In 2021, China imposed a comprehensive ban on cryptocurrency use, prohibiting offshore exchanges from providing services and banning all forms of mining. Despite these restrictions, mainland users have found ways to access the crypto market, leading to increased risks of money laundering. The amended regulations aim to implement stricter guidelines to address and mitigate such activities.
According to cointelegraph.com, the decision follows increased calls from policymakers in the country for enhanced scrutiny of the emerging crypto industry.
As reported by local media, Prime Minister Li Qiang presided over an executive meeting of the State Council on 22 January to deliberate on the revised AML law. The initial draft of the country's AML regulations was proposed in 2021, and the revised version has been included in the legislative agenda of the State Council for 2023, with the aim of formalising it into law by 2025.
This marks the first substantial update to China's AML regulations since 2007. Scholars and financial experts participating in discussions on the revised draft highlighted the broad scope of the AML law, making it challenging to achieve comprehensive coverage. They emphasised the urgency of addressing issues related to cryptocurrency money laundering at the legal level, with the current laws lacking a clear definition of digital assets.
Moreover, a professor at Peking University Law School involved in the discussions, stressed the prevalence of cryptocurrency and digital assets in money laundering, indicating a mainstream trend. While the revised draft includes measures to prevent digital asset money laundering, concerns were raised about the absence of operational guidance on subsequent actions such as asset seizure, freezing, deduction, and confiscation in cases of money laundering crimes. Experts noted that there is room for improvement in combating digital asset-related money laundering.
According to sanctionscanner.com, China's AML law is designed not only to deter money laundering but also to protect fiscal order and combat-related crimes. China has a deep understanding of money laundering and terrorist financing risks, and it is not listed on the Financial Action Task Force (FATF) Country List for AML deficiencies.
However, in a February 2019 report, FATF suggested that China should focus more on addressing the laundering of crime proceeds and expand its resources for national risk assessment. The People's Bank of China has a good understanding of how criminals can exploit financial institutions, leading to a high level of compliance with 15 out of FATF's 40 Recommendations.
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