China Updates AML Laws to Include Virtual Assets for the First Time, Ban on Crypto to be Lifted?

China has made a significant update to its Anti-Money Laundering (AML) laws by revising them to include virtual assets transactions for the first time.

This change, announced by the Supreme Court and Public Prosecutor on August 19, marks the first major update to the country’s AML regulations since their adoption on January 1, 2007. The new interpretation of the law now recognizes transactions involving virtual assets as potential methods for money laundering, reflecting the growing influence of digital currencies in the financial landscape.

Under the revised laws, the transfer and conversion of criminal proceeds through digital transactions will now fall under the scope of regulations aimed at preventing the concealment of the source and nature of criminal proceeds. Offenders could face penalties ranging from 10,000 yuan (approximately $1,400) to 200,000 yuan ($28,000) for more severe offenses, along with potential prison sentences of five to ten years. The amendments also provide clearer guidelines for identifying "serious circumstances" in money laundering cases, such as non-cooperation with authorities or laundering amounts exceeding 5 million yuan (around $700,000). The Supreme People’s Procuratorate reported that in 2023, 2,971 individuals were prosecuted for money laundering, a significant increase from previous years.

This legal revision has sparked renewed speculation about China's stance on cryptocurrencies. Some industry observers have suggested that China could be preparing to lift its ban on crypto trading, with rumors gaining traction following a now-deleted post by Galaxy Digital CEO Mike Novogratz, who speculated that China might "unban" Bitcoin by late 2024. Justin Sun, founder of Tron and the crypto exchange HTX, further fueled these rumors with a cryptic comment on social media, hinting at a possible shift in China's approach to crypto.

However, skepticism remains high among experts. Yifan He, CEO of the Chinese blockchain firm Red Date Technology, expressed doubts that China would allow its citizens to trade Bitcoin using local currency, while Mikko Ohtamaa, co-founder of Trading Strategy, pointed out that such a move would conflict with the Chinese government's broader political goals.

In related news, authorities in Qingdao have recently prosecuted a case involving a network accused of using the stablecoin Tether (USDT) to launder over 8 million yuan ($1.1 million) for criminal enterprises, according to Cointelegraph. The suspects reportedly used business licenses and identification documents to open accounts, which were then employed to facilitate money laundering activities. The laundered funds were converted into USDT and transferred back to the criminals, with the syndicate receiving a commission for their services. Nine individuals are currently facing prosecution in connection with this case.