In China, the Supreme Court and the Supreme People’s Procuratorate have declared that transactions involving „Virtual Assets“ are a method of money laundering. Does this mean that anyone using Bitcoin in China is one step away from prison?
Money laundering, comments the China Times, is a major issue across all segments of society. It is associated with other crimes such as drug trafficking and financial crime, both of which pose dangers to society and financial stability.
Accordingly, the China Times, an ostensibly independent newspaper from Taiwan that sympathizes with the Communist Party, welcomes the recent announcements made by China’s two highest judicial bodies. The Supreme People’s Court and the Supreme People’s Procuratorate stated in a joint press release how they will interpret existing money laundering laws going forward.
This new interpretation for the first time includes „transactions involving virtual assets“—or cryptocurrency transactions in the broadest sense—as a method of money laundering. The China Times emphasizes that these are increasingly being used as tools for money laundering.
Does this mean that every transaction involving cryptocurrencies—say, Bitcoin, Ether, USDT—now constitutes money laundering? That anyone transferring Bitcoin in China is already halfway to jail?
Probably not. Only if a criminal act is involved does a crypto transaction with its proceeds constitute money laundering. Even then, it applies to highly transparent cryptocurrencies like Bitcoin. This is not much different than in the EU, where crypto transactions may not, as now in China, inherently constitute money laundering but can still trigger suspicion without further anonymization measures. There is no talk of crypto transactions being universally criminalized in China.
However, in practice, it is likely to have different effects than in Germany. Money laundering is a widespread phenomenon in China that, according to the China Times, „permeates all sectors of society.“ The magazine describes a typical scheme that increasingly occupies the People’s Republic’s courts:
Ordinary people lend their bank cards to others, becoming „card farmers.“ They receive interest and returns on something akin to „farming“ in DeFi (Decentralized Finance) systems. Some people also use their phones and multiple bank cards, unaware that their account is used to buy cryptocurrencies to launder money. Through cryptotokens, a form of gamification of money laundering occurs; ultimately, they are engaged in „liquidity mining“ with their bank account.
The new law now possibly implicates those who participate naively in money laundering. However, it seems more about thorough investigation. A member of the Supreme Court commented that the court will harshly punish money laundering and intensify the fight against money laundering through cryptocurrencies.
Money laundering is already the most frequently litigated criminal offense in local courts. Since the Supreme Procuratorate stepped up the fight against money laundering in 2020, the number of money laundering trials has been steadily increasing. In 2023, 2971 people were convicted of money laundering, roughly 20 times more than in 2019. Since 2020, the Chinese central bank PBOC has launched 150,000 money laundering investigations. This wave is expected to rise further.
For businesses, this will have indirect consequences, even if they have nothing to do with money laundering. It will become more difficult to accept and process crypto transactions.