Understanding the Latest Judicial Interpretation on Virtual Asset Transactions
On August 19, 2024, China's Supreme People's Court and Supreme People's Procuratorate jointly released "Judicial Interpretation on Several Issues Concerning the Application of Law in the Handling of Money Laundering Criminal Cases" (hereafter referred to as "the Interpretation"). This 13-article document represents a significant tightening of anti-money laundering (AML) enforcement, with virtual asset transactions explicitly included under money laundering provisions.
Key Changes in the 2024 Interpretation:
- Virtual asset transactions now classified under money laundering's "catch-all" clause
Focus on seven specific predicate offenses:
- Drug crimes
- Organized crime
- Terrorism
- Smuggling
- Corruption
- Financial disorder
- Financial fraud
Is Cryptocurrency Trading Still Legal in China?
Short answer: Yes, but with important caveats.
The Interpretation targets money laundering activities, not cryptocurrency ownership or legitimate trading. However, the regulatory environment demands increased caution:
- Legal trading remains permitted when not connected to predicate offenses
- OTC transactions carry higher risk due to potential dirty money exposure
- Documentation is critical to prove legitimate funds
👉 Essential guide to compliant crypto trading in China
Highest-Risk Activities Under New Regulations
1. Currency Exchange Services
Professional "coin merchants" face elevated scrutiny due to:
- High-volume transactions
- Frequent banking interactions
- Higher probability of dirty money exposure
2. OTC Trading Red Flags
Watch for these danger signs:
- Abnormal transaction patterns
- Suspicious counterparties
- Funds exceeding trading amounts
- Unexplained wealth accumulation
Case Example: In 2023, an OTC trader was convicted after receiving 200,000 RMB from known fraudulent sources shortly after previous account freezing.
Practical Protection Strategies for Crypto Traders
1. Comprehensive Documentation
- Maintain records of all fund sources
- Document trading history (screenshots recommended)
- Preserve platform transaction logs
2. Smart Trading Practices
- Reduce unnecessary OTC transactions
- Verify counterparty legitimacy
- Consider mutual non-criminal source declarations
3. Risk Mitigation
- Avoid commingling funds
- Report suspicious transactions
- Seek legal counsel when uncertain
FAQ: China's Virtual Asset Regulations
Q: Does owning cryptocurrency violate Chinese law?
A: No, but using it for money laundering does.
Q: How can I prove my crypto funds are clean?
A: Maintain bank statements, tax records, and trading history.
Q: What should I do if my account gets frozen?
A: Immediately consult legal counsel and provide documentation.
Q: Are all OTC transactions illegal?
A: No, but they require extra due diligence.
Q: How does China track virtual asset transactions?
A: Through banking monitoring and blockchain analysis tools.
Q: Can I still convert crypto to fiat legally?
A: Yes, through properly documented and reasonable transactions.
👉 Professional compliance solutions for crypto investors
Final Thoughts: Navigating the New Normal
China's 2024 AML Interpretation significantly raises stakes for virtual asset participants. While not banning cryptocurrency outright, the regulations demand:
- Enhanced compliance awareness
- Meticulous record-keeping
- Professional legal consultation
The era of casual OTC trading has ended. Protect yourself through documentation, reasonable trading frequency, and professional guidance when needed.