China targets crypto mixers in new AML proposals

China proposes treating crypto mixers and privacy coins as evidence of money laundering, recommending broader anti-money laundering laws and shifting some burden of proof to defendants. The guidance is non-binding.

China's Supreme People's Procuratorate has issued new recommendations to enhance the prosecution of cryptocurrency-related money laundering. Published in the Procuratorial Daily by prosecutors and a law professor, the proposals emphasize treating the use of crypto mixers, privacy coins, and certain anonymous wallet activities as strong evidence of criminal intent. The authors note that the decentralized, pseudonymous, and cross-border nature of digital assets poses significant challenges for the legal system, especially in classifying offenses, gathering evidence, and recovering illicit assets. Currently, most crypto-related cases are prosecuted under Article 312, which broadly covers concealing criminal proceeds, due to the limited applicability of Article 191. The recommendations call for a broader application of anti-money laundering laws to cryptocurrencies and suggest a "one case, two checks" approach, requiring investigators to look for laundering indicators in every major criminal case. They also propose accepting blockchain records as preliminary evidence and shifting part of the burden of proof onto defendants. While non-binding, these recommendations signal a potential shift in China's legal approach to crypto-based financial crimes.