Chinese prosecutors push targeted crypto money-laundering probes

The Supreme People’s Procuratorate posted an article on its website over the weekend calling for more proactive, targeted investigations into cryptocurrency money laundering.

The piece, authored by two SPP officials and a professor from Xiangtan University, said the decentralized, anonymous and cross-border features of virtual currencies make them attractive for laundering and that China’s legal framework has not kept pace with digital-asset technology, hindering investigations, evidence collection and asset recovery.

The authors identified crypto mixers, privacy-focused coins and decentralized exchanges as particular challenges that can obscure the origin and flow of funds.

They recommended treating use of mixers or privacy coins as strong evidence of illicit intent and urged prosecutors to consider rapid transfers of large sums and frequent high-value movements through unexplained anonymous wallets as indicators of money laundering.

The article did not name specific products but noted well-known examples under international scrutiny, including Tornado Cash and privacy coins such as Monero and Zcash. U.S. authorities sanctioned Tornado Cash in 2022.

Earlier this year, the U.S. Treasury published a 32-page report acknowledging that crypto mixers can serve legitimate privacy functions.

China broadly bans cryptocurrency trading and most related services. The People’s Bank of China reiterated last year that activities involving digital tokens fall outside the permitted financial system, and authorities continue to investigate and prosecute crypto-related offenses.

The SPP paper called for investigators to adapt tactics to the technical features of modern digital-asset systems and recommended updates to legal definitions and evidence-collection procedures to improve tracing and asset recovery.

The article did not propose new legislation in its text but included recommendations that press for stricter presumptions of illicit intent in prosecutions involving mixers and privacy coins and for greater emphasis on tracing high-frequency, high-value movements between anonymous wallets.