The new model of judicial disposal of Virtual Money has sparked heated discussions, with professionals interpreting its background and impact.

Recently, the Beijing Municipal Public Security Bureau's Legal Affairs Division published an article on the disposal of virtual money involved in cases, which has attracted widespread attention in the industry. As a legal professional with rich experience in the web3 field, I conducted an in-depth analysis of this.

The Beijing Model is not the first of its kind

According to public information, the Beijing Municipal Public Security Bureau has signed a cooperation agreement with the Beijing Equity Exchange, adopting a model for the disposal of involved Virtual Money. The specific process is as follows: the public security authority entrusts the involved Virtual Money to the Beijing Equity Exchange, which selects a third party for related operations, realizing it into fiat currency through a compliant platform in Hong Kong, and finally transfers the funds into the account of the public security authority after settlement.

However, this joint model of domestic delegation and overseas disposal is not a first. In fact, as early as 2023, disposal companies began to adopt a similar approach.

The Evolution of China's Virtual Money Disposal

Looking back at history, the judicial disposal in our country has gone through three stages:

1. Disposal period 1.0 (around 2018-2021): Judicial authorities mainly realized it through exchanges OTC or private channels, which poses compliance risks.

2. Disposal Period 2.0 (September 2021 - 2023): Affected by policies, domestic virtual money disposal and conversion have basically stopped, and some companies have exchanged their offshore disposals back into the country, but there may be violations.

3. Disposal Phase 3.0 (from the end of 2023 to the present): A joint disposal model has emerged both domestically and internationally, where domestic judicial authorities entrust a third party in mainland China, which then entrusts an overseas entity to dispose of and realize assets on a compliant platform, and finally transfers the funds back to the domestic market through compliant channels.

Characteristics and Potential Issues of the Beijing Model

Although the model adopted in Beijing is the first of its kind locally, there have been precedents nationwide. It is worth noting that:

1. The Beijing Stock Exchange is essentially an intermediary that needs to delegate substantial operations to professional service institutions.

2. A performance bond of 110% is required, which is relatively high in practice.

3. The regulations regarding service fees may need further clarification, especially in relation to the applicability in cases of private auctions.

Future Outlook

Although this disposal model has sparked some speculation, it is still too early to think that this indicates China will open up Virtual Money trading. In fact, the state has never prohibited the judicial disposal of the involved Virtual Money, and judicial authorities across the country have been exploring relevant methods.

Given the current situation, it is likely that the mainland region of our country will maintain a strict regulatory attitude towards Virtual Money transactions in the next two to three years, and it is unlikely to fully open up for ordinary citizens to participate in related transactions.