In criminal cases, after the virtual currencies involved are seized, as the case progresses, except for those that need to be returned to the victim according to law, most of the virtual currencies involved need to be disposed of and converted into RMB, and then confiscated by the judicial authorities. According to the "9.24 Notice" and other relevant regulations, the judicial authorities in mainland China are currently not allowed to exchange virtual currencies for legal tender. Currently, the judicial authorities entrust third-party disposal companies to exchange virtual currencies for legal tender. As a result, the "judicial disposal of virtual currencies" has emerged.
Lawyer Liu has conducted a lot of analysis on the judicial disposal of virtual currency. The current routine operations in practice can be summarized into the following three points:
First, the virtual currency involved in the case can be judicially disposed of before or after the judgment;
Second, when judicial organs deal with matters, they are mainly entrusted by public security organs;
Third, the current disposal model in the market is mainly for judicial authorities to entrust domestic disposal companies, which then entrust overseas compliant entities to dispose of and realize the cash.
Today, Lawyer Liu will mainly talk about how to set up compliant procurement procedures when the judicial authorities entrust domestic disposal companies.
1. What the law stipulates
As a criminal defense lawyer, I may pay more attention to the relevant provisions of criminal substantive and procedural laws. In the previous article " At what stage should the virtual currency involved in the case be disposed of? Public Security or Court ", we analyzed that the current judicial disposal is generally entrusted by the public security organs. The main reasons are as follows:
(1) For criminal cases that have not been adjudicated, the public security organs may, in accordance with the "Several Provisions on the Management of Property Involved in Cases by Public Security Organs", dispose of the property involved in the case with large market price fluctuations upon application or consent by the parties and approval by the principal person in charge of the public security organ. The virtual currencies involved in the case (except stablecoins) generally meet the condition of large market price fluctuations;
(II) For cases after judgment, if the property involved is transferred to the court, according to the relevant provisions of the Interpretation of the Criminal Procedure Law, the court shall dispose of it after the judgment takes effect. However, in reality, in criminal cases involving currency, the public security organs will not necessarily transfer the seized virtual currency to the procuratorate or the court. Therefore, even after the court judgment, the public security organs are still entrusted to dispose of it.
When public security organs entrust third-party disposal companies to provide disposal services, in addition to considering relevant laws and regulations, judicial interpretations, and departmental regulations in criminal case handling, they must also take into account the Government Procurement Law. my country's Government Procurement Law clearly stipulates: "This law shall apply to government procurement conducted within the territory of the People's Republic of China."
Of course, one question about the judicial disposal of the virtual currency involved in the case is that the "government procurement" defined in the "Government Procurement Law" refers to "the behavior of state organs, institutions and collective organizations at all levels using fiscal funds to purchase goods, projects and services within the centralized procurement catalog formulated in accordance with the law or above the procurement limit standards." However, in practice, the entrusting agency will not use fiscal funds specifically to entrust the disposal company, but the disposal company will directly deduct the technical service fee from the disposal object (that is, the virtual currency involved in the case).
2. Practice routine operations
In fact, the above has almost "spoiled" the whole thing. At present, the routine practice of judicial disposal business in practice is for the public security organs (currently, the discipline inspection and supervision commissions have also appeared in some areas) to act as the entrusting agency and sign a "Judicial Disposal Service Agreement" with a third-party disposal company.
For pre-processing, the suspect and the processing company need to sign a processing agreement and a service agreement at the same time. However, for processing after the court judgment takes effect, the defendant does not need to entrust.
The disposal company cannot be disposed of in mainland China, nor can it be disposed of in violation of laws and regulations (mainly violations of local regulations abroad). Anti-money laundering review and other work must be carried out, which will not be elaborated in this article.
In current practice, there are different opinions on whether other government agencies where the case is located (such as the financial department) can entrust the disposal in judicial disposal. Lawyer Liu’s view is: Based on the particularity of criminal cases, especially criminal cases involving virtual currencies, it is not appropriate for government agencies other than judicial agencies to entrust the disposal.
III. Key points for compliance in procurement services
Although the above analysis of the application of the Government Procurement Law in judicial disposal business is not necessarily 100% undisputed, it is completely correct to say that in judicial disposal, when the public security organs purchase disposal services, they can refer to and apply the Government Procurement Law.
Based on the relevant provisions of the Government Procurement Law, we have summarized the following compliance points and recommend that the entrusted authorities pay special attention to them:
First, the qualification requirements of the disposal company. For example, it cannot be a dishonest enterprise and has no penalties or bad records in taxation, social security, accounting system, etc.;
Second, the disposal company must have the necessary professional and financial capabilities to perform the service. For example, under the current deposit model, the disposal company is required to pay a deposit in advance; and in actual disposal, the disposal company is required to have full-process, fully closed-loop, auditable, and traceable professional disposal capabilities;
Third, in terms of procurement methods, based on the professionalism and particularity of virtual currency disposal, "invitation to bid" and "single source procurement" can be adopted, but it is necessary to ensure openness, transparency, compliance with laws and regulations, and prevent behind-the-scenes operations.
4. Optimization Suggestions
ChainGuard Legal, of which Lawyer Liu is a co-founder, has accumulated a great deal of practical experience and legal research in the legal services for the judicial disposal of virtual currencies (see the "Previous Recommendations" at the end of Lawyer Liu's WeChat article for details). We have also provided a large amount of legal consultation, legal opinions and other services to judicial organs and disposal companies.
Based on current disposal practices, we recommend that the disposal entrusting authority verify the disposal company’s overseas virtual currency transaction links when looking for a disposal company to prevent the virtual currency involved from flowing back into the country (such as transferring to sensitive wallet addresses within the country that have been clearly marked). At the same time, we also recommend that the disposal company must have a certain amount of case accumulation, compliant foreign exchange settlement procedures, etc.
As for more optimization suggestions, friends who are interested can contact Lawyer Liu for communication.
