China Tightens Crypto Regulations to Combat Money Laundering

• China tightens laws to combat money laundering with new regulations on virtual asset transactions.
• Prosecutions surge in China as authorities crack down on financial crimes involving crypto assets.
• $2B in Ethereum linked to Plus Token Ponzi scheme moved, signaling possible government action.

China has introduced stricter regulations targeting the use of virtual assets in money laundering activities. Starting August 20, 2024, the Supreme People’s Court and the Supreme People’s Procuratorate will enforce new legal interpretations. These measures are part of China’s broader efforts to close existing legal loopholes and enhance the prosecution of financial crimes related to virtual assets.

The updated guidelines primarily focus on curbing the use of virtual assets in money laundering schemes. According to the new interpretation, virtual asset transactions are now explicitly defined as methods of concealing proceeds from criminal activities. This marks a significant step in China’s ongoing efforts to regulate the expanding virtual asset market and address emerging financial crimes.

The legal interpretation introduces stringent criteria for “serious circumstances” in money laundering cases. For instance, laundering over 5 million yuan or causing losses exceeding 2.5 million yuan will be considered severe, warranting harsher penalties. This move reflects China’s intention to strengthen its legal framework to combat financial crimes more effectively.

In recent years, money laundering incidents have increased significantly in China. Twenty times as many instances as in 2019 were handled in 2023—nearly 3,000 cases. The government’s increased emphasis on combating financial crimes is demonstrated by the 28.4% increase in prosecutions in the first half of 2024, which followed this trend.

Since 2020, the Supreme People’s Procuratorate has been leading efforts against money laundering. They have closely worked with the National Supervisory Commission and the Ministry of Public Security. This teamwork is a key part of China’s strategy to fight corruption and money laundering.

In a parallel development, Chinese authorities recently transferred $2 billion worth of Ethereum associated with the infamous Plus Token Ponzi scheme. These assets, seized during a crackdown on financial crimes, had been dormant since April 2021. The transfer suggests possible government intervention, sparking speculation about the sale of the seized crypto assets.