The Supreme People's Procuratorate of China has introduced new guidelines for combating money laundering using cryptocurrencies. This step marks another escalation of pressure on digital assets in a country where their circulation is already strictly prohibited. The agency proposes a fundamental overhaul of the approach to investigating crypto crimes and updating evidence standards, focusing on eliminating legal loopholes.

Reclassification and Toughening of Articles

Prosecutors point to a fundamental mismatch between the nature of blockchain technologies and current legislation. Currently, most cases involving crypto assets are classified under the relatively lenient article "concealment of criminal proceeds." The initiative's authors insist on applying a stricter article—money laundering. To this end, they propose introducing the principle of "one case, two checks," obligating investigators to look for signs of money laundering when investigating any primary crime.

New Rules of Evidence: Presumption of Guilt

A key innovation is the simplification of working with digital evidence in court. The main initiatives include three points:

  • Blockchain Self-Identification: Data from public blockchain explorers will be recognized as reliable by default if the hash data matches. This removes the prosecution's need to additionally confirm the authenticity of the information.
  • Shift in Burden of Proof: If the prosecutor provides a report analyzing the transaction chain, the defense will be obligated to prove its invalidity or their own innocence. This overturns the classic principle of the "presumption of innocence."
  • Presumption of Guilt: The use of mixers, privacy coins (e.g., Monero), or selling assets at prices significantly different from market rates will be considered sufficient grounds to establish intent for money laundering. In effect, any attempt to enhance transaction privacy will automatically become suspicious.

Confiscation and International Cooperation

The Procuratorate acknowledges serious difficulties in seizing cryptocurrency. Due to the complete ban on the circulation of digital assets in the PRC, agencies have no legal channels for their disposal. The solution is seen in creating a state platform for storing and evaluating confiscated coins. A special committee of experts will conduct the evaluation based on blockchain data and prices on international exchanges.

Furthermore, China intends to initiate the creation of international protocols for tracking and freezing crypto assets as part of judicial cooperation with other countries. This could set a precedent for global regulation, despite the fact that the US position on this issue is currently more lenient—the US Treasury previously recognized the right of law-abiding users to use mixers to protect privacy.

My Analysis: This move by Beijing is a logical continuation of the policy of total control. If the proposals are adopted, China will create one of the world's strictest systems for combating crypto money laundering, where any action aimed at enhancing privacy will be considered a crime by default. This will put significant pressure on the development of privacy solutions in blockchain and could trigger a wave of user deanonymization on a global level if other countries follow the PRC's example.