China to Tighten Anti-Money Laundering Rules for Cryptocurrency by 2025

In a recent development, China is gearing up to introduce substantial changes to its anti-money laundering (AML) laws, extending them to cover cryptocurrency transactions. This move comes in the wake of growing concerns among policymakers about the need for more robust control over the burgeoning crypto sector in the country.

Premier Li Keqiang conducted an executive session of the State Council on January 22nd to discuss the revised anti-money laundering legislation. The initial draft of the revised rules was proposed in 2021 and has been included in the legislative agenda of the State Council for the year 2023. It is expected to be enacted into law by 2025, marking the first significant revision of China's anti-money laundering regulations since 2007.

Prominent scholars and financial experts involved in the discussion of the revised AML rules emphasized the broad scope of the legislation, which makes it challenging to encompass all aspects comprehensively. The most up-to-date content may initially be reflected only in the framework.

Professor Wan Xin from the Beijing University Law School stressed the urgent need to address issues related to cryptocurrency money laundering at the legal level. Xin added that the use of cryptocurrencies and digital assets for money laundering is gradually becoming a prevalent trend, and existing Chinese laws lack a clear definition of digital assets.

However, Xin noted that while the revised draft includes measures to prevent money laundering involving digital assets, it lacks operational guidance for subsequent asset seizure, freezing, retention, and confiscation following money laundering crimes, leading to "disconnection." There is still room for improvement in combating money laundering associated with digital assets.

It's worth noting that China imposed a complete ban on cryptocurrency usage in 2021, prohibiting offshore exchanges from offering services and banning all forms of mining. Nevertheless, due to technological advancements and the decentralized nature of cryptocurrencies, mainland users have found ways to access the crypto market, resulting in money laundering risks. The new revised rules aim to introduce stricter regulatory principles to curb such activities.