China's current legal framework faces significant obstacles when prosecuting virtual currency money laundering cases, according to an article published in the People's Procuratorate Daily. The authors identified three major challenges: difficulties in determining criminal liability, collecting evidence, and recovering illicit assets. Virtual currencies have improved transaction efficiency but their decentralised structure, anonymity and cross-border nature have made them increasingly attractive for laundering criminal proceeds. While China has established an anti-money laundering framework, inconsistencies between the revised Anti-Money Laundering Law and the Criminal Law have created enforcement challenges.
To address evidence collection challenges, the authors proposed recognising publicly verifiable blockchain transaction records as self-authenticating electronic evidence when their hash values remain consistent. Blockchain analytics reports obtained from compliant analysis firms should be accepted as evidence, subject to judicial review of the tools, methods and conclusions used. The proposal calls for a mandatory dual investigation approach examining both underlying offences and related laundering activity, with prosecutors required to assess whether separate money laundering charges should accompany predicate offences. Investigators should prepare virtual currency fund flow reports and intervene earlier in complex investigations.
Asset recovery presents another major obstacle as China prohibits cryptocurrency circulation while authorities often lack compliant channels to dispose of seized virtual assets. The authors proposed establishing a national mechanism to standardise the seizure, custody, valuation and disposal of confiscated virtual currencies. A centralised custody platform could manage seized assets, while disposal could occur through compliant channels such as designated auctions or negotiated transfers. They recommended creating an expert committee to develop judicial valuation standards using blockchain data and pricing from major international exchanges.
The recommendations emphasise strengthening cross-border cooperation through bilateral or multilateral judicial assistance agreements covering virtual currency crime. The authors proposed developing a blockchain-based judicial cooperation network that would allow participating jurisdictions to verify suspicious wallet addresses, asset freeze orders and other enforcement information while respecting national data sovereignty. This network would enable coordinated investigations and asset recovery operations across international borders.
