Introduction

In today’s criminal justice landscape, cybercrime accounts for nearly half of all cases, with an increasing number of criminal cases involving cryptocurrencies taking the spotlight.

A key debate in both practical and theoretical circles regarding these currency-related criminal cases is whether the cryptocurrency involved needs to be liquidated. This question assumes that cryptocurrencies hold property value, which applies only to mainstream currencies. Some legal professionals still argue that all cryptocurrencies should be considered mere data in computer systems, a view that does not align with current realities or legal principles. Thus, our discussion assumes that mainstream cryptocurrencies involved in cases do possess property value.

The answer to this question can vary depending on the specific needs of the case.

1. Cryptocurrency as Evidence in Criminal Cases

In cases where the evidence has property value but is not treated as legal tender (either physical or digital), it is generally not liquidated.

For instance, if A steals a Bitcoin from B, the court can find A guilty of theft without any legal issues. If the Bitcoin is seized, the authorities simply need to return it to B. Even when determining the amount involved for A, there is no need to liquidate the Bitcoin; typically, the amount B paid for the Bitcoin when purchasing it is used as the basis for A’s theft amount (following the principle that the victim should not profit, authorities do not consider any increase in Bitcoin’s value, as discussed in “What happens if the seized cryptocurrency appreciates or depreciates during the seizure period?“). If B received the Bitcoin as a gift or mined it, the amount involved can be based on the Bitcoin’s market price at the time of the theft.

All these processes do not require the actual liquidation of the Bitcoin since the ultimate goal is to return it to the victim (B).

2. Cryptocurrency as Illegal Gains

In certain cases, when the seized cryptocurrency does not need to be returned to a victim (for example, if the suspect has already sold the cryptocurrency or if there is no victim in the case), it is generally necessary to consider liquidating the cryptocurrency involved.

In China’s criminal justice system, most cryptocurrency cases fall under economic or financial crimes, which typically involve fines. The amount of these fines is often closely tied to the suspect’s or defendant’s illegal gains, necessitating the liquidation of the cryptocurrency to accurately determine these gains.

Another key reason for this is that in cases where cryptocurrency is classified as illegal gains, its price often affects whether the case meets the filing criteria. The price of cryptocurrencies can be highly volatile. At the time a victim reports a crime, the price may be sufficiently high to justify filing a case; however, by the time the case goes through the police, prosecutor’s office, and court, the value of the cryptocurrency could drop to zero. In such situations, no matter how light the sentence for the suspect or defendant is, they are likely to feel unjustly treated—why should they be charged with a crime based on cryptocurrency that has lost all its value? Therefore, when cryptocurrency is considered illegal gains, it should be liquidated as soon as possible.

However, the reality can be quite complex. In some criminal cases, cryptocurrency may serve both as evidence and as illegal gains. In these instances, we recommend that judicial authorities prioritize liquidation after securing the necessary evidence. (If the involved cryptocurrency consists of stablecoins like USDT or USDC, they may be temporarily held without liquidation.)

Lastly, it’s also important to consider whether the case has already been decided by the court.

3. Handling Cryptocurrency Before Court Judgment

In China, the general principle is that courts handle involved property after a judgment is made. Therefore, unless there are special circumstances, the disposal of cryptocurrency involved in a case should occur after the court’s ruling. However, exceptions do exist.

According to the “Regulations on the Procedures for Public Security Organs to Handle Criminal Cases” (referred to as the “Procedural Regulations”), properties like stocks, bonds, and fund shares that experience significant market price fluctuations can be legally auctioned or sold before a judgment, provided there is a request or consent from the involved party and approval from the head of the county-level public security agency. There are two main areas of controversy regarding this:

First, cryptocurrency is not explicitly listed among the “stocks, bonds, fund shares, etc.” in the “Procedural Regulations,” and it’s unclear whether the term “etc.” can be interpreted broadly enough to include it.

Second, the “Procedural Regulations” represent the views of the public security agencies, while criminal cases require collaboration and oversight among public security, prosecutors, and courts. As a departmental regulation, the “Procedural Regulations” do not hold the same authority as laws governing the prosecutorial and judicial branches. This raises the question: can the “Procedural Regulations” serve as a legal basis for the prior judicial disposal of cryptocurrency and create a unified approach among the public security, prosecutorial, and judicial entities?

Regarding the first point of controversy, the principle of “no action without authorization” is fundamental for judicial authorities. If “cryptocurrency” is not listed in the “Procedural Regulations,” it appears that public security agencies cannot dispose of it without permission. However, the debate is whether the term “etc.” can be broadly interpreted to include cryptocurrency; this remains a contentious issue with varying interpretations depending on one’s viewpoint, and there is currently no consensus.

As for the second point, while laws and judicial interpretations carry more weight than departmental regulations, it is unfortunate that there are no clear legal or judicial guidelines for disposing of involved property. The “Interpretation of the Criminal Procedure Law” issued by the Supreme People’s Court states that property transferred with the case or seized by the court should be handled by the court after the first-instance judgment takes effect. What happens if the public security agency does not transfer the cryptocurrency along with the case? In such instances, the provisions of the “Criminal Procedure Law Interpretation” would not apply. (For more analysis on this topic, see “At What Stage Should Involved cryptocurrency Be Disposed Of? Public Security or Court“)

This analysis helps us understand the current inconsistencies in handling involved cryptocurrency. As for potential solutions, we will need to rely on further clarification and refinement of relevant departmental regulations and judicial interpretations, especially by incorporating cryptocurrency into future legislation and judicial processes.

4. Handling Cryptocurrency After Court Judgment

Disposing of cryptocurrency involved in a case after a court judgment is the most “traditional” method, typically occurring in two scenarios:

First, if the cryptocurrency seized by judicial authorities consists of mainstream stablecoins, which have a constant price, there is almost no value fluctuation from the time the case is filed to when the court makes a judgment. In such cases, disposing of the assets after the court’s ruling is completely justified (unless the cryptocurrency needs to be returned to a victim).

Second, if the value of the involved cryptocurrency has not decreased, judicial authorities may conduct a price assessment or evaluation. Although the cryptocurrency has not been liquidated in practice, there are official documents in the case that provide what appears to be an authoritative valuation of the cryptocurrency. Courts often rely on the opinions of assessment agencies, identification institutions, and judicial auditing organizations. However, it’s important to note that, according to Lawyer Liu, a web 3.0 criminal lawyer, current laws, regulations, and policies regarding cryptocurrency do not allow any organization or institution to provide pricing services for cryptocurrency transactions. Therefore, these third-party agencies lack any legal authority to determine the price of cryptocurrency.

In conclusion, whether to liquidate the involved cryptocurrency and when to do so is not consistent in current judicial practices. The underlying issue is the ambiguous stance of existing laws and regulatory policies toward cryptocurrency: they hesitate to recognize its financial nature while also struggling to overlook its actual value. In a way, cryptocurrency serves as a challenge from the common people to those in power.

Disclaimer：

1. This article is reprinted from [Liu Zhengyao]. All copyrights belong to the original author [Liu Zhengyao]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned Gate.io, copying, distributing, or plagiarizing the translated articles is prohibited.