The Public Prosecutor’s Office and the Supreme Court of China have amended the provisions of the national anti-money laundering (AML) law. For the first time, crypto transactions are now also recognized.

The change is effective immediately, with the primary goal of attempting to curb the growing use of digital currencies in illicit activities. The new regulations follow years of strict bans on cryptocurrencies in China, signaling a potential adjustment to the regulatory landscape.

A historic shift in regulation

The revised AML legislation is the first major change since the law came into force in 2007. Subsequently, 13 articles were added to the law to clarify the legal regime for money laundering in relation to virtual assets.

Under the new law, those convicted of using cryptocurrencies to conceal the source of criminal proceeds face fines of 10,000 to 200,000 yuan ($1,400 to $28,000) and five to 10 years in prison. It’s a clear sign that while digital currencies are largely banned, the government is aware of their potential as a vehicle for financial crimes.

The changes were partly due to a surge in money laundering cases linked to cryptocurrencies. Nearly 3,000 people were charged with money laundering in 2023 alone, a large increase compared to previous years. Authorities have said that digital currencies are often used to mask the source of illicit funds, giving criminals an easy and simple way to operate undetected.

Total crypto market cap at $2.09 trillion on the daily chart: TradingView.com

Crypto: Speculations About Its Future

The timeframe for these actions and their modification have created a lot of speculation as to whether China might consider re-allowing the use of cryptocurrency. The representatives and analysts of all platforms are very interested in the ultimate implications of this new regulatory policy for the global crypto market.

China's supreme court and public prosecutor updated the country's AML legislation. Source: Supreme People's Procuratorate

The Chinese authorities could ease the bans, which would then result in a rebound in the markets, likely leading to the emergence of more interest in the digital currency field. Moreover, the technological capacity of blockchain could skyrocket as businesses seek to navigate the revised regulations in a more professional atmosphere.

On the other hand, the government is still actively trying to prevent illegal actions related to cryptocurrencies. The police have emphasized that the recognition of virtual assets in the AML (anti-money laundering) framework does not mean that cryptocurrency trading or mining will be legalized.

Rather, it is used as a way to exchange digital money between criminal networks. The government’s intent in enforcement is clear, and some recent high-profile cases of money laundering via the internet, video games, or even streaming proxies are evidence of what the authorities’ primary goal is.

Main image from Ministry of Foreign Affairs, chart from TradingView