How Police Departments Are Solving the Virtual Currency Storage Challenge: Duyun's Cold Wallet Approach

When criminal suspects convert illicit proceeds into virtual currencies, law enforcement faces an unprecedented challenge: how to properly seize, store, and preserve digital assets for court proceedings. This puzzle has become increasingly pressing since China’s 2021 ban on virtual currency transactions, forcing police departments across the nation to innovate their evidence management practices.

The Problem: Why Virtual Currency Storage Matters

Traditional property management systems were never designed for crypto assets. Unlike physical cash or tangible goods, virtual currencies exist only on blockchain networks, presenting unique preservation risks. Once seized, these assets require secure storage methods that prevent both theft and accidental loss—a task that demanded entirely new protocols from law enforcement.

Duyun’s Innovative Solution: Police Wallets in Cold Storage

The Duyun City Public Security Bureau in Guizhou Province has pioneered a practical solution that’s now gaining attention nationwide. When investigators discover that criminal funds have been converted to virtual currencies, they employ a two-step security process:

Step One: Immediate Freezing Police freeze the virtual currency assets directly on the blockchain, preventing suspects from transferring or hiding the funds during investigation.

Step Two: Cold Wallet Isolation Rather than leaving assets on public exchanges, Duyun police have established dedicated cold wallets—offline police wallets that provide complete physical and digital isolation. These secured storage devices keep criminal property completely disconnected from the internet, eliminating hacking risks.

The seized virtual currencies are then formally documented and stored at the Duyun City Property Management Center, where they remain until courts issue final rulings on their disposition.

Real-World Impact and Data

Since launching this property management center in November 2022, Duyun has processed substantial criminal cases involving digital assets:

• 24,753 case-related items received and documented
• Over 20.49 million yuan in case-related funds managed
• More than 7,000 case files centrally stored and organized

These numbers demonstrate that the cold wallet approach isn’t merely theoretical—it’s handling a significant volume of criminal investigations involving virtual currency assets.

A Template for National Police Reform

The Duyun model represents more than just a local solution. It reflects broader efforts by Chinese police departments to establish cross-departmental property management centers that can handle the complexities of modern criminal property, particularly digital assets. As authorities continue refining these procedures, they’re actively exploring improvements in asset preservation, inter-agency transfer protocols, and long-term disposal strategies.

The challenge of virtual currency storage in criminal cases won’t disappear—but thanks to innovations like Duyun’s police wallet system, law enforcement now has practical tools to manage it effectively.