Core Paper Content: On-Chain Tracking and Exchange Cooperation
According to a report by the South China Morning Post, a team led by Sun Shengbin from the Wenzhou Public Security Bureau and Lou Yandi from the Criminal Investigation Corps of the Zhejiang Provincial Public Security Department published a technical paper on June 4 in the journal Criminal Technology. The paper systematically discloses the forensic tools and case-handling procedures used by Chinese police for virtual currency assets such as Bitcoin (BTC) and Ethereum (ETH). It details the complete process from device seizure and evidence collection to on-chain transaction tracking, asset freezing, and seizure. One key tracking method involves analyzing transaction fee patterns to trace and identify centralized exchanges like Binance, after which user data is obtained through formal legal channels. The police explicitly stated that they can obtain Know Your Customer (KYC) records from major exchanges including Binance, OKX, and HTX.
Asset Freeze Mechanism and Regulatory Bottom Line
The paper notes that for funds held on exchanges, police have the authority to freeze accounts for six months, with the possibility of extension. This mechanism grants law enforcement sufficient investigation time but may have short-term liquidity implications for exchange users. More notably, the document emphasizes a strict operational bottom line: investigators must not hold private keys of seized assets. They must adhere to the principle of 'separation of case handling and custody' and establish a comprehensive chain-of-custody record. This reflects the Chinese police's emphasis on procedural legality and evidence chain integrity when combating virtual currency crimes.
Impact and Implications for the Crypto Industry
The disclosure marks a mature level of technical capability and legal procedures in China's law enforcement regarding on-chain forensics and anti-money laundering. For cryptocurrency exchanges, compliance requirements are further reinforced, especially regarding the retention of KYC data and cooperation with judicial requests. For users, privacy coins and mixers face greater regulatory pressure, as transaction traceability can be effectively broken by professional tools under judicial intervention. Overall, the paper provides a reference paradigm for global crypto regulatory authorities while warning industry participants: the anonymity of on-chain behavior may be effectively penetrated when law enforcement steps in with the right technical and legal tools.