China Expands Anti-Money Laundering Law to Cover Crypto

Jimmy Aki
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China has taken a significant step in its regulatory landscape by revising its anti-money laundering (AML) law to include cryptocurrency transactions, aiming to close loopholes that previously allowed money laundering and terrorism financing through unregulated digital transactions.

China Tightens Anti-Money Laundering Regulations to Include Crypto

In a conference on August 19, the Supreme People’s Court and the Supreme People’s Procuratorate announced that transactions involving virtual assets are now officially recognized as a method of money laundering.

The updated law now recognizes virtual assets as part of the financial system that requires strict oversight, signaling China’s intention to crack down on illicit activities facilitated through crypto.

This is the first major revision to the country’s AML framework since its adoption on January 1, 2007.
The regulations now prohibit “covering up and concealing the source and nature of criminal proceeds and their benefits by other means,” thereby fostering China’s regulatory framework in response to the growing use of digital currencies and other virtual assets.

Offenders could face fines from 10,000 Chinese yuan ($1,400) to 200,000 yuan ($28,000) for more severe offenses. They might also get jail time ranging from five to ten years.

This latest development is amid speculations that China might be lifting the ban.

In August, Justin Sun, the founder of Tron and the crypto exchange HTX, added to the speculation by posting on X, asking what the best meme would be for China unbanning crypto.

China’s History of Crypto Crackdowns

China’s relationship with cryptocurrency has been complicated.

In 2017, China banned initial coin offerings (ICOs) and shut down domestic cryptocurrency exchanges, significantly dropping global crypto trading volumes.

Binance, the world’s largest cryptocurrency exchange by daily volume, was founded in China but had to move operations outside the country after the 2017 ban. Despite the restriction, holding cryptocurrency remains legal in China.

Crypto ban in China further deepened when the government prohibited crypto mining activities in 2021.

Despite these restrictions, China has shown interest in blockchain technology, investing heavily in developing its digital currency, the digital yuan.

Since trials began in 2020, the digital yuan has been used in various settings, from transit and healthcare to buying crude oil. It reached 1.8 trillion yuan ($250 billion) in transactions in June 2023.

Meanwhile, as the CBDC program is further planned to facilitate cross-border payments between China and other countries, most Chinese regional banks have stopped processing yuan-based transactions from Russia. This is due to escalating geopolitical tensions that have strained trade flow between China and Russia.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.