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  • Writer's pictureTeresa Pace

China is set to implement updated Anti-Money Laundering (AML) regulations for cryptocurrencies by the year 2025.

In 2021, China implemented a comprehensive ban on cryptocurrency usage, but despite this, mainland users have managed to access the crypto market due to technological advancements and the decentralized nature of crypto. Recognizing the need for increased scrutiny in the nascent crypto industry, China is now poised to introduce a significant amendment to its Anti-Money Laundering (AML) regulations, targeting cryptocurrency-related transactions.

Prime Minister Li Qiang chaired an executive meeting of the State Council on Jan. 22 to deliberate on the revised AML law. The initial draft of China's AML regulations was proposed in 2021, and the revised version has been incorporated into the State Council's legislative plan for 2023, with the goal of being enacted into law by 2025. This marks the first substantial revision to China's AML regulations since 2007.

During discussions on the amended draft, notable scholars and financial experts emphasized the broad scope of the AML law, making it challenging for the draft to be all-encompassing. The urgency of addressing key issues related to cryptocurrency money laundering is reflected in the initial framework, with further refinement expected in subsequent iterations.

Wang Xin, a professor at Peking University Law School, emphasized the pressing need to address crypto money laundering at the legal level. He noted that the use of cryptocurrency and digital assets for money laundering has become increasingly prevalent, yet current Chinese laws lack a clear definition of digital assets. While the revised draft includes measures to prevent digital asset money laundering, Xin highlighted a "disconnect" due to the absence of operational guidance on the subsequent seizure, freezing, deduction, and confiscation of assets related to money laundering crimes. He stressed the importance of refining these aspects to enhance the effectiveness of combating digital asset-related money laundering.

Despite the blanket ban on cryptocurrency in 2021, prohibiting offshore exchanges and mining activities, mainland users have continued to access the crypto market, posing money laundering risks. The upcoming amended regulations aim to address these challenges by implementing stricter guidelines to curb illicit activities within the crypto space.

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