China has officially recognized virtual asset transactions as a potential method for money laundering, marking a significant update to its Anti-Money Laundering (AML) laws. This move is the first major revision of the country’s AML framework since it was initially adopted on January 1, 2007.
The Supreme People’s Court and the Supreme People’s Procuratorate announced the revised interpretation of the AML laws on August 19, 2024. The updates are part of China’s broader effort to strengthen its regulatory framework in response to the growing use of digital currencies and other virtual assets.
The new laws specifically target the concealment of the source and nature of criminal proceeds, closing a loophole in China’s existing AML measures. Penalties for violating these laws are severe, with fines ranging from 10,000 Chinese yuan (approximately $1,400) to 200,000 Chinese yuan (around $28,000), depending on the severity of the offense. In more serious cases, offenders could face prison sentences ranging from five to ten years.
The revisions also provide clearer guidelines for determining “serious circumstances” in money laundering cases. These include scenarios where individuals refuse to cooperate with authorities or when the laundered amount exceeds 5 million Chinese yuan (approximately $700,000).
These changes highlight China’s commitment to combating financial crimes involving virtual assets. The Supreme People’s Procuratorate reported a twentyfold increase in money laundering prosecutions in 2023 compared to 2019, underscoring the growing prevalence of such activities.
The timing of these revisions has sparked industry speculation that China might be reconsidering its long-standing ban on cryptocurrency trading. Prominent industry figures, such as Mike Novogratz and Justin Sun, have fueled this speculation, though some experts, like Yifan He, CEO of Red Date Technology, remain skeptical about China allowing free Bitcoin trading with local currency.
Despite these updates, China continues to face challenges in regulating virtual assets and preventing their misuse in financial crimes. Recent reports revealed that police in Qingdao are prosecuting a case involving the laundering of over $1.1 million through the stablecoin Tether (USDT).
China’s revised AML laws, now encompassing virtual asset transactions, reflect the nation’s determination to adapt its regulatory framework to emerging financial threats. While speculation persists about a potential lift on the crypto ban, China’s stance remains firm, as ongoing prosecutions and stringent penalties demonstrate.
