Core Content of the Paper: On-Chain Tracing and Exchange Evidence Collection
On June 4, Sun Shengbin from Wenzhou Public Security Bureau and Lou Yandi from Zhejiang Provincial Public Security Department Criminal Investigation Corps published a technical paper in the journal Criminal Technology, systematically disclosing for the first time the tools and procedures used by Chinese police to seize virtual currency assets such as Bitcoin and Ethereum. The paper covers device cracking, evidence collection, on-chain transaction tracking, and asset freezing and seizure. One key method involves analyzing transaction fees to trace back to major exchanges like Binance, OKX, and HTX, thereby retrieving user KYC records. Police can legally obtain these records through formal legal channels.
For funds stored on exchanges, authorities can freeze accounts for up to six months, with extensions permissible. The paper also emphasizes operational red lines: investigators must not hold private keys themselves; they must adhere to a strict "case handling and custody separation" principle, and establish a clear chain of custody records to ensure evidence integrity.
Law Enforcement Implications and Industry Lessons
The publication of this paper signals that Chinese law enforcement agencies have developed mature on-chain tracing and exchange collaboration mechanisms, challenging the anonymity of virtual currencies. For crypto practitioners, exchange account KYC information has become a critical loophole for law enforcement, while asset freezing directly impacts user liquidity. The rule prohibiting investigators from holding private keys underscores the strict control over private key security throughout the process. Overall, the paper not only provides standardized guidelines for domestic law enforcement but also carries global implications for cryptocurrency compliance and privacy protection, particularly for users of mixers, privacy coins, or self-custody wallets, who now face higher operational risks.