Chinese judicial authorities are zeroing in on privacy coins and mixers.
In a research article published on July 12 on the official website of China’s Supreme People’s Procuratorate, legal experts proposed that the usage of crypto mixers and privacy coins should be designated as indicators of money laundering intent.
The paper has proposed a new criminal governance framework designed to bridge the gap between blockchain technology and traditional Chinese criminal law.
The triple dilemma
The mushrooming of cryptocurrency laundering is rather challenging for China, given that crypto tends to be decentralized and anonymous. Its detection is also complicated by the cross-border nature of digital assets.
This has created a "triple dilemma" within the domestic judicial system: defining the exact nature of the offense, obtaining evidence, and recovering stolen assets.
As of now, criminal prosecution for money laundering is strictly limited to seven specific predicate crimes.
The article calls for a strict "dual investigation" principle. It requires prosecutors to mandate virtual currency fund flow analysis during upstream crime reviews and apply independent "self-laundering" charges.
"Presumed intent"
What is notable is that the prosecutors proposed a tiered standard of proof and reasonable presumption rules.
An individual can be legally presumed to possess subjective money laundering intent if they engage in specific, obfuscated behaviors with privacy coins or mixers (unless they provide counter-evidence).
Privacy-centric digital assets or mixing protocols are specifically designed to hide on-chain footprints (due to genuine concerns about privacy or some nefarious purposes).
The proposal advocates for a principle of "self-authentication of blockchain data". If on-chain transaction history can be independently verified via a public blockchain explorer and its cryptographic hash values remain untampered with, its authenticity should be preliminarily established by courts.
The authors also recommended integrating data analysis reports from compliant blockchain analytics firms into the judicial process.
Dan Burgin
U.Today Editorial Team
