Chinese Prosecutors Move To Treat Crypto Mixers As Evidence Of Money Laundering
China’s Supreme People’s Procuratorate has published a set of recommendations that will overhaul the way the country investigates and prosecutes cryptocurrency-related money laundering, including a proposal to treat the use of cryptocurrency and cryptocurrency as evidence of criminal intent.
The article, published in the official Procuratorial Daily, was written by two prosecutors from Yuhu County in Hunan province and an associate law professor at Xiangtan University.
The authors argue that the creation of decentralized, anonymous, and cross-border virtual currencies has overtaken China’s legal framework and created a three-pronged problem: defining the crime, gathering evidence, and returning the stolen property.
At the heart of the debate is a gap between the rules. China’s Anti-Money Laundering Law has loosened restrictions on which predicate offenses qualify, but Section 191 of the Criminal Law still classifies money laundering offenses into seven categories.
As a result, many crypto crimes fall under Article 312, which includes the concealment of criminal funds, a crime the authors describe as a catch-all. They are calling for broader enforcement of money laundering legislation and a “one case, two checks” principle that would require investigators to look for indications of fraud in all major criminal investigations.
The burden is shifting in China’s courts
Three propositions stand out. The first, defined as blockchain self-authentication, can treat on-chain records from public block testers as reliable when the hash values match, and will verify their integrity.
Second, it will remove the burden of proof: once prosecutors submit a transaction-chain analysis report, the attorney will need to challenge it.
Thirdly it would allow the courts to consider the purpose of discounting by conduct alone. Under that standard, the use of hybrids or privacy coins, the sale of large assets at off-market prices, or the sale of high prices through unknown wallets with no clear source can establish intent without the defendant providing a reasonable denial.
The authors also address evidence gathering, noting that hybrids, privacy coins, and decentralized exchanges allow for multi-layered isolation and cross-chain transfers that traditional methods struggle to follow.
They propose flexible rules for electronic data, equal standards of evidence, and clear authorization of technical measures such as real-time monitoring and traffic analysis, with restrictions on the protection of personal information and cybersecurity.
Asset acquisition presents another obstacle. Since crypto trading is banned in China, authorities are holding seized coins without an official channel to liquidate them.
This paper recommends a national platform for storing, valuing, and disposing of confiscated goods through compliant channels, and an expert committee that can set prices using on-chain data and foreign exchange prices.
It also promotes bilateral and international agreements and a blockchain-based “chain of legal cooperation” to track and stop money transferred abroad.
The recommendations do not have legal force, but they indicate possible guidance for Chinese courts. The proposals come as China’s anti-trafficking networks are set to process $16.15 billion by 2025, about 20% of the global total, according to Chainalysis.
By 2024, Chinese prosecutors charged more than 3,000 people in crypto-laundering-related cases, a figure that underscores the magnitude of the challenge.
