Global: China’s Supreme Court Expands Anti-Money Laundering Law to Include Virtual Assets

China’s Supreme People’s Court and Supreme People’s Procuratorate have revised the country’s Anti-Money Laundering (AML) laws, officially recognizing “virtual asset” transactions as a potential method for laundering money. This marks the first significant update to China’s AML framework since its enactment on January 1, 2007.

During an August 19 conference, the Supreme People’s Court and the Supreme People’s Procuratorate introduced their new interpretation of the AML law, which now explicitly includes digital transactions involving virtual assets as part of money laundering activities. This amendment reflects the growing concern over the use of digital currencies and virtual assets in concealing illicit financial activities.

Rising Prosecutions and Stricter Penalties

According to the Supreme People’s Procuratorate, the number of prosecutions for money laundering offenses has surged 20-fold since 2019, with 2,971 individuals prosecuted in 2023 alone. The revised AML law imposes penalties ranging from a minimum fine of 10,000 Chinese yuan ($1,400) to 200,000 yuan ($28,000) for severe offenses. Offenders could also face prison sentences ranging from five to ten years.

The amendments also clarify the definition of “serious circumstances” in money laundering cases, including failure to cooperate with authorities and laundering amounts exceeding 5 million yuan ($700,000).

Debate on the Future of Cryptocurrency in China

The revision to China’s AML laws has reignited speculation about the country’s stance on cryptocurrencies. Some industry figures have hinted at the possibility of China lifting its ban on crypto, despite widespread skepticism. In a now-deleted July 14 post on X (formerly Twitter), Galaxy Digital CEO Mike Novogratz suggested that China might “unban” Bitcoin by late 2024. Justin Sun, founder of Tron and crypto exchange HTX, further fueled the speculation with a cryptic comment on X about China’s potential move.

However, many experts remain doubtful. Yifan He, CEO of Red Date Technology, a leading Chinese blockchain firm, expressed skepticism that China would ever permit its citizens to freely trade Bitcoin with local fiat currency. Mikko Ohtamaa, co-founder of algorithmic investment protocol Trading Strategy, echoed this sentiment, stating that reversing the crypto ban would contradict the government’s political agenda.

China first banned crypto exchanges in 2017, followed by an interdepartmental crackdown on crypto activities in 2021.

Qingdao Police Target USDT Money Laundering Ring

In a related development, Qingdao police are prosecuting a case involving a money laundering operation that utilized the stablecoin Tether (USDT) to launder over 8 million yuan ($1.1 million) for criminal enterprises. According to Chinese media reports, three primary suspects enlisted friends to use their business licenses and identification documents to open public accounts, which were then used to receive funds from criminals. The laundered money was converted into USDT and transferred back to the criminals, with the syndicate taking a commission for their services. Nine individuals are currently facing criminal charges and awaiting prosecution.

These developments underscore China’s increasingly stringent approach to regulating virtual assets and preventing their use in money laundering activities, highlighting the country’s determination to maintain control over digital financial transactions.