China Sets Legal Precedent in $111M Crypto Money Laundering Bust

Beijing police uncovered a massive money-laundering network that allegedly moved 800 million yuan (approximately $111.36 million) through cryptocurrency transactions linked to telecom fraud and online gambling.

This criminal operation exploited overseas cryptocurrency platforms to conceal the origins of illegal funds, creating a challenge for Chinese authorities combating cyber and financial crimes.

New Legal Milestone: First Jail Time for Wallet Key Theft

The Beijing police action comes on the heels of a legal precedent in China, where the Xuhui District Procuratorate in Shanghai prosecuted individuals for illegally obtaining digital wallet private keys, representing China’s first case of its kind.

Read also: China, UAE Vow to Crack Down on Crypto-Enabled Crime in Joint Statement

According to officials, three suspects, including a man identified as Liu, conspired to insert a backdoor into a virtual wallet application.

This security breach allowed the perpetrators to unlawfully access 27,622 mnemonics and 10,203 private keys. Furthermore, the Xuhui District Procuratorate and the Public Security Bureau collaborated to draft guidelines for managing virtual currencies in criminal litigation.

Legal Interpretation on Virtual Assets for Money Laundering

In a recent development, China’s Supreme People’s Court and Supreme People’s Procuratorate issued a legal definition of the use of virtual assets in laundering money. Under Article 191 of the Criminal Law, the statement states that virtual asset transactions used to transfer or conceal criminal proceeds can be considered as money laundering.

Attorney Shao Shiwei clarified that if virtual assets are utilized to receive funds linked to any of the seven predicate crimes under money laundering laws, such transactions qualify as money laundering.

Additionally, Attorney Liu Yang noted that this action marks the first inclusion of “virtual assets” within a judicial interpretation of money laundering crimes, a step to clarify the legal framework in response to increasing cases involving digital currencies.

Despite the strengthened legal stance, China’s prohibition on domestic cryptocurrency exchanges remains in effect. Holding or trading virtual currencies individually is not explicitly banned, though the new interpretation may lead individuals to carefully weigh the potential legal implications more closely.