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China’s supreme court and public prosecutor have revised their interpretation of the country’s anti-money laundering (AML) laws to recognize “virtual asset” transactions.
In a joint August 19 press conference, the Supreme People’s Court and the Supreme People’s Procuratorate announced that under the new interpretation of the law, “virtual asset” transactions are to be listed as one of the recognized money laundering methods.
The country adopted its existing AML law on January 1, 2007, and this revision is the first significant update it has received.
The new interpretation added that when criminal proceeds are transferred or converted through digital asset transactions or financial asset exchanges, it may be found to be otherwise “covering up or concealing the source and nature of criminal proceeds and their benefits by other means.”
The punishment for those found to have violated AML laws ranges from a minimum of 10,000 Chinese yuan ($1,400) to 200,000 yuan ($28,000) and jail terms of between five and 10 years for more severe offenders.
The revisions also clarified what would constitute “serious circumstances” of money laundering and thus receive a more severe punishment. Namely, if the amount of money laundered is more than 5 million yuan ($700,000); there are multiple acts of money laundering; refusal to cooperate with the recovery of property, making it impossible to recover; and/or it caused losses of more than 2.5 million yuan ($350,000).
During the press conference, the Supreme People’s Procuratorate, the highest national agency responsible for legal prosecution and prosecutorial investigation in China, noted that 2,971 people were prosecuted for money laundering in 2023, a 20-fold increase from 2019. Hence, the rules need updating and clarifying.
The new interpretation of China’s AML law came into force on August 20.
China’s ongoing digital currency ban
China implemented a ban on digital asset exchanges in 2017, and shortly after, a crackdown on mining operations began. This was followed by a ban on all “virtual currency” related transactions in 2021.
Monday’s updating of China’s AML rules to include digital assets—despite the fact that they are currently banned in the country and so transacting in them for any purposes, money laundering or otherwise, is illegal—reignited recent speculation that the country may be heading towards a ban-reversal.
In a now-deleted July 14 post on X (formerly Twitter), Galaxy Digital CEO Mike Novogratz said he heard reports that China is “likely to unban” Bitcoin by late 2024.
This was followed on August 18 by Justin Sun, founder of Tron and digital asset exchange HTX, cryptically fanning ban-reversal rumor flames by posting on X: “China unbans crypto. What’s the best meme for this?”
However, others have sought to dampen expectations of a potential change of heart from Beijing.
In July, the CEO of Chinese blockchain firm Red Date Technology, Yifan He, dismissed the idea, saying he didn’t think China would ever allow its citizens to trade Bitcoin freely. Similarly, Trading Strategy Co-Founder Mikko Ohtamaa argued that “the rumor of China opening up to cryptocurrencies is unlikely to be true, because it contradicts the agenda of national construction in China.”
Adding that, “China’s concern about cryptocurrencies has always been capital flight, further democratization of finance and the ability of middle and low-income groups to flee capital.”
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