China is reportedly taking steps to bolster surveillance within the expanding cryptocurrency sector by amending its anti-money laundering (AML) laws to encompass cryptocurrency transactions.
A committee of executives, led by Prime Minister Li Qiang, deliberated on the ‘revised draft’ of the AML regulations on January 22. According to a local news report, this marks the first significant update to China’s AML regulations since 2007.
The decision to amend these regulations has been prompted by growing concerns among policymakers in China, with a primary focus on addressing issues related to cryptocurrency money laundering.
This amendment was initially proposed in 2021, with public input sought. Subsequently, the State Council’s legislative work plan for 2023 included the revised draft.
It is anticipated that the current amendment to the AML regulations will be enacted in 2025, as mentioned by Professor Wang Xin of Peking University.
China Battles to Combat Crypto Money Laundering Crimes
Wang Xin emphasized that the top priority at the legal level is to address the issue of cryptocurrencies being used for money laundering.
Since 2021, China has banned the provision and receipt of services related to cryptocurrencies. However, the increasing use of cryptocurrencies in money laundering activities has surpassed the existing “strict prevention” measures against money laundering risks.
“While the revised draft of the Anti-Money Laundering Law has incorporated measures for preventing money laundering through virtual assets, there is a lack of practical guidance on the subsequent steps like seizure, freezing, deduction, and confiscation of assets involved in virtual asset money laundering crimes, leading to a disconnect,” noted Professor Wang.
Yan Lixin, the executive director of the China Anti-Money Laundering Research Center at Fudan University, emphasized the importance of legal authorization. The absence of legal authorization creates gray areas, blind spots for law enforcement, and challenges in combating the use of cryptocurrencies for money laundering. Lixin also pointed out that there is still room for improvement in China’s AML rule enforcement and judicial relief work.
Notably, Hong Kong’s Securities and Futures Commission (SFC) introduced a similar amendment to its AML regulations in April 2023. In October, the regulator announced plans to update its framework for regulating cryptocurrency sales and requirements.