Exploration of New Judicial Disposal Models for Involved Virtual Money

Recently, the Beijing Municipal Public Security Bureau's Legal Affairs General Team published an article about the "new channels" for the disposal of involved virtual money, which has attracted widespread attention in the industry. As a legal professional who has long focused on this field, I believe it is necessary to conduct an in-depth analysis to clarify some misunderstandings.

The Beijing model is not a pioneer

According to public information, the Beijing Municipal Public Security Bureau signed a cooperation agreement with the Beijing Equity Exchange to establish a mode for the disposal of virtual money involved in cases. The specific process is as follows: The public security organ entrusts the Beijing Equity Exchange to dispose of the virtual money involved in the case, the Beijing Equity Exchange then selects a third party for specific operations, realizes it through an overseas compliant platform, and finally converts the funds back to the public security organ.

However, this model of domestic delegation and overseas disposal is not a first. In fact, similar disposal methods have already been practiced by disposal companies in 2023.

The Evolution of Judicial Disposition of Virtual Money in China

Looking at the judicial disposal of Virtual Money in our country, it has roughly gone through three stages:

1. Disposal Period 1.0 (2018-2021): Judicial authorities mainly liquidated through over-the-counter (OTC) or private channels, which posed compliance risks.

2. Disposal Period 2.0 (September 2021 - 2023): Due to policy impacts, direct disposal in the country has basically stopped, and instead, it is converted into foreign currency through overseas monetization before being brought back into the country. However, there are compliance risks associated with the currency conversion method.

3. Disposal Phase 3.0 (End of 2023 to Present): Establishing a joint disposal model for domestic and foreign entities. Domestic judicial authorities entrust a third party, which in turn entrusts foreign entities to handle and liquidate on compliant platforms, and finally convert and bring the funds back through compliant channels.

Characteristics and Questions of the Beijing Model

The disposal model in Beijing, although a first locally, is not innovative from a national perspective. It is worth noting that:

1. The Beijing Stock Exchange actually plays an intermediary role and needs to entrust professional institutions for substantive operations.

2. A performance guarantee deposit of 110% is required, which is relatively high in practice.

3. There may be applicability issues regarding the service fee regulations. The conversion of Virtual Money on foreign exchanges does not constitute a public auction, so the concept of a reserve price may not be entirely applicable.

Future Outlook

Regarding the judicial disposal of the involved virtual money, the state has never explicitly prohibited it. Since 2017, judicial authorities across various regions have been exploring disposal methods, gradually forming the current model of joint disposal both domestically and internationally.

However, this does not mean that China will soon relax its restrictions on Virtual Money trading. It is expected that in the next two to three years, the mainland region of our country will still maintain a strong regulatory stance, and it is unlikely to fully open up participation in Virtual Money trading for ordinary citizens.

Overall, this initiative by Beijing reflects the proactive exploration of judicial authorities in dealing with new types of assets, but it still needs to be continuously improved in practice to ensure compliance and efficiency in the disposal process.