China weighs new judicial rules for virtual currency money laundering cases

Push for dedicated case-handling rules

The authors said China’s highest judicial authorities should issue specific guidelines for handling virtual currency money laundering cases, publish more guiding cases and expand training for investigators and prosecutors in blockchain analysis technologies.

A central recommendation is a mandatory “dual investigation” model. Under that approach, authorities would examine both the underlying offence and the related laundering activity, rather than treating the financial trail as secondary. Investigators would also be encouraged to prepare virtual currency fund flow reports during the case, while prosecutors would be expected to consider whether separate money laundering charges should be brought alongside predicate offences, including under China’s self-laundering provisions where applicable.

The proposal also calls for earlier prosecutorial involvement in complex cases. It says prosecutors should look at the purpose behind fund transfers instead of relying only on the type of upstream crime, and should strengthen oversight when conduct that may amount to money laundering is instead pursued under other criminal provisions.

Evidence rules adapted to blockchain cases

The article describes evidence collection as a major challenge in virtual currency investigations. According to the authors, suspects increasingly use mixers, privacy coins, decentralized exchanges and cross-chain transfers to fragment and move funds across jurisdictions. Encrypted communications, destroyed data, limited cross-border cooperation and the difficulty of tying wallet addresses to real-world identities add to the problem.

To address that, the authors propose recognizing publicly verifiable blockchain transaction records as self-authenticating electronic evidence when hash values remain consistent. They also say blockchain analytics reports from compliant analysis firms should be admissible, provided courts review the tools, methods and conclusions behind those reports.

The recommendations further suggest that courts should be allowed to infer criminal intent in some situations, such as when a suspect uses mixers or privacy-focused cryptocurrencies to obscure transactions, quickly disposes of large holdings through abnormal trading methods or repeatedly conducts high-value transfers through anonymous wallets that cannot reasonably be connected to the user’s identity. Rather than forcing investigators to reconstruct every transaction from start to finish, the article argues that corroborating indirect and circumstantial evidence should be enough when it forms a complete chain of proof.

Seized crypto assets remain a practical problem

Asset recovery is presented as another weak point in enforcement. The article notes that China bans cryptocurrency circulation, while authorities often do not have compliant channels for disposing of confiscated virtual assets. It also says inconsistent practices around private key management, valuation and liquidation have created risks in criminal cases.

To close that gap, the authors propose a national mechanism to standardize the seizure, custody, valuation and disposal of seized virtual currencies. A centralized custody platform could be used to manage confiscated assets, while liquidation could proceed through compliant methods such as designated auctions or negotiated transfers.

They also recommend setting up an expert committee to create judicial valuation standards based on blockchain data and pricing from major international exchanges.

Cross-border recovery is the next challenge

Because virtual currency transactions often span several jurisdictions, the proposal also emphasizes stronger international cooperation. The authors support bilateral or multilateral judicial assistance agreements specifically covering virtual currency crime and related asset recovery.

They additionally suggest building a blockchain-based judicial cooperation network that would let participating jurisdictions verify suspicious wallet addresses, freeze orders and other enforcement information, while still respecting national data sovereignty. For now, the recommendations remain a proposed framework, with the next confirmed step being whether China’s top judicial authorities move to issue the dedicated guidance the authors are calling for.