China Seeks Legal Overhaul for Crypto Money Laundering Cases

China’s Supreme People’s Procuratorate (SPP) has called for a comprehensive overhaul of the country’s criminal framework for tackling cryptocurrency-enabled money laundering, arguing that existing laws are struggling to keep pace with blockchain technology and the growing use of virtual assets in financial crime.

In a policy article published on July 12, prosecutors Yang Yingjie, Guo Shaoyou, and Liu Xinqi said the growth of virtual currencies has created significant legal and investigative challenges despite China’s existing anti-money laundering framework.

The paper, published through the SPP’s official website, argues that crypto’s decentralized, anonymous, and cross-border characteristics have made it an increasingly attractive tool for laundering illicit proceeds.

Why prosecutors say the law needs updating

According to the paper, investigators are facing three recurring problems when dealing with virtual currency cases: determining the appropriate criminal charges, obtaining admissible blockchain evidence, and recovering digital assets that have already been transferred across multiple wallets and jurisdictions.

The authors argue that China’s existing anti-money laundering framework was largely built around traditional financial institutions and has not fully adapted to blockchain-based transactions. They also noted that prosecutors often rely on broader concealment-related offenses instead of direct money laundering charges because of limitations in the current Criminal Law.

Blockchain is making investigations harder

Among the paper’s key recommendations is a proposal to formally recognize blockchain transaction records as judicial evidence. The authors suggested that publicly verifiable blockchain data should be treated as presumptively authentic when transaction records can be independently confirmed through blockchain explorers and matching cryptographic hashes.

The paper also recommends allowing blockchain forensic reports produced by qualified analytics firms to be introduced during criminal proceedings, provided investigators can demonstrate the reliability of the underlying technology and methodology.

Blockchain analytics and stronger international cooperation

The report also urges authorities to make greater use of blockchain forensic tools when investigating crypto-related crimes. Rather than relying solely on traditional financial records, prosecutors argue that investigators should increasingly analyze wallet activity, transaction flows, privacy tools, and cross-chain transfers to establish money laundering patterns.

The paper further recommends expanding international cooperation, including agreements covering cryptocurrency investigations, cross-border asset freezes, and blockchain intelligence sharing, acknowledging that many laundering operations now extend well beyond China’s borders.

Part of China’s broader crypto crackdown

The recommendations come as China continues strengthening its enforcement against cryptocurrency-related financial crime.

Earlier this year, Chinese authorities arrested the former chairman of Huione Group, accusing him of helping operate a multi-billion-dollar crypto laundering network linked to online scam operations. 

Against that backdrop, the Supreme People’s Procuratorate’s latest proposals suggest authorities are looking beyond enforcement actions and focusing on strengthening the legal framework governing cryptocurrency-related investigations.

By proposing clearer rules for blockchain evidence, digital asset tracing, and cross-border cooperation, prosecutors aim to give law enforcement more effective tools to pursue crypto-enabled money laundering while adapting criminal procedures to rapidly evolving blockchain technologies.

Also Read: Thailand’s Central Bank & SEC Target Cash and USDT in Grey Money Audit

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