Amending Crypto AML Legislation
Mainland China will see a landmark change to its crypto activities in the coming months following a move to amend its financial regulation. China plans to revise its anti-money laundering (AML) legislation to broaden its scope and include cryptocurrency-related transactions.
This measure is in response to growing calls from domestic policymakers for stricter regulation of the rapidly developing digital currency sector. According to local media sources, Prime Minister Li Qiang presided over a recent State Council’s executive meeting, the agenda of which focused on improved anti-money laundering laws.
The State Council has included the amended AML legislation, whose initial draft was presented in 2021, in its legislative agenda for 2024. However, the estimated timeline for officially adopting the proposed regulatory amendment into legislation is by 2025.
Notably, this move represents the first significant change to China’s anti-money laundering regulations since 2007. The proposed revisions adequately indicate the government’s commitment to control the dynamic financial ecosystem, particularly cryptocurrencies.
China intends to strengthen its efforts to combat money laundering and criminal financial activity in the rapidly rising digital asset industry by statutorily incorporating crypto-related transactions into its AML legislation. This decision is consistent with a global trend of regulatory changes in response to the challenges posed by the digital revolution of financial markets.
Limitations Of The Proposed AML Regulations
According to prominent finance specialists who actively participate in the discussions about the revised AML legislation, there are some challenges that the move must address. Wang Xin, a famous professor at Peking University Law School and an active participant in the conversations, stressed the importance of addressing legal issues around cryptocurrency money laundering.
The scholar points to the increased occurrence of money laundering involving cryptocurrencies, highlighting a current vacuum in Chinese regulation regarding the precise definition of digital assets. Furthermore, Professor Xin noted that while the amended draft includes provisions to prohibit money laundering through digital assets, it lacks practical instructions for confiscation, freezing, deduction, and seizure of assets involved in illicit activities.
According to him, this deficit causes an apparent “disconnection” from what the country aims to achieve.
China’s Crypto Ban
In 2021, China imposed a total ban on all crypto-related activities such as crypto mining and services provided by offshore exchanges. Despite these stringent rules, the decentralized nature of cryptocurrencies and technical advancements have enabled mainland residents to utilize alternate means to explore the digital asset market.
Given the changing economy and the enormous challenges posed by ongoing efforts to circumvent existing regulations, the recently revised rules seek to impose more stringent guidelines. Therefore, the Chinese government can prevent risks of money laundering that have evolved due to citizens’ unauthorized activities in this sector.
The good news is that the move aligns with the global trend of regulation modifications to accommodate the fast-evolving digital asset landscape.
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