China’s supreme court and public prosecutor have recently updated their interpretation of the Anti-Money Laundering (AML) law to include “virtual asset” transactions for the first time.
During a conference on 19 August, the Supreme People’s Court and the Supreme People’s Procuratorate - the country’s highest level court and prosecutor - jointly announced the new interpretation, which now recognises “virtual asset” transactions as a method of money laundering.
The interpretation also clarifies that
transferring or converting proceeds of crime and relevant gains through virtual assets transactions… may constitute an offence of disguising and concealing the source and nature of criminal proceeds and illicit gains through other means…in the Criminal Law
Penalties for violation range from a minimum fine of 10,000 Chinese yuan ($1,400) to 200,000 yuan ($28,000) for more serious offenses, along with potential jail terms of five to ten years.
Such interpretative guidance is often issued by the two top judicial bodies in China as “de facto” laws, providing important guidance on how the laws should be interpreted and enforced by lower courts and prosecutors. In practice, they are treated as valid source of legal authority and generally complied with.
Other revisions provide clearer guidelines on what constitutes “serious circumstances” in money laundering cases, including refusal to cooperate with authorities or laundering amounts exceeding 5 million yuan ($700,000). In 2023, the Supreme People’s Procuratorate reported prosecuting 2,971 individuals for money laundering, a significant rise from 2019.
This change also coincides with recent social media speculation about China potentially lifting its blanket ban on cryptocurrency (i.e. banning all commercial exchange and public-fund raising using cryptocurrency). Notably, Justin Sun, founder of Tron and crypto exchange HTX, posted a tweet on 19 August asking what the best meme to suit China’s unbanning of crypto would be.
However, some experts remain doubtful. Mikko Ohtamaa, co-founder of Trading Strategy, argued that reversing the crypto ban would contradict the government’s political agenda.
In related news, police in the Chinese city of Qingdao are prosecuting a case involving a network accused of using stablecoin Tether (USDT) to launder over 8 million yuan ($1.1 million) for criminal enterprises. Authorities allege that three main suspects recruited friends to use their business licenses and IDs to open accounts used for receiving money from criminals. The funds were then converted into USDT and returned to the criminals, with the syndicate earning a commission. Nine individuals are currently facing charges and awaiting prosecution.
The state of cryptocurrency is interesting in China. Despite its ban on cryptocurrency, the government has continued to make forays into digital asset by launching its own NFT marketplace, building a new blockchain network and issuing a world-leading central bank digital currency. Not to mention the efforts by Hong Kong to establisha licensing framework for virtual asset service providers, and promulgating regulations for stablecoins and tokenisation.
Written by J Huang and S Pettigrove
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