In the article on the official website of China's highest prosecutor's office, the Supreme People's Prosecutor's Office (SPP), it was argued that virtual currencies increase transaction efficiency, but provide unprecedented ease for money laundering crimes with their decentralized, anonymous and cross-border circulation features. The article argues that China's current legal framework has not kept pace with digital asset technologies, making it difficult to investigate money laundering, collect evidence, and recover stolen assets.
The authors, including two SPP officials and a Xiangtan University professor, specifically noted the use of mixers, privacy coins and decentralized exchanges. According to the authors, current investigation methods have difficulty monitoring transactions and collecting evidence through these tools.
The authors argued that if a person uses a mixer or privacy coin, it should be assumed that they have the intent to launder money. They stated that the rapid movement of large amounts of cryptocurrency under suspicious circumstances or frequent and high-amount transactions through unexplained anonymous wallets should also be considered a sign of money laundering.
Although not mentioned in the article, the most well-known tool among the mixers is Tornado Cash, and the most well-known privacy coins are Monero and Zcash. Tornado Cash and other crypto mixers have been at the center of numerous lawsuits and enforcement actions in the US and Europe in recent years.
The proposal by Chinese prosecutors contrasts with other assessments that are more cautious on the issue. Crypto mixers can serve legitimate financial privacy purposes, the U.S. Treasury Department said in a 32-page report to Congress this year. This assessment marked a significant change in attitude after the agency sanctioned Tornado Cash in 2022.
While China largely bans cryptocurrency trading and services, authorities actively investigate and prosecute crypto-related crimes. The country's central bank, the People's Bank of China (PBoC), last year reiterated its stance that digital asset transactions are illegal in the country.