China Proposes New Crypto AML Framework and Blockchain Evidence Rules

• China’s legal experts seek stronger crypto AML rules to address money laundering enforcement challenges.
• Proposed blockchain evidence standards aim to improve cryptocurrency crime investigations and court procedures.
• New asset recovery measures target seized crypto management and cross-border enforcement cooperation.

China’s legal experts have proposed a new framework to strengthen cryptocurrency anti-money laundering enforcement, improve blockchain evidence standards, and enhance digital asset recovery procedures.

China Targets Legal Gaps in Crypto Money Laundering Cases

Chinese prosecutors and legal researchers have proposed reforms aimed at addressing challenges in cryptocurrency-related money laundering investigations. The recommendations were published in the Procuratorial Daily theoretical edition by Yang Yingjie, Guo Shaoyou, and Liu Xinqi.

The authors said virtual currencies have improved financial efficiency, while their decentralized structure and cross-border features have created new risks. Therefore, authorities face growing difficulties when investigating illicit transactions involving digital assets.

The paper identified three major challenges affecting enforcement: criminal classification, evidence collection, and asset recovery. It argued that existing legal frameworks have struggled to match the technical features of blockchain-based financial crimes.

China’s Anti-Money Laundering Law has expanded the scope of predicate offenses. However, Article 191 of the Criminal Law still applies only to seven specific underlying crimes.

As a result, some cryptocurrency laundering cases involving other criminal activities are often handled under provisions covering the concealment or disguise of criminal proceeds. The authors warned this approach could create an overreliance on broader criminal provisions.

The proposal recommends stronger judicial guidance and improved coordination between investigators and prosecutors. 

Additionally, authorities should review possible money laundering charges alongside investigations into the original offenses.

Proposed Blockchain Evidence Rules to Support Investigations

The experts highlighted that cryptocurrency investigations face significant obstacles because criminals increasingly use privacy tools, mixers, decentralized exchanges, and cross-chain transfers.

These methods can make wallet ownership identification more difficult. Furthermore, fragmented transaction records and international data barriers can complicate efforts to establish complete financial trails.

To address these issues, the authors proposed recognizing blockchain transaction records as reliable electronic evidence when data can be independently verified and hash values remain unchanged.

They also suggested accepting blockchain analysis reports from qualified firms as specialized evidence. However, courts should examine the reliability of analytical methods, tools, and conclusions before determining evidentiary value.

Moreover, the proposal supports reasonable legal presumptions in certain cases. Investigators could consider criminal intent when individuals use anonymity-focused tools or conduct unexplained large transactions through unidentified wallets.

The authors also called for clearer standards governing technical investigative methods while maintaining protections for privacy and cybersecurity.

China Seeks Unified Crypto Asset Recovery System

Asset recovery remains another major challenge in cryptocurrency-related criminal cases. The paper noted that restrictions on crypto circulation have created difficulties for authorities managing seized digital assets.

Currently, unclear procedures exist for private key custody, asset valuation, and liquidation after authorities confiscate cryptocurrencies. Therefore, the authors recommended establishing a national framework for handling these assets.

The proposal includes creating standardized procedures for seizure, custody, valuation, and disposal. Additionally, a specialized platform could help authorities manage confiscated digital assets through compliant channels.

The experts also encouraged stronger international cooperation because cryptocurrency transactions frequently cross jurisdictions. They proposed agreements that would improve information sharing and asset recovery efforts.

Overall, the framework aims to modernize China’s approach to crypto-related financial crime. By combining stronger evidence rules, improved investigations, and coordinated asset management, authorities seek to close existing enforcement gaps.