Written by Qian Wei, Mankiw LLP
In recent years, with the rapid development of blockchain technology and the growing prosperity of the digital currency market, virtual currency has gradually become a new type of investment and payment tool. However, the anonymity and decentralization of virtual currency have also become a favorable tool for criminals to commit crimes, resulting in frequent virtual currency crime cases.
In view of the current inadequacy of investigative means and in order to effectively combat such crimes, public security organs often rely on the power of blockchain technology companies during the investigation process. As a result, more and more cryptocurrency practitioners have transformed and established relevant blockchain technology companies to assist judicial organs in combating virtual currency crimes, and local public security has also taken a positive attitude towards such cooperation due to technical level, case scale, financial needs and other reasons.
However, blockchain technology companies also face many legal issues in assisting public security organs in combating virtual currency crimes. This article will conduct an in-depth discussion of the legal issues of blockchain technology companies in combating virtual currency crimes from five aspects: legality , data privacy and protection , leaks , wrongful attacks , and virtual currency disposal .
Maintain operational compliance
When assisting public security organs in combating virtual currency crimes, blockchain technology companies must ensure the legality of their actions . In other words, the legality of the blockchain technology companies’ auxiliary investigation status, the legality of their means, and the legality of their contracts with public security organs.
Generally speaking, only public security organs can file criminal cases related to virtual currency, but they often need technical assistance from blockchain technology companies. Blockchain technology companies need to ensure the legality of technical means and that cooperation with the public security complies with all legal provisions. At present, neither the Criminal Procedure Law nor the Provisions on the Procedures for Handling Criminal Cases by Public Security Organs have made clear explanations on the participation of third-party companies in the investigation activities of public security organs, nor have they proposed a review of the legality of their status. This has led to confusion in practice among the participating entities, lack of unified standards, and certain compliance issues. At the same time, the technology provided by technology companies needs to be compliant, and they have an obligation to review during use.
Virtual currency-related businesses are illegal financial activities in my country. When providing technical support, blockchain technology companies must comply with relevant laws and regulations. If a blockchain technology company fails to fulfill its corresponding review obligations and provides technical support or assistance to criminals, it may also bear corresponding legal responsibilities. For example, a blockchain technology company provided virtual currency tracking services to a customer without strictly reviewing the customer's identity. It turned out that the customer was actually a criminal gang suspected of money laundering. In the end, the blockchain technology company was punished for violating the Anti-Money Laundering Law and other laws and regulations.
In addition, if the technical means or methods adopted by blockchain technology companies in assisting public security organs in investigations violate the law, such as technical investigations exceeding the scope of technical investigations stipulated in Article 148 of the Criminal Procedure Law, it may also constitute a violation of the law. Therefore, when blockchain technology companies participate in combating virtual currency crimes, they need to pay attention to the legitimacy of the subject of the contract signed with the public security organs, the legitimacy of the application of technology, and the legitimacy of the service content.
Keep your data safe
When assisting public security organs in investigating virtual currency crimes, blockchain technology companies need to collect and process a large amount of user data. This data may include sensitive information such as user personal information, transaction records, and communication content. If blockchain technology companies fail to protect data and cause customer information to be leaked , it will not only infringe on the privacy rights of users, but may also be held criminally liable for suspected crimes of infringing citizens' personal information. For example, when assisting public security organs in investigating a virtual currency fraud case, a blockchain technology company used technical means to collect the personal information of relevant citizens without obtaining legal evidence collection authority, which caused great negative impact and was eventually found to have committed the crime of infringing on public rights.
In addition to data leakage, blockchain technology companies may also face the problem of illegal data acquisition . Some criminals may obtain the data of blockchain technology companies through hacker attacks, internal leaks, etc., and use them to carry out other criminal activities. This will not only cause economic losses and reputation damage to blockchain technology companies, but may also lead to more serious legal consequences.
Therefore, when collecting, storing and using user data, blockchain technology companies must strictly abide by relevant laws and regulations, strengthen data security management and technical protection measures, and ensure the security and confidentiality of user data.
Be careful not to reveal the secrets of investigation
When the public security organs investigate virtual currency crimes, all the information collected is a state secret. Investigative secrets are an important factor in ensuring the smooth investigation of cases and maintaining social stability. Therefore, blockchain technology companies may be exposed to a large number of investigative secrets in the process of assisting public security organs in investigations. If blockchain technology companies fail to properly keep these secrets or accidentally leak them to the outside world, it may cause serious consequences to the case. The problem of leaking investigative secrets is mainly manifested in the following aspects:
First, the case is hindered. Once the investigation secrets are leaked, the suspects may take various measures to evade the crackdown or destroy the evidence, making the case more difficult to solve.
Secondly, the relevant background data involved in the case is the key to the conviction and sentencing of the case. Once leaked, it may cause major flaws in the case evidence.
Third, the most important thing about virtual currency crimes is to get the criminals' wallet addresses and private keys. Once leaked, they can be easily transferred, causing significant property losses.
To prevent the problem of leaking investigative secrets, blockchain technology companies should take the following measures:
Strengthen information security management and technical protection. Establish a sound information security management system and technical protection system to ensure data security and confidentiality;
Clarify confidentiality responsibilities and sign confidentiality agreements. In the process of cooperation with public security organs, clarify your own confidentiality responsibilities and sign confidentiality agreements;
Strengthen employee training and improve legal awareness. Strengthen information security and confidentiality knowledge training for employees to improve their safety awareness and skills.
Prevent accidental injury to innocent people
In assisting the public security organs in investigating virtual currency crimes, blockchain technology companies may also face the problem of wrongful attacks. Due to technical limitations, information misjudgment or other reasons, blockchain technology companies may mistake non-involved persons or legitimate enterprises as those involved in the case and crack down on them. At this time, the company needs to ensure that it does not mistakenly freeze or process the virtual assets of innocent customers, which will not only harm the customers, but may also cause legal troubles for the company.
Specific manifestations of the problem of wrong strikes include:
First, accounts not involved in the case were frozen, seized, or deducted, and legitimate transactions were misjudged;
Second, persons not involved in the case are listed as criminal suspects and criminal coercive measures are taken.
In practice, this phenomenon is also quite common. In some cases of profit-seeking law enforcement, relevant personnel will target those with large virtual assets, and use judicial means to investigate and crack down on them. Finally, even in the absence of substantial evidence, it is common to deduct and refund accounts that have been associated with upstream criminal transactions. From a legal perspective, the problems and harms of wrongful attacks are extremely terrible, and the consequences are unbearable for blockchain technology companies.
Therefore, when blockchain technology companies participate in the public security organs’ handling of virtual currency cases, they still need to strictly control the legal procedures and entities, strengthen the verification of information during the investigation process, avoid affecting innocent customers due to inaccurate information, and at the same time ensure strict implementation of multiple verifications in data verification to reduce the risk of misjudgment and avoid a lose-lose situation.
Compliance with regulations regarding virtual currency
Blockchain technology companies assist public security organs in combating virtual currency crimes, and one of the most important aspects is that they have the priority to deal with them . The issue of judicial disposal of virtual currency is already a commonplace issue, so I will not go into details here, but just briefly talk about the general issues:
First, the lack of clear legal provisions and operating standards for the judicial disposal of virtual currency may cause legal problems for third-party disposal companies. For example, the custody and disposal of virtual currency should follow the principle of "separation of custody and disposal". If this principle is violated, it may lead to asset loss or illegal transfer due to poor management, thus causing problems.
Second, the public security organs may be eager to liquidate the seized virtual currency before the case is finalized to avoid value loss caused by market fluctuations. This practice may lead to third-party companies disposing of property in pending cases. Once the decision of the procuratorate does not meet the expectations of the public security organs, the third-party companies may bear corresponding legal responsibilities. Therefore, before the case is finalized, the early disposal of virtual currency needs to be particularly cautious to avoid legal disputes for blockchain technology companies.
Third, if the public security organs entrust a third-party company to dispose of the virtual currency involved in the case without following the legal procedures, this behavior itself may violate the relevant provisions of the "Administrative Measures for Confiscated Property" and other relevant regulations, making the disposal behavior of the third-party company illegal in procedure. Therefore, when accepting the entrustment, blockchain technology companies must confirm that the disposal procedures of the public security organs have been authorized by law.
Fourth, according to relevant regulatory policies, virtual currency-related business activities are illegal financial activities in China. Therefore, even if a third-party company disposes of virtual currency under the entrustment of the public security organs, such as through foreign exchange settlement, it may violate relevant laws due to lack of relevant qualifications and constitute criminal offenses such as illegal business operations. Therefore, blockchain technology companies must ensure that they have legal qualifications when disposing of virtual currency.
Fifth, during the disposal process, blockchain technology companies may also face legal issues such as bribery and corruption. Especially when large amounts of virtual currency assets are involved, it is crucial to ensure transparency and compliance in the disposal process.
Attorney Mankiw's Summary
When Web3 Blockchain Technology Company assists public security organs in combating virtual currency crimes, although there is nothing wrong in combating crime itself, it is worth studying how to combat crime at the legal and compliant level.
