The cryptocurrency world cannot do without Justin Sun, just like the U.S. election cannot do without Trump.
A wave of market conditions in the cryptocurrency market on July 5th showed the new generation of cryptocurrency newcomers what "excitement" is. Various virtual currencies, led by Bitcoin, began to fall sharply. If you don't fall by more than double digits, you are embarrassed to say that you participated in the cryptocurrency promotion on Black Friday.
I surfed the Internet and read the analysis of various experts on the reasons for this sharp drop. One of them is attributed to the German government. According to blockchain intelligence company Arkham, in early June, a wallet marked as the "German government" began to transfer 50,000 BTC previously seized from the pirated movie website operator Movie2k to the crypto trading platform, and sold about 4,736 bitcoins in batches that month. In the past week, the German government has sold more than 2,000 bitcoins. Just after the market fell yesterday morning, the German government was monitored to transfer 13,475 bitcoins and has sold 13,000 bitcoins. As of now, the German government still holds 40,359 BTC, with a total value of approximately US$2.3 billion. The national-level selling pressure is considered to be one of the reasons for the continuous decline in the market.
As the price of Bitcoin fell and the German government transferred millions of dollars worth of Bitcoin, Tron founder Justin Sun proudly announced on X that he was ready to buy the remaining Bitcoin from the German government. He hoped to purchase all the Bitcoin held by the German government through over-the-counter (OTC) transactions to minimize the impact of these Bitcoins flowing into the market on the price.
Joking aside, the German government's sale of Bitcoin does raise a very important topic: How should the government sell virtual currencies in order to ensure that they are legal, compliant and reasonably priced? If everyone is as "straight-minded" as the German government, depositing coins to exchanges and selling them in a large order, directly killing 10% of the currency market, this is not a good thing for any seller, after all, no one wants to cause the loss of state-owned assets.
The same handling of virtual currency, very different styles
Because of his work in the industry, Liu Honglin, an attorney at Mankiw Law Firm, often receives legal advice from a number of virtual currency disposal companies, including those in mainland China, as well as some overseas financial institutions, mainly concerning how to dispose of virtual currencies in the hands of the government. In the past year or so, Mankiw's legal team has written a large number of articles discussing how to legally and compliantly convert virtual currencies involved in cases in China into RMB in local fiscal accounts, including the selection of third-party disposal companies, whether the transaction should be concluded in China or abroad, and what qualifications the disposal transaction service providers should have.
Because mainland China restricts virtual currency transactions, the government currently does not publicly handle virtual currency judicial disposals. Whether in the bidding process or in the transaction process, the virtual currency realization in most cases is actually completed through over-the-counter transactions, that is, OTC transactions. The prices of related virtual asset transactions will naturally not be reflected in the market. The advantage of this is that the local government's selling will not affect the market price, but it also brings about the problem of opacity in the process, which may breed the risk of corruption and illegal operations.
What’s even more outrageous is that in his daily work, Lawyer Honglin has also encountered some scammers who claimed that they had connections with certain local governments and wanted to dispose of virtual assets. They even provided detailed materials, such as the tens of thousands or thousands of bitcoins in the wallet were his. But after communicating with other people in the industry, they found that this information was often false. Friends from overseas institutions also reported that it is a difficult problem to identify the authenticity of authorization documents provided by domestic disposal companies or intermediaries or bidding information from local governments. Therefore, there is indeed a lot of confusion in the current domestic virtual currency disposal.
Instead, when the German government sells virtual currencies, it simply transfers the virtual currencies directly to different exchanges and then liquidates them within the exchanges. The advantage of this method is that it is open and transparent. Not only the on-chain data of the transfer can be traced, but the pending order transactions or market price transactions in the exchange also make the transaction price more transparent, and it is not easy to operate in the dark. However, the disadvantage is that it may cause the market price to drop significantly. , especially when a large amount of virtual currency is sold in a short period of time, this price fluctuation is more significant. If the currency price continues to fall during this period, it will be a loss to the government's fiscal revenue.
It can be seen from this that how sovereign states deal with virtual assets held by them due to judicial jurisdiction and administrative enforcement not only involves legal and compliance aspects, but also affects market stability and trust.
Core links of judicial disposal of virtual currency
Over the past year or so, we have learned from different channels and information sources about various regulatory documents issued by central ministries and local governments on the disposal of virtual currencies. We can also clearly feel that as the amount of funds involved in virtual currencies increases, local governments have higher and higher compliance requirements for related links. For example, more and more companies choose to use overseas funds or institutions for disposal. Another obvious change is the price of asset disposal, which has dropped from 30% and 20% two or three years ago to less than 10% in the past six months, and even controlled between 6% and 8%. From the perspective of practitioners, the competition is fierce, but from a market perspective, this is becoming more and more formal.
In general, there are three core issues in the government's judicial handling of virtual currencies:
1. How to choose a disposal company?
In the process of judicial disposal of virtual currency, it is crucial to choose the right disposal company. First of all, who has the right to sign a service contract with the disposal company? This usually requires clarifying the authority of the relevant government departments or agencies. When choosing a virtual currency disposal company, its qualifications and reputation are key considerations - is it necessary to be a licensed financial institution such as a state-owned enterprise or a central enterprise, or can an ordinary private technology company also be competent? State-owned enterprises have an advantage in reputation endorsement, and their stability and government relations are more reliable, but private technology companies may be more flexible in technology and efficiency. In some relevant documents, the Honglin Law Firm team found that some local governments have clear requirements for the qualifications of disposal companies. For example, the company's registered capital must be greater than or equal to RMB 50 million, the company's business scope must be related to network technology and blockchain technology, and it must have compliant and legal foreign exchange settlement qualifications. Whether these requirements are reasonable and whether they have promotional value is also a question to be discussed.
2. How is the disposal price determined?
How to determine the price of virtual currency to be liquidated is another key link in judicial disposal. The way the price is determined can affect the fairness of the disposal and the market reaction. There are several main ways: through public bidding, the average transaction price of the reference exchange, or a framework pricing agreement signed by both parties. Public bidding helps to ensure transparency and fairness and avoid corruption and shady operations. The average transaction price of the reference exchange can provide a market-based price reference and reduce the risks brought by price fluctuations. Signing a framework pricing agreement can lock in prices to a certain extent and reduce the impact of market fluctuations, but it is also necessary to ensure the fairness and transparency of the agreement. These methods have their own advantages and disadvantages. Choosing the right pricing method requires weighing the pros and cons according to the specific situation to maximize the protection of government and public interests.
3. Where does the purchase funds come from?
In terms of the path of capital repatriation, ensuring the compliance of funds is crucial. First of all, can mainland RMB funds be used? If it is necessary to repatriate funds through overseas institutions, how to ensure its legality? What are the requirements for the names of capital inflow? These are all issues that need to be clarified. The path of capital repatriation must be legal and compliant to ensure that it does not violate the country's foreign exchange management policies. Who is responsible for communicating with the State Administration of Foreign Exchange and other relevant government departments? How the relevant transaction details meet the requirements of subsequent audits is also a key point. The entire capital repatriation process needs to be transparent, traceable, and able to withstand audit and legal inspections. This is not only to prevent illegal funds from flowing into the market, but also to maintain the credibility of the government and the market and ensure the fairness and transparency of judicial disposal.
Through careful consideration and strict implementation of these three core issues, the government can better balance transparency, market stability and compliance in the judicial disposal of virtual currencies, and ensure the fairness, justice and efficiency of the disposal process.
summary
By comparing the different methods and strategies of China and Germany in dealing with virtual currencies, we can see that mainland China avoids market volatility through over-the-counter transactions but faces transparency challenges, while Germany increases transparency through public transactions, which may cause sharp fluctuations in market prices. With the continuous development and popularity of virtual currencies around the world, governments and relevant institutions need to continuously improve and optimize their disposal and regulatory measures, and seek a balance between legality, compliance, efficiency and transparency.
