China has updated its Anti-Money Laundering (AML) laws to include virtual asset transactions, marking the first significant change to the country’s AML rules since they were established on January 1, 2007.
On August 19, the Supreme People’s Court and the Supreme People’s Procuratorate announced that their new interpretation of the AML laws officially recognizes virtual asset transactions as potential tools for money laundering.
This change comes as part of China’s efforts to tighten its regulatory framework in response to the growing use of digital currencies and other virtual assets.
Offenders Face Fines of Up to $28,000 The updated regulations now ban “covering up and concealing the source and nature of criminal proceeds and their benefits by other means,” closing a significant loophole that previously existed in China’s AML efforts.
Those found guilty of using virtual assets for money laundering face severe penalties.
Fines for offenders can range from a minimum of 10,000 Chinese yuan (about $1,400) to a maximum of 200,000 Chinese yuan (around $28,000), depending on the seriousness of the offense.
In more severe cases, individuals could face prison sentences of five to ten years.
The revised AML laws also provide clearer guidelines on what counts as “serious circumstances” in money laundering cases.
These include situations where individuals refuse to cooperate with authorities or when the laundered amount exceeds 5 million Chinese yuan (about $700,000).
These changes emphasize China’s commitment to cracking down on all forms of financial crime, including those involving virtual assets.
In 2023, the Supreme People’s Procuratorate reported that 2,971 individuals were prosecuted for money laundering, a twentyfold increase since 2019.
This sharp rise in prosecutions highlights the growing prevalence of money laundering activities and the urgent need for regulatory measures that address new forms of financial crime.
China Might Lift Its Crypto Ban The timing of these revisions has sparked debate and speculation within the industry.
Some believe that China might be moving toward lifting its long-standing ban on cryptocurrency trading.
Speculation grew in mid-July when Mike Novogratz, CEO of Galaxy Digital, suggested on social media that China might unban Bitcoin by late 2024.
Although the post was later deleted, it fueled ongoing rumors.
Adding to the speculation, Justin Sun, founder of Tron and Huobi (HTX), made a cryptic comment on August 19, asking what meme would best fit China’s potential unbanning of crypto.
However, not everyone in the industry is convinced.
Yifan He, CEO of Red Date Technology, a major Chinese blockchain firm, expressed doubt, stating that China is unlikely to allow its citizens to trade Bitcoin freely using local currency.
China’s stance on cryptocurrencies has been strict, with the country banning crypto exchanges in 2017 and launching a broader crackdown on crypto activities in 2021.
Recent reports indicate that Qingdao police are currently prosecuting a case involving the laundering of over $1.1 million through the stablecoin Tether (USDT).
This case highlights the ongoing challenges China faces in regulating virtual assets and preventing their misuse in financial crimes.
