Virtual Currency and Cybercrime: Challenges and Responses in Judicial Practice

Virtual Currency and Cybercrime: Challenges and Responses in Judicial PracticeVirtual currency, with its decentralized, anonymous, and untraceable nature, offers convenience for cybercriminals to dispose of their illicit gains, making it an integral part of cybercrime. However, the control and disposal of digital assets, represented by virtual currency, differ significantly from traditional property

Virtual Currency and Cybercrime: Challenges and Responses in Judicial Practice

Virtual currency, with its decentralized, anonymous, and untraceable nature, offers convenience for cybercriminals to dispose of their illicit gains, making it an integral part of cybercrime. However, the control and disposal of digital assets, represented by virtual currency, differ significantly from traditional property. On the one hand, China's legislation has not yet granted virtual currency legal status; on the other hand, there is controversy in judicial practice regarding the disposal of virtual currency involved in cases. This article will delve into the role of virtual currency in cybercrime, analyze the challenges it faces in judicial practice, and explore corresponding countermeasures.

Virtual Currency: A New Type of Criminal Tool and Criminal Object

Digital assets, particularly virtual currencies like Bitcoin and emerging non-fungible tokens (NFTs), powered by blockchain technology, possess decentralized, anonymous, and untraceable characteristics, making them easily used as illegitimate means of payment and evolving into new criminal tools.

1. Criminal Tool Attributes of Virtual Currency:

- Money Laundering Tool: Case Six in the typical cases of combating and governing telecommunications and network fraud and related crimes issued by the Supreme People's Procuratorate in 2022, "Luo Moujie Fraud Case - Using Virtual Currency for Cross-border Transfers of Funds for Overseas Telecommunications and Network Fraud Gangs," reveals a typical case of virtual currency being used as a money laundering tool.

- Cross-border Fund Transfer Tool: The anonymity and untraceability of virtual currency make it an ideal payment method for cross-border crimes. Global virtual currency crime transactions have risen from $8.4 billion in 2020 to $20.6 billion in 2022, a historical high, demonstrating the significant role of virtual currency in cross-border crime.

- Payment and Settlement Tool: The anonymity and untraceability of virtual currency make it a convenient payment tool for cybercrime, such as using virtual currency for illegal payments, purchasing Bitcoins and other virtual currencies on behalf of third parties for payment and settlement in cybercrime.

2. Criminal Object Attributes of Virtual Currency:

- Attacks on Virtual Currency Trading Platforms: In November 2023, the renowned virtual currency trading platform Bithumb was hacked, resulting in the theft of approximately $115 million in virtual currency assets, highlighting the reality of virtual currency trading platforms becoming targets for criminals.

- Virtual Currency Theft: Cases targeting virtual currency are also prevalent in China. Judicial practice typically handles them as theft, illegal acquisition of computer information system data, or fraud. For example, in case (2022) Xiang 3123 Xing Chu 93, the illegal gains and the resulting proceeds of 2944.6808 Bitcoins were confiscated and turned over to the national treasury.

- Virtual Currency Fraud: Based on the data retrieved from "Xiaobao Gong," information network crime cases involving virtual currency, most of them are investment fraud in the name of Bitcoin (by case), accounting for 58.91%. Other proportions include: fraud funds used for Bitcoin trading (by case) 15.35%, Bitcoin used for payment and settlement (by case) 25.74%.

Legal Attributes of Virtual Currency: Challenges and Controversies

As a product of digital technology, the legal attributes of virtual currency are controversial in both legislation and judicial practice, posing significant challenges to traditional property control and disposal models.

1. Legal Attributes of Virtual Currency:

- Non-Monetary Attribute: Chinese law has consistently denied the monetary attribute of virtual currency, classifying it as a specific virtual commodity, prohibiting its circulation and use as currency in the market, and forbidding the conduct of commercial activities involving virtual currency exchange.

- Property Attribute: Despite China's prohibition on virtual currency transactions, its real-world trading and circulation among the public cannot be ignored. Judicial practice supports the recognition of the property attribute of virtual currency. For instance, in 2021, the Baoshan District People's Court of Shanghai City ruled that the defendant return one Bitcoin to the plaintiff, affirming its object property attribute.

- Data Attribute: As a product of digital technology, virtual currency can be considered a type of computer information system data. However, data is merely a manifestation of property and should not be separated from its property attribute.

2. Challenges in Judicial Practice of Virtual Currency:

- Difficulty in Identification: The decentralized, anonymous, and untraceable nature of virtual currency presents difficulties in identifying its legal attributes.

- Disposal Problems: Controlling and disposing of virtual currency requires the cooperation of the involved parties, rendering traditional seizure measures ineffective.

- Lack of Supervision: Existing legal regulatory documents are insufficient to meet the needs of judicial practice in disposing of virtual currency involved in cases, leading to numerous challenges in its forced disposal due to a lack of dedicated research on virtual currency involved in cases.

3. Points of Controversy:

- Can virtual currency be confiscated as criminal proceeds?

- How should the custody and disposal of virtual currency involved in cases be conducted?

- How is the realization price of virtual currency involved in cases determined?

- How to handle the issue of ownership of virtual currency involved in cases?

Improving the Disposal Mechanism for Virtual Currency Involved in Cases: Countermeasures in Judicial Practice

In the face of challenges posed by virtual currency in cybercrime, improving the disposal mechanism for virtual currency involved in cases is crucial in combating cybercrime and safeguarding the property interests of the people.

1. Clarifying Legal Basis and Improving Legislation:

- Clarifying the Legal Attribute of Virtual Currency: Develop specific legislation regarding the property attribute of virtual currency to clarify its legal status, providing clear legal grounds for judicial practice.

- Improving the Disposal Process for Virtual Currency Involved in Cases: Formulate specific disposal processes for virtual currency, including specific provisions for the stages of seizure, custody, and realization, ensuring the lawful and secure disposal of virtual currency involved in cases.

- Enhancing International Cooperation: Promote the establishment of cooperative relationships on the disposal of virtual currency involved in cases with countries and regions that recognize the legal status of virtual currency, jointly combating cross-border virtual currency crime.

2. Improving Judicial Practice Mechanisms:

- Improving the Control Procedures for Virtual Currency Involved in Cases: Develop specific procedural regulations to clarify the division of responsibilities among the procuratorial, public security, and judicial organs in the seizure, custody, and disposal of virtual currency involved in cases, ensuring the safe and effective control of such assets.

- Standardizing Seizure Procedures: Institutionalize the seizure method employed by public security organs involving transferring virtual currency to public security agency accounts, ensuring transparency and openness throughout the seizure process.

- Improving the Custody System for Virtual Currency Involved in Cases: Enhance the custody system for virtual currency involved in cases, ensuring the secure management of keys to prevent loss or cyberattacks due to improper custody.

- Establishing a Disposal Platform for Virtual Currency Involved in Cases: Headed by relevant national ministries and commissions, establish a disposal platform for virtual currency involved in cases to handle the disposal and realization of virtual currency involved in cases on behalf of local case-handling agencies, ensuring the traceability of funds sources and destinations.

- Improving the Supervision Mechanism for the Realization of Virtual Currency Involved in Cases: Establish a comprehensive supervision mechanism to review the source of funds and the destination of virtual currency, verify the identity information of individuals involved in transactions, and prevent money laundering and other criminal activities.

3. Optimizing the Disposal Process:

- Restricting the Prior Disposal of Virtual Currency Involved in Cases: Due to the significant fluctuations in virtual currency value, there are risks in disposing of virtual currency involved in cases during the investigation stage. Therefore, such disposal should be handled by professional institutions after the conclusion of the case, followed by an evaluation.

- Establishing an Evaluation Mechanism for the Realization Price of Virtual Currency Involved in Cases: Collect prices of crypto assets from major trading platforms in the international market. Based on the principle of maximizing profits, strive to recover losses for as many victims as possible.

- Improving the Standards for Determining the Amount of Virtual Currency Involved in Cases: Use the amount of loss incurred by the victim as the amount involved in the case. The average trading price of the virtual currency on overseas trading platforms at the time of the criminal act should be used as the calculation reference.

4. Strengthening Publicity and Education:

- Raising Public Awareness of Virtual Currency Crime Prevention: Strengthen publicity and education, guiding the public to rationally understand virtual currency, enhance risk awareness, and avoid becoming victims of cybercrime.

- Improving Law Enforcement Capacities of Judicial Organs: Strengthen training for judicial personnel to enhance their ability to handle cases involving virtual currency crime and effectively combat related criminal activities.

Conclusion

The emergence of virtual currency has presented new challenges for cybercrime but also offers new opportunities for combating crime and maintaining social security. By improving the disposal mechanism for virtual currency involved in cases, we can effectively combat virtual currency crime, protect the property security of the people, and maintain social stability. Faced with the opportunities and challenges presented by virtual currency, we need to continuously explore, innovate, adapt to the development needs of the digital era, build a more sound legal system and judicial system, and uphold national security and social justice.