Intensified Cyber Regulation: China Bans Abuse of Virtual Currencies in New Law

The strengthening of regulations against the misuse of virtual currencies marks an important milestone in China’s cybersecurity strategy. In response to the growing challenge of crimes related to digital assets, China’s Ministry of Public Security recently released an innovative draft legislation aimed at curbing illicit activities within the cryptocurrency ecosystem.

Law Context: Combating Cybercrimes

The Cybercrime Prevention Law emerges at a time when China recognizes significant risks associated with the exploitation of virtual currencies for criminal purposes. The regulatory draft acknowledges that illicit actors use these technologies for money laundering, illegal fund transfers, and hiding assets derived from unlawful activities. The legislative initiative invites society to participate in the drafting process, seeking to incorporate diverse perspectives into the final formulation of the regulation.

Imposed Restrictions: Control of Cryptocurrency Operations

The draft establishes categorical bans on specific practices involving virtual currencies. The legislation prohibits individuals and organizations from conducting operations aimed at concealing, transferring, acquiring, or disposing of cryptocurrencies linked to criminal activities. Additionally, it formally bans the provision of resource transfer services that knowingly utilize illicitly obtained virtual currencies. These restrictions aim to create effective barriers against converting illegal assets through cryptographic channels.

Implications for the Digital Assets Sector

The proposed cyber regulation represents a significant tightening of China’s regulatory stance toward the cryptocurrency universe. The strengthening of norms signals China’s proactive approach to protecting its financial infrastructure from criminal infiltration. For service providers and intermediaries in the virtual currency market, the law establishes new compliance standards that will require the implementation of robust mechanisms for verifying and tracking suspicious transactions.