On June 19, an article published by the Shenzhen Intermediate People's Court in the (People's Court Daily) provided a clear 'Chinese solution' to the thorny issue of how China can dispose of involved virtual currencies. The proposed 'dual-track mechanism'—that is, monetizing on compliant overseas platforms or destroying specific high-risk assets using 'black hole addresses'—not only officially establishes the property attributes of virtual currencies but also builds 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 currencies in China has been controversial. The 'Document No. 237' issued in 2021 clearly states that they do not have the status of legal currency and categorizes related activities as illegal financial activities. However, judicial practice faces an unavoidable reality: how to dispose of the large amounts of virtual currencies seized in criminal cases to achieve the goals of compensating victims or remitting to the treasury?
The article clearly points out that the property attributes of virtual currencies have formed a consensus in judicial practice. This conclusion is not unfounded. Data from the Ministry of Public Security shows that in 2024, the national value of criminal cases involving virtual currencies reached 430.719 billion yuan, an increase of more than 12 times year-on-year. Virtual currencies have become key tools 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 December 2024 judgment by the Lianshui Court in Jiangsu regarding a USDT theft case explicitly affirmed the property attributes of virtual currencies, providing strong support for the views of the Shenzhen Intermediate Court.
Track One: Overseas compliant monetization, balancing regulation and efficiency.
Since domestic trading is banned, how can one legally monetize? The path provided by the Shenzhen Intermediate Court is: 'going abroad'.
The specific operation involves, under the filing and supervision of the People's Bank and the foreign exchange management department, entrusting a professional third-party institution to monetize through a legally licensed trading platform in jurisdictions where virtual currency trading is legal (such as Hong Kong).
The core advantage of this model lies in:
Legal compliance: Leveraging the mature VASP (Virtual Asset Service Provider) licensing system and regulatory framework in regions like Hong Kong to avoid the legal risks of direct transactions in mainland China.
Controllable process: The monetization process must be filed with regulatory authorities, the flow of funds must be transparent, and prices should reference market fair value to effectively prevent asset loss or price manipulation.
Of course, challenges still exist. The virtual currency market is known for its extreme volatility, as evidenced by the substantial fluctuations in Bitcoin prices between $65,000 and $72,000 in June 2025. The timing of monetization directly relates to the value of asset recovery. Additionally, 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 optimal monetization strategies based on market conditions and specific case needs.
Track Two: Destruction of 'black hole addresses' to completely sever the criminal funding chain.
For certain special types of virtual currencies, monetization may not be the best choice. The article innovatively proposes a **'black hole address' destruction mechanism**.
When the involved virtual currency is used to harm national security or public interests, especially difficult-to-trace 'privacy coins' like Monero and Zcash, it can be transferred to a 'black hole address' that has no private key and cannot be controlled by anyone. Once the asset enters, it is permanently locked and cannot circulate again, effectively resulting in 'destruction'.
This practice is not a first. Internationally, stablecoin issuer Tether has previously collaborated with law enforcement to send involved USDT to a black hole address. The Shenzhen Intermediate Court's integration of this into the Chinese judicial system reflects a deep integration of law and technology. The Ministry of Public Security pointed out at a press conference in January 2025 that criminal groups are using privacy coins to upgrade their methods. Through 'black hole' destruction, it can physically cut off the circulation channels of these 'dirty money', providing strong protection for financial security.
The deeper meaning and future outlook of the 'Chinese solution'.
The 'dual-track mechanism' of the Shenzhen Intermediate Court is not only an operational guide but also has deeper significance in that it provides a pragmatic 'Chinese solution' to the global digital asset regulatory dilemma. It cleverly combines strict regulation domestically with compliant markets abroad, achieving a unity of 'blocking the bad' and 'opening the good'.
To ensure the stability and sustainability of this innovation, further improvements are still needed in the following areas:
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 technologies such as blockchain analysis and fund tracing in the judicial field to improve case handling efficiency and accuracy.
International cooperation: Deepen judicial collaboration 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 the leader of innovation. The explorations of the Shenzhen Intermediate Court vividly reflect China's judicial courage and proactive approach in the digital economy era.
