Author: Lawyer Liu Zhengyao
Introduction
A timely "guideline"
In recent years, with the rapid development of blockchain technology and the continuous high incidence of crimes related to virtual currencies, the judicial authorities in China have faced increasingly prominent challenges when handling cases involving virtual currencies. At the national level, our country has not yet established unified rules for the disposal and realization of virtual currencies involved in cases; currently, provinces are largely "crossing the river by feeling the stones," and some provincial public security departments have already issued relevant investigation and disposal rules for criminal cases involving virtual currencies.
Against this backdrop, the Shanghai High People's Court, on February 9, 2026, took the lead in publicly releasing the "Guidelines for Standardizing the Execution Work of Network Virtual Property (Trial)" (hereinafter referred to as the "Guidelines") on its official website. This is one of the most systematic and detailed normative documents released by domestic high people's courts regarding civil execution in relation to network virtual properties (especially virtual currencies), and it is worth in-depth interpretation.
As a lawyer who has been deeply involved in the judicial disposal of virtual currencies for many years, the author has long been focused on and participated in practical research in this field. Today, I will provide a detailed analysis of the contents of the Shanghai High Court's "Guidelines" and discuss how it may impact the judicial disposal of virtual currencies nationwide in the future.
01 Background of the Shanghai High Court Issuing the "Guidelines"
The first sentence of the "Guidelines" states: "To further regulate the work of people's courts in handling execution cases involving network virtual property," which is undoubtedly an extremely correct statement. However, the author also believes that there is a special background in Shanghai that necessitates the High Court to express opinions on the judicial disposal of virtual currencies involved in cases, namely, the large amount of virtual currencies currently seized by various courts in Shanghai that urgently need to be disposed of and realized.
02 Highlights of the "Guidelines"
The most commendable aspect of the "Guidelines" is that it directly addresses the long-standing unresolved issues of technical security and custody standards in previous judicial disposals, especially by making substantial institutional arrangements for the seizure and custody mechanisms of virtual currencies.
(1) Establishment of Cold Wallet Seizure Mechanism
The 15th article of the "Guidelines" clearly stipulates, "When the people's court seizes virtual currencies, it should be equipped with cold wallets," and that "the seized virtual currencies should be transferred from the owner's wallet, centralized exchange, and other addresses to the specially established cold wallet of the people's court for storage," and "in principle, the use of the original holder's wallet or centralized exchange to seize virtual currencies is prohibited." This provision has a strong technical specificity.
Virtual currencies traded on centralized exchanges can have the accounts involved frozen by the exchange; strictly speaking, leading centralized exchanges (such as OKEX, Binance), have relatively close ties with regulatory departments in mainland China. If transactions occur on decentralized exchanges, freezing can be done by seizing the cold wallet or the keys. Previously, some judicial agencies did not transfer the seized virtual currencies into independently controlled cold wallets, posing serious security risks.
A cold wallet refers to the form of a wallet where private keys are stored on offline devices not connected to the internet, with the core advantage of isolating risks from network attacks. By uniformly transferring the involved virtual currencies into a specially designated cold wallet of the court, it both technically cuts off the possibility of remote theft of assets and establishes, at the systemic level, the independent right of judicial authorities to manage the involved property, preventing the original holder from transferring assets with account permissions, thus completely eliminating the institutional loophole of "seized in name, controlled in person."
(2) Supervision Mechanism of "Separation of Execution and Custody"
The 16th article of the "Guidelines" further stipulates that when the court entrusts a third-party institution to assist in the custody of virtual currencies, a working mechanism of "separation of execution and custody," "multiple people and multiple locks," and "mutual supervision" must be established.
This mechanism design is quite ingenious. "Separation of execution and custody" means that the execution actions and custody actions are separated to prevent the same entity from deciding on asset disposals while also having actual control over private keys, thus mechanically closing off the space for power rent-seeking. "Multiple people and multiple locks" refers to the dual authorization management principle used in financial institutions (commonly referred to as "multi-signature" in the cryptographic field), ensuring that no single person can independently call on private keys or mnemonic phrases, thus avoiding insider theft. "Mutual supervision" requires all participating parties in the custody to establish a checks-and-balances relationship to prevent collusion.
In the criminal cases involving virtual currencies represented by Lawyer Liu, some agreements signed between local judicial authorities and disposal companies included disposal rates as high as 35%, meaning that only 6.5 million would be recovered from a virtual currency valued at 10 million, while the remaining 3.5 million would be taken as processing fees by the disposal company. This shocking figure reflects the institutional costs brought about by the previous lack of a standardized supervision mechanism. The "separation of execution and custody" and "multiple people and multiple locks" mechanisms established by the "Guidelines" are expected to fundamentally reduce corruption in the entrusted custody process.
Additionally, Article 27 of the "Guidelines" specifically stipulates confidentiality obligations, clearly stating, "Enforcement personnel are strictly prohibited from storing private keys (or mnemonic phrases) on internet devices," and "the use of cold wallet devices that have not been authorized by the people’s court, do not meet technical standards, or affect the security of virtual currencies is strictly prohibited," raising the security of virtual currency custody to a level of confidentiality equivalent to state secrets, reflecting the rule makers' profound understanding of the technical attributes of this special asset.
03 Inadequacies of the "Guidelines": The "Paper Plan" Dilemma of Price Change Disposal
However, in Lawyer Liu's view, the provisions on price change disposal in the "Guidelines" are precisely the most questionable part of the entire document in terms of operability.
Article 17 of the "Guidelines" stipulates, "After the network virtual property of the person being executed is sealed, seized, or frozen, the people's court shall timely conduct auction, sale, or take other execution measures according to the needs of the case." Article 19 allows auction announcements to be assigned to the virtual property operator to centrally publish them in their system. Article 20 also allows the court to decide to directly dispose of the property, including "entrusting the network trading platform for repurchase or consignment, or through negotiations between the parties to discount," etc.
On the surface, these provisions seem to construct a relatively complete path for realization, but under the current regulatory framework in Mainland China, the aforementioned paths face fundamental legal obstacles.
Since the release of the "Notice on Further Preventing and Handling Risks of Virtual Currency Transaction Speculation" (the "9.24 Notice") in 2021, activities related to virtual currencies have been defined as illegal financial activities in our country; neither individuals nor legal entities or non-legal entities, nor even national administrative or judicial authorities are allowed to engage in virtual currency-related businesses within the territory of our country. This regulation has made it difficult for judicial authorities to dispose of seized, sealed, or confiscated virtual currencies through traditional means. Furthermore, on February 6 of this year, the People's Bank of China, the China Securities Regulatory Commission, and other eight departments jointly issued the "Notice on Further Preventing and Handling Risks Related to Virtual Currencies" (hereinafter referred to as "Document No. 42"), which abolished the 2021 "9.24 Notice," but did not change the classification of illegal financial activities related to virtual currencies in Mainland China.
In other words, if the court publicly auctions Bitcoin or Ethereum within the territory, or entrusts a platform to repurchase USDT, it essentially involves the court directly engaging in "legal currency and virtual currency exchange," which directly conflicts with the "illegal financial activities" defined in the "Document No. 42." Since judicial authorities cannot publicly auction virtual currencies directly within the country, and the disposal of virtual currencies requires a certain level of expertise, they may choose to entrust professional third-party institutions for disposal. However, even when entrusting third-party institutions for auctioning, they similarly face a series of issues regarding the venue for auction, the identities of bidders, anti-money laundering, anti-terrorist financing, and other related matters that the "Guidelines" have not considered (or have avoided).
Moreover, if the virtual currency of the parties is stored in an exchange, since exchanges have already been withdrawn from the domestic market, their operational management personnel have largely moved overseas, and exchange accounts cannot be controlled by regulatory authorities in our country like bank accounts, it is not possible to enforce compulsory measures to require exchanges to execute the operation of deducting virtual currencies. In such cases, the so-called "auction announcements assigned to operators to centrally publish (auction announcements and other information)" lacks a supporting carrier; and "direct selling" in the form of "entrusting the network trading platform for repurchase" cannot find a compliant counterpart domestically (such as Tether or Circle, which are considered illegal or even criminal entities in China).
Interestingly, in September 2025, the Baoshan District People's Court of Shanghai, under the guidance of the Shanghai High People's Court and in collaboration with the Shanghai Public Security Bureau, successfully disposed of over 90,000 FIL coins using the "domestic entrustment, overseas disposal, closed-loop return" method (see: "New Progress in the Judicial Disposal of Virtual Currencies in China: Shanghai High Court Officially Announces Successful Disposal Case"). However, the "Guidelines" touch on this path very little, with the main focus still on the questionable operational domestic auction and sale proposals, making this information quite intriguing.
04 Conclusion: Rules Preceding, Practice Testing
Overall, the release of the "Guidelines" by the Shanghai High People's Court represents an important step taken by China's judicial authorities towards the standardization of virtual currency execution. The Supreme Court has listed the "disposal of virtual currencies involved in cases" as a new situation and new problem, emphasizing that judicial authorities need to enhance disposal capabilities and improve regulations. In the future, there is a high possibility of forming a unified disposal model across the country, or even a disposal platform. As a forefront position for legal innovation in the country, this move undoubtedly accumulates valuable local experience for the eventual issuance of national unified rules.
Its professional construction—especially the establishment of the cold wallet custody mechanism and the "separation of execution and custody" and "multiple people and multiple locks" supervision system—holds practical institutional value, filling major gaps in the previous custody of virtual currencies. However, the "auction + sale" blueprint described in the price change disposal part is of very low operability in the mainland's practice, especially following the recent enforcement of "Document No. 42," and the legal barriers to direct auctions and sales remain insurmountable.
As the saying goes, "the law alone is not enough to stand on its own." The vitality of the "Guidelines" ultimately needs to be tested through practical operations. How courts in Shanghai will proceed with the actual realization of virtual currencies under the new regulatory framework, whether they will further improve the system for overseas compliant disposal, and whether this local exploration can promote the issuance of national-level regulations are all important points worth continuous attention. We shall see how the practical effectiveness of Shanghai courts unfolds—that will be the real test of these "Guidelines."
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