Paper Reveals: How Police Crack Crypto Assets
According to a report by the South China Morning Post, on June 4, Sun Shengbin from the Wenzhou Public Security Bureau and Lou Yandi from the Criminal Investigation Corps of Zhejiang Provincial Public Security Department, along with others, published a technical paper in the journal Criminal Technology. This marks the first time Chinese police have systematically disclosed their forensic tools and operational procedures for major cryptocurrencies like Bitcoin and Ethereum. The paper points out that many users store mnemonic phrases in plain-text formats on their phones (e.g., memo apps, WeChat messages) or computer files. Therefore, the first step after seizing a suspect's device is to thoroughly scan for any traces of private keys or mnemonics.
On-Chain Tracing and Exchange Cooperation: Account Freezes Last Up to Six Months
For on-chain transaction tracking, the paper outlines several methods. One approach involves tracing transaction fees (gas) back to centralized exchanges such as Binance, enabling police to obtain user data through legal channels. Specifically, police can request Know Your Customer (KYC) records from major exchanges including Binance, OKX, and HTX. For funds held on exchanges, authorities can freeze accounts for up to six months, with the freeze period extendable upon proper procedure. This mechanism combines on-chain forensic techniques with centralized compliance nodes, creating a closed-loop tracking network.
Operational Bottom Line: No Private Holding of Keys, Separation of Case Handling and Custody
The paper emphasizes strict operational rules for investigators: they are prohibited from holding private keys personally. The principle of "separation of case handling and custody" must be adhered to, with comprehensive supervision and a clear chain of custody records. This bottom line aims to prevent asset misappropriation and power abuse during law enforcement, ensuring judicial integrity. Overall, the technical paper not only showcases Chinese police's capabilities in combating crypto crimes but also highlights the importance placed on preserving digital evidence chains.