New Trends in the Judicial Disposal of Virtual Money: Analysis and Reflection on the Beijing Model

Recently, the Beijing Municipal Public Security Bureau's Legal Affairs Division published an article titled "Innovative! New Channels for Handling Involved Virtual Money," which has attracted widespread attention in the industry. However, as a professional who has long focused on the judicial disposal of virtual money, I believe that this so-called "innovation" and "new channels" are not truly innovative in the real sense.

Analysis of the Beijing Model

According to public information, the Beijing Public Security Bureau has signed a cooperation agreement for the disposal of the virtual money involved with the Beijing Equity Exchange (referred to as "North Exchange"). The disposal model is roughly as follows:

1. The Public Security Bureau of Beijing will entrust the involved virtual money to the Beijing Stock Exchange for disposal.
2. The Beijing Stock Exchange selects a third-party institution to carry out relevant operations and conducts public monetization through a compliant exchange in Hong Kong.
3. After approval by the State Administration of Foreign Exchange, the converted funds will be transferred to a special account of the public security organ.

Although this model may be the first attempt in Beijing, similar domestic and foreign joint disposal models have already been implemented nationwide as early as 2023.

Evolution of China's Virtual Money Disposal Model

Looking at the judicial disposal process of virtual money in China, it has roughly gone through three stages:

1. Disposal Period 1.0 (2018-2021): Mainly realized through over-the-counter (OTC) or private channels, with significant compliance risks.

2. Disposal 2.0 Period (September 2021 - 2023): Based on regulatory requirements, direct disposal has been suspended domestically, and the method of overseas disposal followed by foreign exchange settlement for entry has been adopted, but there are still compliance risks.

3. Disposal during the 3.0 period (from the end of 2023 to now): a joint disposal model has begun to be adopted, in which domestic judicial authorities entrust third-party disposal companies, which then entrust overseas entities to carry out disposal and monetization on compliant platforms, ultimately completing the fund's entry into the country.

Analysis of the Beijing Model

Although the cooperation model between the Beijing Stock Exchange and the Beijing Public Security Bureau is the first of its kind in Beijing, it is not the first in the country. It is worth noting that this model has the following several issues:

1. The Beijing Stock Exchange actually only plays an intermediary role; the real disposal operations still need to be entrusted to professional service agencies.

2. Require third-party institutions to provide a performance bond of 110%, which is relatively high in practical operations.

3. Regarding the setting of service fees and reserve prices, it may not fully align with the actual circumstances of Virtual Money disposal.

Future Outlook

Although the Beijing Municipal Public Security Bureau has made this disposal model public, it does not mean that China will fully open up Virtual Money trading. In fact, the judicial disposal of the involved Virtual Money has been ongoing, and the disposal methods are continuously being optimized.

In the current situation, it is expected that within the next two to three years, mainland China will still maintain a strict regulatory attitude towards Virtual Money trading, and it is unlikely to fully open up participation in Virtual Money trading for ordinary citizens.

Overall, this initiative by the Beijing municipal government reflects the active exploration of judicial authorities in handling cases involving Virtual Money, but there is still a considerable distance to true breakthrough innovation. We need to continue to pay attention to the development in this field, in the hope of finding a better balance between compliance and efficiency.