China prosecutors propose 3-part framework to target crypto laundering

China's top prosecutors have proposed a framework to crack down on crypto money laundering, urging courts to presume criminal intent when suspects use privacy coins or coin mixers without providing counter-evidence.

The proposals appeared in the Procuratorate Daily, the newspaper of the Supreme People's Procuratorate, written by two district prosecutors from Hunan province and a university law professor. The article carries no legal force but offers a window into the thinking taking shape inside China's prosecution system, which charged more than 3,000 people with crypto-related money laundering in 2024 alone.

The framework calls for a "double investigation of one case" rule that would screen every underlying crime for laundering and require investigators to map the flow of any crypto involved. It also proposes treating verifiable on-chain records and reports from compliant blockchain analytics firms as admissible evidence, with laundering established from circumstantial evidence as long as it forms a coherent chain.

The push comes as Chinese-language laundering networks processed an estimated $16 billion in 2025, accounting for roughly a fifth of all crypto money laundering worldwide, according to Chainalysis. China outlawed crypto trading and mining in 2021 but remains one of the busiest fronts for crypto-based money laundering.

Mixers and privacy coins as red flags

The boldest proposals concern proof. Courts would be able to presume a suspect meant to launder money when they use tools designed to obscure transactions such as mixers or privacy-focused tokens like Monero (XMR), Zcash (ZEC) and Dash (DASH), offload large amounts of crypto at "obviously unreasonable" prices, or run high-frequency transfers through anonymous wallets with no link to their identity. The burden would shift to the suspect to provide "reasonable counter-evidence."

The article also floats a "blockchain data self-verification" principle where on-chain records checked on a public block explorer with matching hash values would be treated as presumptively genuine. Reports from compliant blockchain analytics firms, such as fund flow maps and address clustering, would count as expert evidence.

The seized-coin problem

The third piece of the framework addresses what China should do with crypto once it seizes it. Because Beijing bans trading, authorities that confiscate tokens have no clean legal way to cash them out, leaving billions of dollars in limbo.

The article calls for a national platform to custody and dispose of seized crypto through "compliant channels" like directed auctions, a standing expert committee to value holdings against on-chain data and global exchange prices, and a blockchain-based "judicial cooperation chain" to trace assets moved offshore. In practice, local governments have already been quietly selling seized crypto through private firms in offshore markets, a workaround Reuters documented last year that a formal system would be meant to replace.

Chinese-language laundering networks processed an estimated $16 billion in 2025 and now handle roughly a fifth of all crypto money laundering worldwide, according to Chainalysis. The firm traces their rise partly to China's own capital controls, as wealthy citizens moving money offshore supply the liquidity that lets the networks launder for Western organized crime groups. The proposed framework, if adopted, would give prosecutors a more direct legal pathway to pursue these cases.

This article is for informational purposes only and does not constitute investment advice.