In early July 2026, a piece of news sparked widespread attention in the digital asset sector: Chinese police publicly disclosed, for the first time, the complete technical system for tracing, forensically collecting evidence, and seizing cryptocurrencies.
According to the South China Morning Post, Sun Shengbin of the Wenzhou Public Security Bureau and Lou Yandi of the Criminal Investigation Corps of the Zhejiang Provincial Public Security Department, along with others, published a technical paper on June 4, 2026, in the journal Forensic Science and Technology, systematically revealing the processes of evidence collection, tracing, freezing, and seizure in cryptocurrency-related cases.
Three Key Steps Form the Complete Evidence Chain
The paper shows that police forensic work in cryptocurrency crime mainly consists of three parts: device forensics, on-chain tracing, and asset freezing.
Step 1 is device forensics. Investigators use professional tools such as Meiya Pico and Pinghang to perform full-disk scans and intelligent filtering on seized mobile phones, computers, and hardware wallets.
Because many users are accustomed to storing mnemonic phrases in phone memos, WeChat messages, or plain text files on computers, the first step after confiscating devices is to carefully inspect these devices for any traces of private keys or seed phrases. By scanning for private keys, mnemonics, screenshots, and chat records, police can precisely locate crypto assets.
Step 2 is on‑chain tracing. If private keys are not directly obtained, investigators can combine blockchain transaction records, cross‑chain transfer paths, mixing fund flows, and real‑name information from trading platforms to conduct tracing.
The paper outlines multiple tracing methods, one of which is a key technique: tracing transaction fees—by analyzing the source of gas fees for the addresses involved, investigators can trace back to mainstream exchanges such as Binance, OKX, and HTX to obtain user data. Police can obtain "Know Your Customer" (KYC) records from these exchanges through formal legal channels.
Step 3 is asset freezing and seizure. For confirmed proceeds of crime, police can transfer assets into controlled wallets by changing private keys, or coordinate with trading platforms to freeze accounts. For funds stored on exchanges, police can freeze accounts for up to six months, with the possibility of extension.
All procedures must be fully documented and recorded on video to ensure lawful compliance and evidentiary validity for judicial proceedings.
Strict Operational Standards and Regulatory Boundaries
The paper emphasizes stringent operational boundaries: investigators are not allowed to hold private keys personally; they must adhere to the principle of "separation of case handling and custody," ensure comprehensive oversight, and establish a clear chain‑of‑custody record. These rules safeguard the fairness and traceability of law enforcement actions.
The End of On‑Chain "Anonymity"
This official public release of the complete technical process sends two important signals:
First, China's on‑chain regulatory capabilities have achieved systematic, technological, and full‑coverage status. The long‑held belief in on‑chain anonymity and untraceability has been completely overturned.
No matter how many address hops, mixing operations, or intermediary wallets are involved, police can fully reconstruct fund flows, transaction trajectories, and transfer timelines. On‑chain assets have shifted from "anonymous and hidden" to "completely transparent."
Second, the boundary between legal and illegal digital assets has been clearly drawn. The space for gray‑market cryptocurrency speculation is significantly narrowed, while compliant digital assets, data elements, and national‑level Real World Assets (RWA) are emerging as the only legitimate path.
As the paper reveals, future digital assets must be a system that is subject to regulation, traceability, clear ownership, and compliant circulation.
Industry observers point out that the publication of this technical paper marks China's establishment of a mature, replicable, and practical investigation system in the field of cryptocurrency enforcement.
Any channels relying on virtual currencies for money laundering, illegal fund transfers, or capital movement have been effectively shut down.
With the regulatory framework growing increasingly robust, the digital asset industry is accelerating its transition from "unrestrained growth" to an "orderly development" phase.