China Labels Crypto Transactions as Money Laundering in New AML Law

China has recently updated its anti-money laundering (AML) laws to include cryptocurrency transactions. This change means that buying, selling, or trading crypto can now be considered money laundering under Chinese law. This new regulation could have significant implications for the crypto industry, affecting how people handle and report their digital assets. In this article, we'll explore what this update means and how it might impact the world of cryptocurrency.

China Redefines Crypto Transactions as Money Laundering in New AML Law Update

On Monday, Chinese authorities made a groundbreaking move by officially recognizing “virtual asset” transactions as a method of money laundering. This marks the first time that such a classification has been applied to cryptocurrencies in China.

The Supreme People’s Court and the Supreme People’s Procuratorate, the country’s highest judicial bodies, jointly unveiled this update during a press conference. Set to take effect on Tuesday, the new measures are part of a broader effort to strengthen anti-money laundering regulations, specifically targeting the use of cryptocurrencies in illegal financial activities.

Under the new legal interpretation, transactions involving virtual assets, including those made through cryptocurrency exchanges, are now considered as actions that “obscure and hide the origins and nature of criminal proceeds.”

New Penalties for High-Value Money Laundering Offenses in China

Chinese authorities have introduced new criteria for classifying serious money laundering offenses. Transactions involving amounts over 5 million yuan ($685,000) or resulting in losses exceeding 2.5 million yuan ($343,000) will now be subject to stricter legal measures.

These updated thresholds are aimed at addressing large-scale money laundering activities with heightened legal scrutiny and more severe penalties. Individuals found guilty of such offenses could face up to five years in prison or criminal detention, along with a minimum fine of 10,000 yuan ($1,370). Those sentenced to five to ten years in prison will incur a higher fine, starting at 200,000 yuan ($27,400) in addition to their prison term.

What this means for the crypto world?

The recent move by Chinese authorities to classify virtual asset transactions as money laundering has significant implications for the cryptocurrency industry. By imposing stringent legal thresholds—where transactions exceeding 5 million yuan ($685,000) or causing losses above 2.5 million yuan ($343,000) are considered serious offenses—the new regulations signal a tougher stance on illicit activities involving cryptocurrencies. 

This development suggests a heightened regulatory environment that could lead to increased scrutiny on crypto transactions, particularly those involving large sums.

For the crypto world, this could mean a more challenging operating environment in China, as businesses and traders may face stricter compliance requirements and potential legal risks. 

Exchanges and other crypto-related platforms might need to enhance their anti-money laundering practices and implement more rigorous monitoring systems to avoid falling afoul of the new regulations. This increased regulatory pressure could drive some operations out of China or force them to adapt their practices significantly.

Moreover, the new legal interpretation could influence global crypto markets by setting a precedent for other countries considering similar regulatory measures. As more jurisdictions observe China's approach and its effects on the industry, they might be encouraged to adopt stricter regulations of their own, potentially leading to a more regulated and less volatile global crypto market. 

So, while these measures aim to curb illegal financial activities, they could also reshape the landscape of cryptocurrency operations and trading, pushing the industry toward greater transparency and compliance.