The revised law on Anti-Money Laundering (AML) practices in China will take into account the prevention of cryptocurrency use for such illegal purposes.

As reported by local media, China’s Prime Minister Li Qiang hosted an executive meeting of the State Council on Jan. 22 to discuss major amendments to the national AML law which will reflect the new financial realities, in particular, cryptocurrency transactions.

Following a 2021 crypto ban and focusing on centralised cryptocurrency (CBDC), China still must admit that mainland users have found their way to access crypto and participate in crypto trading. One of the ways Chinese citizens use to surpass government restrictions to trade in cryptocurrencies is through VPNs. Therefore, the country needs to address these transactions in the regulatory field.

Last year, the Shanghai Second Intermediate People’s Court officially recognized Bitcoin as a “unique and non-reproducible” currency. Although far from being accepted as legal tender, this gave Bitcoin a status close to?legal property providing it with some legal protection.

Today, the local government recognises the need to include crypto requirements in its AML regulations. Notably, China’s AML regulations haven’t been updated since 2007 so they don’t reflect any innovations in the payment sphere. The first revised draft of the law was proposed in 2021. It was included in the legislative work plan of the State Council in 2023 and is now expected to be signed into law by 2025.

Discussions on the revised draft of the AML regulations involved prominent scholars and financial experts. They state that the AML law has a broad scope, so it takes a lot of time and effort to revise all the provisions. Initially, only the most urgent content will be added to the framework.

Since current Chinese laws don’t have a clear definition of digital assets, their mainstream use and exclusion from general AML regulations give plenty of opportunities to use crypto for illegal purposes which is often done. Apparently, addressing issues around crypto money laundering at the legal level is a matter of urgency. However, the limited scope of added amendments makes the law uncomprehensive.

As noted by Wang Xin, a professor at Peking University Law School who participated in the discussion, the current version of the revised draft includes only the prevention of digital asset money laundering. So far, the law lacks operational guidance on the procedures of seizure, freezing, deduction and confiscation of the digital assets gained by money laundering crimes. Therefore, there is still much room for improvement when it comes to digital asset-related money laundering laws.