The monetization and disposal of virtual currency in criminal cases is fraught with legal disputes, and practical guidelines are urgently needed.

Written by: Lawyer Liu Zhengyao

In criminal cases, cybercrime now occupies a significant portion; among these, the number of criminal cases involving virtual currency is increasing rapidly, showing a trend of leading the pack.

For criminal cases involving virtual currency, there is a contentious issue both in practice and theory: should the virtual currency involved in the case be monetized? This question presupposes that virtual currency has property value, which is limited to mainstream virtual currencies. Currently, some judicial workers still believe that all virtual currencies can only be considered as data from computer information systems, a view that is clearly inconsistent with reality and legal principles. Therefore, our following discussion is based on the premise that the mainstream virtual currencies involved in the case have property value.

The answer to this question varies depending on different case handling needs.

1. Virtual Currency as Evidence in the Case

In criminal cases, when the evidence involved has property value but is not presented as legal currency (tangible or intangible), it generally will not be monetized.

Taking theft as an example, if A steals one Bitcoin from B, the court can determine that A has committed theft without any legal obstacles. If this Bitcoin is seized, the judicial authority only needs to return the involved Bitcoin to B. Even when determining the amount involved for A, there is no need to monetize this Bitcoin; current practice generally uses the amount B paid when purchasing the Bitcoin as A's theft amount (according to the "victim does not profit" principle, the judicial authority should not consider the appreciation of Bitcoin, see "What to Do When the Value of Seized Virtual Currency Appreciates or Depreciates?"); if B's Bitcoin was gifted by someone else or mined by B, then the amount involved can be determined based on the market price of Bitcoin at the time of the theft.

All these operations do not require the actual monetization of Bitcoin, as the ultimate destination of the involved Bitcoin is to be returned to the victim (i.e., B).

2. Virtual Currency as Illegal Gains

In some cases, when the seized virtual currency does not need to be returned to the victim (for example, if the virtual currency has already been sold by the suspect, or if there is no victim in the criminal case), it is generally necessary to consider monetizing the involved virtual currency.

In China's criminal justice system, cases involving virtual currency are mostly economic/financial crimes, and these cases generally involve fines, which are closely related to the illegal gains of the suspect/defendant. This necessitates the monetization of the involved virtual currency to determine the illegal gains.

Another important reason is that in cases where virtual currency is considered illegal gains, the price of the virtual currency often determines whether it meets the filing standards: the price of virtual currency fluctuates significantly over time. When the victim reports the case, the price of the virtual currency may be high enough to meet the filing standards, but after passing through the police, prosecutor's office, and court, the price of the involved virtual currency may drop to zero. At this point, regardless of how lenient the sentence imposed on the suspect/defendant is, they are likely to feel unjustly treated—why should they be deemed to have committed a crime based on virtual currency that has no actual value? Therefore, when virtual currency is considered illegal gains, monetization is required, and it should be done as early as possible.

Of course, reality is often complex; in some criminal cases, virtual currency may serve as both evidence and illegal gains. In such cases, we recommend that judicial authorities prioritize monetization after securing the evidence. (If the involved virtual currency is stablecoins like USDT or USDC, they may be temporarily left unmonetized.)

Additionally, an important factor to consider is whether the case has already been adjudicated by the court.

3. Disposal of Virtual Currency Before Court Judgment

In principle, our country disposes of involved property after the court's judgment, so for involved virtual currency, judicial disposal should generally occur after the court's judgment unless there are special circumstances. However, where there are principles, exceptions are inevitable.

According to the "Regulations on the Procedures for Handling Criminal Cases by Public Security Organs" (hereinafter referred to as "Procedural Regulations"), for properties with significant market price fluctuations, such as stocks, bonds, and fund shares, they can be legally auctioned or sold before a judgment if the parties apply or agree, and with the approval of the main responsible person of the county-level public security organ. The potential disputes here mainly involve two points:

First, virtual currency is not listed among the "stocks, bonds, fund shares, etc." in the "Procedural Regulations," and it is unclear whether the "etc." can be broadly interpreted to include virtual currency.

Second, the "Procedural Regulations" are merely the "opinion of one department," while criminal cases involve the collaboration and mutual supervision of the public security, prosecutor's office, and court. As a departmental regulation, the "Procedural Regulations" do not have the same authority as the prosecutor's office or court. Therefore, can the "Procedural Regulations" serve as a legal basis for the prior judicial disposal of involved virtual currency across the three judicial entities?

Regarding the first point of dispute, for judicial authorities, the principle of "no action without authorization" is fundamental. If the "Procedural Regulations" do not list "virtual currency," it seems that the public security organ cannot unilaterally dispose of it. However, the contentious issue is whether the "etc." can be broadly interpreted to include virtual currency; this remains a matter of debate, with different interpretations depending on one's position, and there is currently no unified stance.

As for the second point of dispute, while it is true that laws and judicial interpretations have greater authority than departmental regulations, it is unfortunate that there are currently no laws or judicial interpretations providing direction on the disposal of involved property. The "Interpretation of the Criminal Procedure Law" issued by the Supreme People's Court states that involved property transferred with the case or seized by the court shall be handled by the court after the first-instance judgment takes effect. What if the public security organ does not transfer the virtual currency with the case? At this point, the provisions of the "Interpretation of the Criminal Procedure Law" cannot be applied. (For an analysis on this, see "At What Stage Should Involved Virtual Currency Be Disposed? Police or Court")

Through the above analysis, we can understand the current lack of uniformity in the disposal of involved virtual currency. As for solutions, it can only rely on further clarification and refinement of relevant departmental regulations and judicial interpretations, especially incorporating virtual currency into future legislation and judicial processes.

4. Disposal of Virtual Currency After Court Judgment

Disposing of involved virtual currency after a court judgment is the most "orthodox" approach, with two common scenarios:

First, the virtual currency seized by the judicial authority is a mainstream stablecoin. Since stablecoins have a constant price, there is almost no value fluctuation from the initiation of the criminal case to the court judgment, making it entirely appropriate to dispose of it after the court's judgment (unless the involved virtual currency needs to be returned to the victim).

Second, if the value of the involved virtual currency has not depreciated, the judicial authority has conducted a price appraisal/assessment. In this case, although the virtual currency has not been monetized, there are corresponding materials in the case that seemingly provide authoritative recognition of the virtual currency's price, and the court often directly adopts the opinions of appraisal institutions, price assessment institutions, and judicial audit institutions. However, it should be noted that as a web 3.0 criminal lawyer, Lawyer Liu believes that according to current laws, regulations, and virtual currency regulatory policies, no organization or institution is allowed to provide pricing services for virtual currency transactions, so the aforementioned third-party institutions have no legal basis to determine the price of virtual currency.

In summary, whether to monetize the involved virtual currency and when to dispose of it remains inconsistent in current judicial practice, primarily due to the ambiguous attitude of current laws and regulatory policies towards virtual currency: unwilling to acknowledge the financial attributes of virtual currency while unable to avoid its actual value. In a sense, virtual currency represents a challenge from the grassroots level to those in power.

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