Chinese prosecutors and a legal academic have called for more consistent rules to investigate money laundering involving virtual currencies. The recommendations were published on July 12 on the website of China’s Supreme People’s Procuratorate. They were prepared by officials from the Yuhu District People’s Procuratorate in Hunan and a scholar from Xiangtan University. The publication is a legal research document, not a new law, judicial interpretation or mandatory enforcement policy.
Legal gaps complicate prosecutions
China’s current framework creates uncertainty over how some crypto laundering cases should be charged. Article 191 of the Criminal Law applies the standalone money laundering offence to proceeds connected to specified upstream crimes. When virtual currencies are used to conceal funds from other offences, authorities may instead rely on provisions covering the concealment of criminal proceeds.
The recommendations call for a dual-investigation model under which authorities examine both the original crime and any later attempt to transfer, convert or hide the proceeds. This would allow prosecutors to determine whether separate money laundering charges should accompany charges related to the underlying offence.
Clearer standards for blockchain evidence
Blockchain transactions create a public record, but they do not automatically identify the person controlling a wallet. Investigators often need exchange KYC records, login details, communications, banking information and device data to connect a blockchain address to a real-world suspect. Publicly verifiable transaction records could be accepted as electronic evidence when their hashes and underlying data remain consistent. Blockchain analytics reports could also support prosecutions, provided courts review the tools, data and methods used.
Courts could rely on a combined chain of direct and circumstantial evidence instead of requiring investigators to trace every transfer across mixers, decentralised exchanges and multiple blockchain networks. Using privacy coins or mixers would not automatically prove criminal conduct. It could support an inference of intent only when combined with evidence of concealment or illicit fund origins.
National system proposed for seized crypto
China’s restrictions on cryptocurrency trading leave authorities with limited channels to store, value and dispose of confiscated tokens. A proposed national framework would standardise asset seizure, custody, private-key management, valuation and disposal. A central platform could hold confiscated assets, while authorised institutions could manage security and liquidation.
The proposals would require formal legal or administrative approval before they could be implemented. China’s domestic restrictions have not stopped overseas platforms from offering products linked to Chinese companies. Coinbase Derivatives introduced perpetual-style futures tracking a China ADR index, showing the separation between domestic crypto controls and offshore market exposure.
Cross-border cases remain difficult
Crypto assets can move through several countries before investigators obtain evidence or freezing orders. That challenge was visible in a suspected Japanese crypto fraud linked through investigative reporting to a Chinese network previously accused of handling fentanyl precursor chemicals. On-chain transfers exposed financial connections, but establishing wallet control and criminal responsibility still required evidence across jurisdictions.
The recommendations call for stronger international cooperation on wallet identification, evidence exchange, asset freezing and recovery. China’s wider control over digital platforms was also seen when Apple removed the Jack Dorsey-linked Bitchat messaging app from its China App Store following a demand attributed to the Cyberspace Administration of China.
However, the laundering proposals address a narrower issue: how prosecutors and courts should classify offences, authenticate blockchain evidence and recover criminal assets.
Recommendations do not change Chinese law
The legal research reflects growing pressure to create practical rules for crypto-related financial crime. Its main focus is not the legality of cryptocurrency trading in China, but the operational problems faced by investigators, prosecutors and courts when tracing transactions, proving intent and recovering assets.
The recommendations remain non-binding. Any enforceable change would require legislation, a formal judicial interpretation, official case-handling guidance or another authorised policy measure.
