Will content related to virtual currency be included in the newly revised Criminal Procedure Law?
TechFlow Selected TechFlow Selected
Will content related to virtual currency be included in the newly revised Criminal Procedure Law?
Only when the public and regulators alike accept the existence of cryptocurrencies in the future will they have a chance to enter legal and regulatory frameworks.
Navigating Web3 tides with focused insightsAuthor: Liu Zhengyao, Lawyer at Shanghai Manqin Law Firm
Today I noticed that several WeChat groups were sharing a proposal submitted by a deputy to the National People's Congress—amending Article 144 of the Criminal Procedure Law to include virtual currency. The revised text reads: "When investigating criminal cases, people’s procuratorates and public security organs may, in accordance with regulations, inquire into or freeze a suspect’s deposits, remittances, bonds, stocks, fund shares, virtual currencies, and other properties. Relevant entities and individuals shall cooperate."
Compared to the original version, this amendment explicitly adds “virtual currency.” At first glance, this seems to place virtual currency on equal footing with fiat money (deposits). However, under mainland China's current regulatory framework governing virtual currencies, my immediate reaction—as lawyer Liu—is: How could this possibly happen!?
After carefully reviewing an official report from Fazhi Net regarding this NPC deputy’s proposal, I now understand the background better: it relates specifically to judicial handling of seized virtual assets in criminal cases.
Regular readers familiar with my work know I’ve done extensive research on this topic and written multiple articles about it. Under existing Chinese regulations—particularly those outlined in the September 24 Circular issued by ten government departments titled “Notice on Further Preventing and Addressing Risks Related to Cryptocurrency Trading and Speculation”—all exchange services between virtual currencies and fiat currencies are deemed illegal financial activities. This restriction applies equally to public security agencies or so-called cryptocurrency disposal companies conducting such exchanges—even when carried out in connection with criminal investigations.
Therefore, in practice, whenever public security organs investigate criminal cases involving virtual currencies—whether the digital assets are used as tools for committing crimes or represent illicit gains—they typically outsource the monetization process to third-party disposal firms. This allows them to avoid directly violating the provisions of the September 24 Circular. Of course, these third-party firms aren’t reckless either; they often further delegate the actual liquidation work to overseas service providers. After converting the virtual assets abroad, funds are then transferred back into mainland China through legal or sometimes questionable channels before being deposited into dedicated fiscal accounts controlled by law enforcement as part of case-related assets.
In traditional criminal cases, seized property is usually auctioned off during the court execution phase. But due to the unique nature of virtual currencies, current judicial practice generally involves early monetization during the investigation stage. The resulting proceeds are then transferred along with the case file for final disposition by the courts. While I won't elaborate here on why this approach has become standard (readers interested can refer to my previous articles: *Current Status and Compliance Suggestions for Judicial Disposal of Seized Cryptocurrencies in China*, *Is It Legal for Third-Party Companies to Handle Cryptocurrencies in Criminal Cases?*, *How Can Cryptocurrency Judicial Disposal Firms Protect Themselves?*, *How to Achieve Greater Compliance in Cryptocurrency Judicial Disposal (I), (II), (III)*), this early disposal model raises at least four major concerns:
First, lack of sufficient legal basis. Although some internal public security regulations allow preliminary disposal of certain types of volatile assets—for example, Article 21 of the *Regulations on Management of Case-Related Property by Public Security Organs* (2015 revision) states: “Where market prices fluctuate significantly—for bonds, stocks, fund shares, etc.—or where instruments like bills, promissory notes, or checks are nearing expiration, and where ownership is clear, upon written consent or application by the rights holder and approval by the head of a county-level or higher public security organ, such property may be legally sold or auctioned, with proceeds deposited into the unit’s sole compliant account.” While virtual currencies certainly experience high volatility, they are not classified as “bonds, stocks, fund shares,” nor are they negotiable instruments like bills or checks. According to national policy, the most one can call virtual currencies is “virtual commodities.” Moreover, China does not recognize the legality of cryptocurrency exchanges (operating a crypto exchange within China or offering services to Chinese residents from offshore platforms both constitute illegal financial activities). Therefore, logically and legally speaking, there is no foundation for monetizing seized virtual currencies.
Second, there is no proper institutional mechanism for查封 (seizure), 冻结 (freezing), or 扣押 (detention) of virtual currencies. Due to their technical nature, cryptocurrencies stored in wallets can only be accessed via private keys, while those held on exchanges often require cooperation from foreign-based platforms to freeze. Currently, law enforcement commonly places suspects under residential surveillance at designated locations, then uses persistent legal education and psychological pressure to persuade—or coerce—the suspect into voluntarily disclosing private keys and transferring the assets to wallets controlled by investigators. Whether this constitutes torture or forced confession varies by case. In my own experience, I haven’t encountered direct evidence of physical abuse, but online reports from families or lawyers in some cases suggest suspects suffered mistreatment during detention. Let’s consider a hypothetical: what if, regardless of any measure taken, the suspect refuses to disclose the private key to the wallet holding the seized cryptocurrency? What then?
Third, the current model for disposing of seized virtual currencies lacks transparency and oversight, making it prone to corruption and illicit benefit transfers. I won’t go into detail here (to avoid having the article blocked), but just note that officials from Yancheng, Jiangsu, and a cryptocurrency disposal company in Zhejiang were recently investigated precisely because of improper financial dealings between law enforcement and disposal firms during asset liquidation processes.
Fourth, there is no authoritative method for determining the value of disposed virtual currencies. Judicial appraisals and forensic audit reports are standard forms of evidence in criminal proceedings, yet they are rarely seen in cryptocurrency-related cases. So how exactly is one Bitcoin valued at 490,000 RMB instead of 500,000 in a particular case? (In fraud cases, this difference determines whether the defendant faces more than ten years in prison—literally a matter of life and death.) Why use Binance’s average trading price over a certain period rather than OKX’s? (OKX might internally protest: Am I really that bad?) Or why not adopt the average trading price across the top ten global exchanges?
These are just four issues I’ve casually highlighted. As defense attorneys reviewing case files, we frequently uncover many more problems. Together, these challenges constitute the current dilemma in the judicial handling of seized virtual currencies.
So, would including virtual currency in the Criminal Procedure Law resolve these known or unknown issues? My view is: it would help somewhat, but hardly solve the core problems. Especially given regulators’ overall negative stance toward virtual currencies, the idea of incorporating them into formal legislation remains wishful thinking.
Only when both the general public and regulators fully accept the existence of virtual currencies will they have a chance to enter formal laws and regulations—either positively (e.g., recognized as legitimate personal digital assets) or negatively (e.g., treated as criminal proceeds subject to seizure). For now, however, in the eyes of regulators, virtual currencies barely merit anything beyond a meeting among a few ministries issuing a circular or memo. They’re like the characters relegated to the “Secondary Register” or “Tertiary Register” in *Dream of the Red Chamber*—forever excluded from the “Main Register.” Entry into mainstream legal recognition is simply out of reach—for now, at least.
This regret stretches endlessly, without end.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
