and equity funds”. Whether the public security or the procuratorate disposes of virtual currencies, they are suspected of being “unjustified”;
Second, the current regulatory documents on virtual currencies do not allow anyone to carry out virtual currency and legal currency cash conversion business activities. For this reason, the public security organs have entrusted a third-party disposal company to carry out the disposal business of the virtual currencies involved in the case. Whether this model is consistent with the current regulatory provisions is still controversial;
Third, generally speaking, there are no clear and unified regulations or guidelines for reference in the disposal of virtual currencies involved in the case, which has led to the local law enforcement agencies “talking to themselves” and “crossing the river by feeling different stones” in practice, forming different grassroots experiences. Among them, the "Guidelines" is one of them, but Lawyer Liu believes that the issuance of the "Guidelines" is still of positive significance. If it can be made public to all citizens, it will be of greater significance (or citizens in Xuhui District).
Back to the question at the beginning of this section, if the "Guidelines" have an impact on the disposal of virtual currency, it is only limited to Xuhui District, Shanghai, and it is also difficult to escape the limitations of the positive and negative issues listed by Lawyer Liu above.
IV. Conclusion
Recently, the news about the disposal of virtual currency involved in the case is really overwhelming, from the Supreme Court's project bidding to the People's Court Daily article (see "Previous Recommendations" at the end of this article for details), to the guidelines of Xuhui District, Shanghai, all of which illustrate a problem: more and more judicial organs have paid attention to the compliance issues in the field of disposal of virtual currency involved in the case, and even the need for compliance disposal is urgent. This also gives a warning to third-party disposal providers: only compliance can achieve long-term success.
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