China’s money laundering crackdown heightens risk for crypto investors, USDT traders

China’s highest court says use of virtual assets to transfer criminal proceeds is among a range of money laundering methods on the mainland

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The judicial interpretation by China’s highest court has raised the legal risks faced by mainland cryptocurrency investors when making trades. Photo: Shutterstock

Published: 7:00am, 21 Aug 2024

China is closely monitoring the use of virtual assets in money laundering activities, according to the country’s highest court, in a move that legal experts say could increase the risk of prosecution for trading cryptocurrency on the mainland.

Using virtual assets to transfer or convert criminal proceeds is among a range of money laundering methods that violate China’s criminal law, according to a judicial interpretation published on Monday by the Supreme People’s Court and the main agency responsible for legal prosecution, the Supreme People’s Procuratorate.

The top court’s judicial interpretation increases the legal risks faced by mainland Chinese cryptocurrency investors when making trades, Shao Shiwei, a lawyer at Shanghai-based Mankun Law Firm, wrote in a post on WeChat.

“From now on, it will be more difficult for USDT merchants to operate and for ordinary people to occasionally trade cryptocurrencies because of potentially high legal risks,” Shao wrote, referring to the world’s biggest stablecoin. Tether’s USDT stablecoin is a type of cryptocurrency pegged to the US dollar.

Money laundering related to the use of virtual assets, such as cryptocurrencies, has become an urgent focus in Chinese authorities’ crackdown on financial crimes. Photo: Shutterstock

If ordinary investors happen to receive proceeds from criminal activities during the buying or selling of virtual assets, they could be held as suspects in a money laundering case, according to Shao. Crypto investors on the mainland must be more cautious to avoid inadvertently taking part in money laundering and other illegal activities, she added.