China is intensifying its fight against money laundering by introducing new laws targeting cryptocurrency-related crimes. As digital financial technology advances, the risks associated with illicit activities such as crypto-based money laundering have also evolved. To address these emerging threats, China is revising its money laundering legislation to include provisions that directly respond to the growing influence of cryptocurrency in financial crimes.
Updating Legislation to Address New Money Laundering Risks
The Standing Committee of the National People’s Congress, China’s highest legislative body, is reviewing a draft revision of the country’s money laundering laws. This revision introduces new concepts that aim to address the challenges of tech-driven financial crimes, focusing on cryptocurrency.
The updated law redefines the crime of money laundering, adding seven new types of predicate offences to its scope. These offences include complex criminal activities and organized crime, which often use advanced technology, including cryptocurrencies, to facilitate illegal transactions. This legislative effort is in line with international anti-money laundering (AML) standards and reflects China’s commitment to tightening its grip on financial crimes.
Cryptocurrency Remains Banned in China
China has consistently opposed the use of cryptocurrency as legal tender and has banned its circulation within the country’s financial system. Despite its stance against crypto, the Chinese government recognizes the growing risks posed by digital currencies in facilitating illegal activities, particularly money laundering.
According to Wang Xiang, a spokesman for the Legislative Affairs Commission of the Standing Committee, the rapid development of new technologies has significantly complicated efforts to monitor and prevent money laundering. He noted that while these advancements offer many benefits, they also make it harder for authorities to detect and investigate illicit financial activities.
Central Bank to Issue New Guidelines
As part of the new revisions, China’s central bank will be responsible for issuing specific guidelines to help financial institutions monitor and manage these new money laundering risks. These guidelines will focus on improving the ability of banks and other financial entities to identify suspicious transactions, particularly those involving cryptocurrency, and respond swiftly to potential threats.
This move complements other efforts by Chinese state institutions to tackle crypto-related money laundering. For instance, the Supreme People’s Court and the Supreme People’s Procuratorate, two of China’s most influential judicial bodies, recently issued a joint document that recognized cryptocurrency exchanges as tools criminals use to obscure the origin and nature of their illegal proceeds.
Aligning with Global AML Standards
China’s new money laundering law revisions are also part of a broader initiative to align with international standards on anti-money laundering practices. The country is aiming to enhance its ability to cooperate with global financial institutions and law enforcement agencies in the fight against financial crimes. By updating its regulations, China hopes to strengthen its defences against the misuse of cryptocurrency in money laundering operations and create a more robust legal framework to combat these evolving threats.
While China’s efforts to combat illicit activities like money laundering are crucial, the extent to which cryptocurrency is involved in these crimes remains a topic of debate. Some argue that the scope of crypto-related illicit activity is often overstated, given that traditional financial systems still account for the majority of money laundering cases. However, it’s undeniable that emerging technologies, including cryptocurrencies, pose new challenges for regulators. Strengthening laws to address these risks is important, but it’s equally vital to ensure that these regulations are proportionate and targeted, focusing on genuine criminal activity rather than stifling innovation. Supporting the fight against financial crime is necessary, but the approach should balance security with the potential benefits that digital currencies and new technologies offer.