China Expands Anti-Money Laundering Laws to Include Virtual Assets in Major Regulatory Overhaul
China has taken a significant step in its ongoing battle against financial crime by updating its Anti-Money Laundering (AML) laws to include virtual asset transactions. This marks the first major overhaul of the nation's AML framework since it was established on January 1, 2007.
On August 19, the Supreme People’s Court and the Supreme People’s Procuratorate unveiled their latest interpretation of these laws, formally recognizing the potential for virtual assets to be used in money laundering schemes. This update reflects China's growing concern over the increasing use of digital currencies and other virtual assets in illicit activities.
The revised regulations aim to close a critical loophole by explicitly prohibiting the "concealment and disguising of the source and nature of criminal proceeds and their benefits through various means." This move strengthens the country's AML efforts and aligns with its broader strategy to tighten regulatory oversight.
Penalties for those caught using virtual assets for money laundering are steep. Depending on the severity of the offense, fines range from 10,000 Chinese yuan (approximately $1,400) to 200,000 Chinese yuan (around $28,000). In cases deemed particularly egregious, offenders could face prison sentences of up to ten years.
The new AML framework also provides more detailed criteria for what constitutes "serious circumstances" in money laundering cases. These include instances where individuals refuse to cooperate with authorities or when the amount of money involved exceeds 5 million Chinese yuan (approximately $700,000).
China's amendments to its AML laws highlight its commitment to combating financial crimes, including those involving virtual assets. The urgency of these measures is underscored by recent data: in 2023, the Supreme People’s Procuratorate reported prosecuting 2,971 individuals for money laundering, a staggering twentyfold increase since 2019. This sharp rise in prosecutions underscores the need for updated regulations to address evolving financial crime tactics.
The timing of these legal revisions has sparked speculation within the industry, with some observers wondering if China might be preparing to lift its long-standing ban on cryptocurrency trading. Rumors intensified in mid-July when Galaxy Digital CEO Mike Novogratz hinted on social media that China could unban Bitcoin by late 2024, though the post was later removed. Further fueling the speculation, Tron and Huobi (HTX) founder Justin Sun made a cryptic comment on August 19, asking followers which meme would best capture China's potential reversal on crypto.
China's history of strict regulations on cryptocurrencies dates back to its 2017 ban on crypto exchanges, followed by a comprehensive crackdown on crypto activities in 2021. Whether these recent AML updates signal a shift in China's stance on digital currencies remains to be seen. However, the move clearly demonstrates the country's intent to adapt its regulatory framework to address the challenges posed by emerging financial technologies.