Latest Trends and Future Developments in the Judicial Disposal of Involved Virtual Money

Recently, there have been some new changes in the judicial disposal field involving Virtual Money. This has particularly attracted widespread attention in the industry after the Beijing Municipal Public Security Bureau's Legal Affairs Division announced a new model. Many judicial authorities and disposal companies are inquiring about the specific content of this new model and its implications.

Analysis of the Beijing Equity Exchange Model

Beijing Equity Exchange (referred to as BEE) is an institution controlled by Beijing State-owned Assets Management Co., Ltd. It is authorized as a network judicial auction platform for courts at all levels across the country and a platform for handling assets related to criminal proceedings in Beijing that are submitted to the national treasury. However, on its official website, no projects related to Virtual Money disposal have been found.

According to publicly available information, the Beijing Stock Exchange has signed a framework cooperation agreement with the Beijing Municipal Public Security Bureau regarding the disposal of virtual money involved in the case. Subsequently, the Beijing Stock Exchange has entrusted the specific disposal work to a third-party company, which will carry out disposal, monetization, and fund settlement overseas. This model still follows the existing mode of "domestic + overseas joint disposal" and has not brought about any substantial innovation or breakthrough.

The Necessity of Intermediary Institutions in Judicial Disposal

Considering the current regulatory provisions regarding virtual money in our country, domestic third-party disposal companies have become a temporary compromise in judicial activities. Therefore, it seems unnecessary to introduce additional intermediary structures.

The regulatory notice issued in September 2021 clearly states that activities related to Virtual Money are considered illegal financial activities, and the exchange of legal currency for Virtual Money is strictly prohibited. This regulation applies to all domestic entities, including judicial authorities.

To avoid this regulatory requirement, the disposal and monetization model of the involved virtual money has evolved from direct monetization within the country to entrusting a third party to monetize it abroad. The current "domestic + overseas joint disposal" model basically meets regulatory requirements at the business level.

In this case, introducing intermediary institutions similar to the North Exchange has not brought about substantial optimization to the existing disposal model. Following the principle of Occam's razor, the disposal process should be simplified as much as possible, avoiding the addition of unnecessary steps.

Future Development of Judicial Disposal of Involved Virtual Money

Currently, there are still differences in the disposal models of virtual money involved in cases among judicial authorities across the country. Some regions are still using a relatively primitive disposal method, where the mainland judicial authorities directly entrust domestic entities to cash out within the country. This practice not only violates regulatory provisions but may also bring risks such as money laundering and illegal currency exchange.

Despite the existence of the relatively compliant "Disposal 3.0" model, many judicial authorities or disposal companies have insufficient understanding of it. In practical operations, compliance may only be one of the considerations. However, non-compliant disposal methods will undoubtedly lay hidden dangers for judicial activities.

In the first half of 2024, the Supreme People's Court initiated several research projects, including the judicial disposal of virtual money involved in cases, reflecting the highest judicial authority's attention to the complexities in this field and the need for unified judicial practices.

Possible future developments in the judicial disposal of the virtual money involved in the case include:

1. Under the existing regulatory framework, continue to primarily adopt the compliant "Disposal 3.0" model, while a small amount of non-compliant disposal will inevitably occur.

2. Modify existing regulatory provisions to allow judicial authorities to directly dispose of and monetize assets abroad.

3. Adjust regulatory policies and establish a unified disposal platform domestically, which may be at the central or provincial level, providing disposal services to judicial authorities by banks, traditional judicial auction platforms, or various local property exchange institutions.