Shenzhen Intermediate Court breaks the deadlock in the disposal of the involved virtual money: overseas compliance monetization and "black hole" destruction proceed in parallel.

On June 19, an article signed by the Shenzhen Intermediate People's Court, published in the "People's Court Daily", provided a clear "Chinese solution" to the thorny issue of how to deal with virtual money involved in cases. The article proposed a "dual-track mechanism"—i.e., cashing out on compliant platforms abroad or destroying specific risky assets at the "Burn Address"—which not only formally established the property attributes of virtual money but also built a pragmatic bridge between strict regulation and judicial practice.

Property attributes: From legal ambiguity to judicial consensus

For a long time, the legal status of Virtual Money has been controversial in China. The "Document No. 237" of 2021 clearly states that it does not possess the status of legal tender and categorizes related activities as illegal financial activities. However, judicial practice faces an unavoidable reality: how to dispose of the large amounts of Virtual Money seized in criminal cases to achieve the goal of compensating victims or remitting to the national treasury?

The article clearly points out that the property attributes of virtual money have formed a consensus in judicial practice. This conclusion is not a castle in the air. Data from the Ministry of Public Security shows that in 2024, the national case value related to virtual money crimes reached 430.719 billion yuan, an increase of more than 12 times compared to the previous year. Virtual money has become a key tool for money laundering, fraud, and other criminal activities. In the face of this severe situation, judicial authorities must treat it as a disposable "virtual property." The ruling by the Lianshui Court in Jiangsu in December 2024 regarding a USDT theft case clearly recognizes the property attributes of virtual money, providing strong support for the views of the Shenzhen Intermediate Court.

Track 1: Overseas Compliance Monetization, Balancing Regulation and Efficiency

Since domestic trading is banned, how can one legally cash out? The path given by the Shenzhen Intermediate Court is: "Go overseas."

The specific operation is to, under the record and supervision of the People's Bank and foreign exchange management departments, entrust a professional third-party institution to carry out monetization through a licensed trading platform in a jurisdiction where virtual money transactions are legal (such as Hong Kong).

The core advantage of this model is:

Legal Compliance: By leveraging the mature VASP (Virtual Asset Service Provider) licensing system and regulatory framework in regions such as Hong Kong, it avoids the legal risks of direct trading in the mainland.

Process controllable: The monetization process must be filed with regulatory authorities, the flow of funds is transparent, and prices refer to the market fair value, effectively preventing asset loss or price manipulation.

Of course, challenges still exist. The virtual money market is known for its extreme volatility, as evidenced by the significant fluctuations in Bitcoin prices between $65,000 and $72,000 in June 2025. The choice of timing for cashing out directly affects the value of asset recovery. In addition, cross-border coordination and foreign exchange management also require more detailed operational guidelines. The article suggests that judicial authorities should establish a dynamic evaluation mechanism to develop the best cashing strategy based on market conditions and specific case needs.

Track Two: "Burn Address" destruction, completely severing the criminal funding chain.

For certain special types of virtual money, liquidation is not the best option. The article innovatively proposes the "Burn Address" destruction mechanism.

When the virtual money involved is used to harm national security or public interests, especially for untraceable "privacy coins" like Monero and Zcash, it can be transferred to a "Burn Address" that has no private key and cannot be controlled by anyone. Once the assets enter, they are permanently locked and cannot circulate again, equivalent to a complete "destruction."

This practice is not a new invention. Internationally, the stablecoin issuer Tether has collaborated with law enforcement agencies to send involved USDT to a Burn Address. The Shenzhen Intermediate People's Court has introduced this into the Chinese judicial system, reflecting the deep integration of law and technology. The Ministry of Public Security pointed out at a press conference in January 2025 that criminal groups are upgrading their methods using privacy coins. By destroying through the "black hole," it can physically cut off the circulation channels of these "dirty money," effectively safeguarding financial security.

The profound meaning and future outlook of the "China Solution"

The "dual-track mechanism" of the Shenzhen Intermediate Court is not only an operational guideline, but its deeper significance lies in providing a pragmatic "Chinese solution" to the global regulatory challenges of digital assets. It cleverly combines strict regulation within the country with compliant markets abroad, achieving a unity of "blocking the evil door" and "opening the right door."

In order for this innovation to develop steadily and far-reaching, improvements still need to be made in the following areas in the future:

Top-level design: The Supreme Court or relevant departments should quickly issue unified judicial interpretations or guidelines to standardize the specific processes for overseas monetization and destruction.

Technical Empowerment: Strengthen the application of blockchain analysis, fund tracing, and other technologies in the judicial field to improve case handling efficiency and accuracy.

International Cooperation: Deepen judicial cooperation with advanced regions in virtual asset regulation such as Hong Kong and Singapore, and jointly explore efficient cross-border law enforcement and asset disposal mechanisms.

In the face of technological waves, the judiciary is not only the guardian of rules but should also be a leader in innovation. The exploration by the Shenzhen Intermediate People's Court is a vivid embodiment of the Chinese judiciary's willingness to take responsibility and actively engage in the era of the digital economy.