Summary
- A proposal in China's Supreme People's Procuratorate newspaper outlines how to prosecute crypto-related money laundering.
- The suggestions include assuming criminal intent when individuals utilize coin mixers or privacy coins without providing credible counter-evidence, and accepting on-chain records and reports from analytics firms as valid evidence.
- The authors recommend establishing a national system to manage and sell confiscated cryptocurrency, addressing challenges arising from China's ban on trading.
An article published in the official publication of China's top prosecuting authority has introduced a framework aimed at addressing crypto money laundering. It suggests that courts should assume criminal intent when individuals use coin mixers or privacy coins, and also proposes that the government create a platform for the sale of confiscated cryptocurrencies.
This piece appeared in the theory section of the Procuratorate Daily and was authored by two district prosecutors from Hunan province along with a law professor. Although it lacks legal authority, such articles reflect the evolving mindset within China's legal system, which has charged over 3,000 individuals with crypto-related money laundering in 2024 alone.
Identifying Gaps in Charges
According to the authors, China’s specific money laundering laws encompass only seven categories of predicate crimes, leading prosecutors to often resort to a broader "concealment" charge for crypto-related offenses. They argue that this has resulted in an overly broad application of the law.
The authors advocate for a "double investigation of one case" approach that would require screening each underlying crime for potential money laundering and mapping the trajectory of any involved cryptocurrency. This builds upon a 2024 judicial interpretation from China's Supreme People’s Court that recognizes using virtual assets to transfer criminal proceeds as a laundering method.
Indicators of Money Laundering
The most striking suggestions pertain to evidence requirements. The authors contend that courts should presume a suspect's intent to launder money unless the suspect can provide “reasonable counter-evidence” when utilizing tools that obscure transactions, such as mixers or privacy coins, conducting significant crypto transactions at “obviously unreasonable” prices, or making frequent, large transfers through anonymous wallets unlinked to their identity.
They also propose a "blockchain data self-verification" principle, whereby on-chain records verifiable on public block explorers with matching hash values would be considered presumptively valid, shifting the burden of proof to those who challenge them. Additionally, reports from compliant blockchain analytics firms, including fund flow maps and address clustering, would serve as expert evidence, and laundering could be established through circumstantial evidence as long as it forms a coherent narrative, even if not every coin is traced back to its origin.
Addressing Seized Cryptocurrency
The third aspect discusses the handling of crypto once it is seized. Given that trading is banned in China, authorities who confiscate tokens lack a clear legal method to liquidate them, resulting in billions of dollars of cryptocurrency being left in limbo.
The article advocates for a national platform to manage and sell confiscated crypto through "compliant channels" such as directed auctions, the establishment of an expert committee to assess the value of holdings based on on-chain data and global exchange prices, as well as cross-border agreements and a blockchain-based "judicial cooperation chain" to trace and recover assets that have been moved offshore. In practice, local governments have already been discreetly selling confiscated cryptocurrencies through private firms in offshore markets, a workaround Reuters highlighted last year, which a formal system would aim to replace.
China prohibited crypto trading and mining in 2021, yet it remains a significant hub for crypto-related money laundering. Law enforcement in China has dismantled large laundering operations, including a $1.7 billion laundering scheme in 2022, while networks operating in Chinese have processed approximately $16 billion in 2025 and currently account for about one-fifth of all global crypto money laundering, according to Chainalysis. The firm's analysis attributes their rise partially to China's own capital controls, as affluent citizens seeking to move money abroad contribute liquidity that enables these networks to launder funds for organized crime in the West.