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Virtual Asset Transactions Now Classified as Money Laundering Methods in China
In a significant move that could reshape the landscape of cryptocurrency in China, the Supreme People’s Court and Supreme People’s Procuratorate have issued a new legal interpretation that expands the scope of money laundering to include virtual asset transactions. This interpretation, detailed in the newly released “Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Money Laundering” (hereinafter referred to as the “Interpretation”), was announced at a joint press conference on August 19, 2024. The new rules are set to take effect from August 20, 2024.
The “Interpretation” consists of 13 articles that clarify various aspects of money laundering crimes, including the standards for determining self-laundering and laundering on behalf of others, the criteria for considering a money laundering case “serious,” and the principles for imposing penalties. Importantly, the new rules establish clear guidelines on how money laundering crimes intersect with other crimes such as concealing or hiding criminal proceeds.
Strict Criteria for “Serious” Money Laundering Offenses Established
One of the most critical updates in the “Interpretation” is the explicit inclusion of virtual asset transactions as a method of money laundering. The document specifies that transactions involving virtual assets, such as cryptocurrencies, can be classified as methods of concealing or disguising the origin and nature of criminal proceeds, as defined under Article 191 of China’s Criminal Law. This inclusion represents a significant tightening of the legal framework surrounding cryptocurrencies in China, where digital currencies have already faced extensive regulation and restrictions.
The “Interpretation” also sets forth specific criteria for when money laundering activities can be considered “serious.” This includes cases where the laundered amount exceeds 5 million yuan, where repeated money laundering activities have been conducted, where there is a refusal to cooperate in the recovery of criminal assets leading to an inability to recover stolen funds or goods, or where the losses caused by money laundering exceed 2.5 million yuan.
This legal update is expected to have substantial implications for the cryptocurrency market in China. By categorizing virtual asset transactions as potential vehicles for money laundering, the authorities are signaling a tougher stance on digital currencies. This move is likely to result in increased scrutiny of cryptocurrency transactions, creating an environment of heightened legal risk for individuals and entities involved in the market.
Impact on Market Confidence as China Tightens Cryptocurrency Regulations
For the global cryptocurrency community, this development represents a bearish signal, as it may lead to reduced activity and lower market confidence in China, a major player in the cryptocurrency space. The stringent regulations could deter new entrants and prompt existing participants to exit the market to avoid potential legal repercussions.
As the Chinese government continues to clamp down on financial activities that it perceives as risky or destabilizing, the future of cryptocurrencies in the country remains uncertain. Market participants will need to closely monitor the implementation of these new rules and their impact on the broader cryptocurrency ecosystem.
