Cryptocurrency Faces Stricter Oversight in China’s AML Overhaul

China is poised to introduce sweeping revisions to its Anti-Money Laundering (AML) laws, with a particular focus on regulating cryptocurrency transactions. This move, the first major amendment since the laws’ inception in 2007, signifies China’s determination to combat potential money laundering crimes associated with digital assets. The revised AML law is anticipated to be enacted by 2025, showcasing the country’s commitment to staying ahead of the evolving landscape of financial crimes.

Revised AML Framework and Cryptocurrency Inclusion

At a recent executive meeting of the State Council chaired by Prime Minister Li Qiang, discussions centered on the comprehensive amendment to the Anti-Money Laundering Law of the People’s Republic of China. This comes as a response to the increasing complexity of financial crimes, especially those involving virtual assets like cryptocurrencies. The revision, included in the 2023 legislative work plan, aims to address loopholes and ambiguities exploited in the digital currency realm.

Legal experts, including prominent scholars and financial authorities, participated in discussions emphasizing the urgency to tackle challenges posed by crypto money laundering. The lack of a clear definition of digital assets in existing laws has led to gaps in operational guidelines for law enforcement. Wang Xin, a professor at Peking University Law School, stressed the need for a legal resolution to issues related to crypto money laundering.

Broader Regulatory Scope and Global Impact

The revised AML regulations extend beyond the financial sector, targeting non-financial entities such as property developers, accounting firms, and precious metal exchanges. This broader definition of money laundering activities encompasses any attempts to conceal or disguise criminal income and its sources. Individuals and organizations are now obligated to report large cash transactions and implement special preventive measures against listed targets involved in terrorism or money laundering.

The legislative changes also introduce stricter penalties for AML violations, including fines up to CNY 200,000 for the failure to adopt special preventive measures. The law sets reciprocal requirements for international AML cooperation, reflecting China’s commitment to align with global practices and establish a risk-based approach to AML and Combating the Financing of Terrorism (CTF) efforts.

China’s move to revamp AML laws demonstrates the country’s proactiveness in addressing the challenges posed by the rapid evolution of the cryptocurrency landscape. As one of the world’s leading economies, China’s regulatory actions in the crypto space could set a precedent for other jurisdictions, fostering standardized laws for cryptocurrency regulation globally.

Challenges and Future Enhancements

While the revised AML framework represents a significant step forward, legal experts such as Wang Xin and Yan Lixin, the Executive Director of the Anti-Money Laundering Research Center at Fudan University, emphasize the need for further enhancements. They advocate for improvements in judicial relief mechanisms and the establishment of a comprehensive financial intelligence network to effectively enforce AML laws while safeguarding citizens’ rights and interests.