What to know:
- Chinese legal experts urged broader money laundering enforcement by addressing legal gaps surrounding cryptocurrency-related financial crimes.
- The proposal recommends blockchain analysis, earlier prosecutorial involvement, and stronger standards for admitting digital evidence in court.
- The paper also highlights challenges in recovering seized crypto assets because of legal and cross-border enforcement barriers.
China’s prosecutorial authorities have proposed broader legal measures to strengthen the country’s response to cryptocurrency-related money laundering. A newly published legal paper argues that existing criminal laws and investigative practices no longer match the complexity of blockchain-enabled financial crime.
According to the paper, Systematically Solve the Legal System Dilemma of Money Laundering Using Virtual Currency, legal experts Yang Yingjie, Guo Shaoyou, and Liu Xinqi examined how cryptocurrencies have become attractive tools for concealing illicit funds. They said decentralized networks, pseudonymous transactions, and seamless cross-border transfers have made financial investigations increasingly difficult.
Moreover, the authors warned that these characteristics have widened legal gaps involving criminal classification, digital evidence collection, and asset recovery. Consequently, they urged prosecutors and courts to adopt a more comprehensive legal approach when handling crypto-related cases.
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Experts Call for Wider Use of Blockchain Analysis
According to the paper, China’s revised Anti-Money Laundering Law no longer restricts the types of crimes linked to money laundering. However, Article 191 of the Criminal Law still limits money laundering charges to seven specific predicate offenses.
Because of that restriction, prosecutors often pursue suspects under separate laws covering the concealment or transfer of criminal proceeds instead of filing independent money laundering charges.
To address this issue, the authors recommended broader judicial guidance and mandatory reviews of possible money laundering offenses alongside investigations into the underlying crime. Additionally, they proposed wider use of blockchain analysis to trace digital asset movements and strengthen evidence collection.
The paper also recommends involving prosecutors earlier in major investigations. According to the authors, early participation would help investigators collect stronger evidence and determine the true purpose behind suspicious cryptocurrency transactions.
Furthermore, the experts called for stronger supervisory reviews to identify cases where money laundering investigations were never opened. They also suggested adjusting prosecutorial performance standards to place greater emphasis on recovering stolen assets and pursuing standalone money laundering charges.
Digital Evidence and Asset Recovery Need Clearer Rules
The paper states that investigators face growing technical obstacles because criminals increasingly rely on privacy coins, crypto mixers, decentralized exchanges, encrypted communication platforms, and cross-chain transfers. These tools make it harder to identify wallet owners, trace transaction histories, and gather reliable cross-border evidence.
According to the authors, courts should recognize blockchain records as authentic evidence when investigators independently verify public blockchain data and confirm that hash values remain unchanged. They also proposed granting formal evidentiary status to blockchain forensic reports prepared by qualified firms while requiring courts to assess the reliability of their analytical methods.
In addition, the paper recommends allowing investigators to infer criminal intent in specific circumstances. These include repeated use of privacy-focused tools, unusually rapid liquidation of large crypto holdings, and repeated transfers through anonymous wallets without a legitimate explanation.
The authors also identified asset recovery as a major weakness in the current legal framework. China’s restrictions on cryptocurrency circulation, combined with the absence of unified procedures for handling seized digital assets, complicate enforcement efforts. Moreover, differing legal treatment of cryptocurrencies across jurisdictions makes cross-border asset freezes and confiscations significantly more difficult.
Conclusion
The paper concludes that stronger legal guidance, improved digital evidence standards, earlier prosecutorial involvement, and more effective blockchain analysis would better equip China’s authorities to investigate cryptocurrency-related money laundering while improving the recovery of illicit digital assets.
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