Nikolas Sargeant
China has modernized its Anti-Money Laundering (AML) laws, explicitly including virtual asset transactions in the first major revision since the framework's inception on January 1, 2007.
On August 19, China's highest judicial authorities announced that their new interpretation of AML laws now officially acknowledges virtual asset transactions as potential money laundering vehicles. This development aligns with China's efforts to bolster its regulatory framework in response to the increasing use of digital currencies and other virtual assets.
Penalties for AML Violations Using Virtual Assets
The updated regulations now prohibit concealing the origin and nature of illicit proceeds through any means, addressing a significant gap in the country's previous AML efforts. Penalties for using virtual assets in money laundering activities are substantial.
Violators may incur fines between ¥10,000 and ¥200,000 ($1,400 to $28,000), depending on the severity of the offense. More serious cases could result in prison sentences of five to ten years. The revised laws also clarify what constitutes "serious circumstances" in money laundering cases, including non-cooperation with authorities or laundering amounts exceeding ¥5 million ($700,000).
These changes reflect China's determination to combat financial crimes in all forms, including those involving virtual assets. In 2023, authorities prosecuted 2,971 individuals for money laundering, a twentyfold increase since 2019, highlighting the growing prevalence of such activities.
Speculation on China's Crypto Stance
The timing of these revisions has fueled industry speculation about China potentially lifting its cryptocurrency trading ban. In mid-July, Galaxy Digital CEO Mike Novogratz suggested on social media that China might unban Bitcoin by late 2024, though the post was later removed.
Justin Sun, founder of Tron and Huobi (HTX), added to the speculation with a cryptic comment about potential memes for China unbanning crypto. However, some industry insiders remain skeptical. Yifan He, CEO of Red Date Technology, expressed doubt that China would allow its citizens to freely trade Bitcoin using local currency.
China has maintained a strict stance on cryptocurrencies, banning crypto exchanges in 2017 and launching a comprehensive crackdown on crypto activities in 2021. Recent reports of Qingdao police prosecuting a case involving over $1.1 million laundered through Tether (USDT) underscore the ongoing challenges in regulating virtual assets and preventing their misuse in financial crimes.
