15th July 2026
By Shubhii Verma
China Seeks to Strengthen Crypto AML Regulations
Chinese legal experts have called for a stronger regulatory framework to combat cryptocurrency-related money laundering, arguing that existing laws and investigative tools are no longer sufficient to address the growing use of digital assets in financial crimes. The recommendations were presented in a research paper published by China’s prosecutorial authorities, highlighting the need to modernise the country’s legal system in response to the rapid evolution of blockchain technology.
The paper, titled “Systematically Solve the Legal System Dilemma of Money Laundering Using Virtual Currency,” was authored by legal experts Yang Yingjie, Guo Shaoyou, and Liu Xinqi. It examines the legal and operational challenges faced by investigators as cryptocurrencies become increasingly attractive for laundering illicit funds.
Key Challenges in Investigating Crypto Crimes
According to the authors, cryptocurrencies possess characteristics such as decentralization, pseudonymous transactions, and seamless cross-border transfers, making them appealing tools for criminals seeking to conceal the origins of illegally obtained assets. These features often complicate investigations, particularly when funds move across multiple blockchain networks and international jurisdictions.
To address these challenges, the paper recommends expanding China’s anti-money laundering (AML) framework to better cover virtual asset transactions. The authors argue that current legislation should be updated to explicitly recognise cryptocurrency-related offences and provide investigators with broader legal authority to pursue digital asset crimes.
Recognizing Blockchain Records as Legal Evidence
A major recommendation is the formal recognition of blockchain transaction records and on-chain data as admissible legal evidence. While blockchain analytics has become an important investigative tool worldwide, the paper suggests that clearer legal standards are needed to ensure digital evidence can be effectively used during criminal investigations and court proceedings.
The researchers also called for enhanced investigative capabilities, including greater access to blockchain analysis technologies and stronger cooperation between prosecutors, financial regulators, law enforcement agencies, and technology providers. They believe that closer collaboration would improve authorities’ ability to trace suspicious transactions and identify individuals involved in complex money laundering networks.
Another key concern highlighted in the paper is the difficulty of tracking anonymous or pseudonymous cryptocurrency transactions. The authors noted that while blockchain ledgers are transparent, identifying the real-world identities behind wallet addresses remains a significant obstacle, particularly when privacy tools or overseas platforms are involved.
The proposals reflect China’s continued focus on strengthening financial crime enforcement while adapting its legal system to emerging digital technologies. Although the country maintains strict restrictions on cryptocurrency trading and mining, authorities continue to monitor the misuse of virtual assets for illegal activities, including fraud, money laundering, and cross-border financial crimes.
If adopted, the proposed reforms could strengthen China’s ability to investigate cryptocurrency-related offences, improve the admissibility of blockchain evidence in court, and establish a more comprehensive legal framework for combating digital asset-based financial crime.
