On June 19, an article signed by the Shenzhen Intermediate People's Court and published in the "People's Court Daily" provided a clear "Chinese solution" for how China should handle the tricky issue of virtual currencies involved in legal cases. The article proposed a "dual-track mechanism"—that is, cashing out on compliant overseas platforms or destroying specific risk assets through "black hole addresses"—which not only formally established the property attributes of virtual currencies 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 currencies in China has been controversial. The "Document No. 237" issued in 2021 clarified that they do not have the status of legal tender and classified related activities as illegal financial activities. However, judicial practice faces an unavoidable reality: how to handle the large amounts of virtual currency seized in criminal cases to achieve the goals of compensating victims or remitting to the national treasury?

The article clearly pointed 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 value of criminal cases involving virtual currencies nationwide reached 430.719 billion yuan, a year-on-year increase of over 12 times. 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 them as a disposable "virtual property." The December 2024 ruling by the Lianshui Court in Jiangsu on a USDT theft case explicitly recognized the property attributes of virtual currencies, providing strong support for the Shenzhen Intermediate Court's viewpoint.

Track One: Compliant Cash-Out Overseas, Balancing Regulation and Efficiency

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

The specific operation involves, under the record-keeping and supervision of the People's Bank and foreign exchange management departments, entrusting professional third-party institutions to cash out through trading platforms with legitimate licenses in jurisdictions where virtual currency trading is legal (such as Hong Kong).

The core advantages of this model are:

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

• Controllable Process: The cash-out process must be recorded with regulatory authorities, ensuring transparency in the flow of funds and referencing market fair value, effectively preventing asset loss or price manipulation.

Of course, challenges still exist. The virtual currency 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 timing of cashing out directly affects the value of asset recovery. Additionally, cross-border coordination and foreign exchange management require more detailed operational guidelines. The article suggests that judicial authorities should establish a dynamic assessment mechanism to formulate the best cash-out strategy based on market conditions and specific case needs.

Track Two: "Black Hole Address" Destruction, Completely Severing the Criminal Funding Chain

For certain special types of virtual currencies, cashing out may not be the best option. The article innovatively proposed a "black hole address" destruction mechanism.

When the involved virtual currency is used to harm national security or public interests, especially for untraceable "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 assets enter, they are permanently locked and cannot circulate again, effectively "destroying" them.

This practice is not original. Internationally, the stablecoin issuer Tether has collaborated with law enforcement to send involved USDT to a black hole address. The Shenzhen Intermediate Court's introduction 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, the circulation channels of these "dirty money" can be physically severed, providing strong protection for financial security.

The Deep 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 a deeper significance in providing a pragmatic "Chinese solution" to the global regulatory challenges of digital assets. It cleverly combines strict domestic regulation with compliant overseas markets, achieving a unity of "blocking the evil door" and "opening the right door."

To ensure the stability and longevity of this innovation, improvements are still needed in the following areas:

• Top-Level Design: The Supreme Court or relevant departments should quickly issue unified judicial interpretations or guiding opinions to standardize the specific processes for overseas cash-out and destruction.

• Technological Empowerment: Strengthen the application of blockchain analysis, fund tracing, and other technologies in the judicial field to enhance 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 should not only be the guardian of rules but also the leader of innovation. The exploration by the Shenzhen Intermediate Court vividly reflects the willingness and proactive actions of Chinese judiciary in the era of digital economy.

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