Against the backdrop of the ever-changing global cryptocurrency regulation. On August 19, the Supreme People's Court and the Supreme People's Procuratorate of China jointly issued an interpretation on several issues concerning the application of law in handling criminal cases of money laundering, which clearly listed "virtual asset" transactions as one of the methods of money laundering. The "interpretation" has caused widespread discussion in the industry, and some traffic media and users have many misunderstandings about the "interpretation". After paying attention to the response of the market and the community, we are also thinking about how to promote the stability and transparency of the industry on the basis of compliance, while promoting growth and innovation? At 22:00 on the evening of August 28 (UTC+8), 137Labs, OKLink and many industry experts jointly held an X Space with the theme of [In-depth interpretation of the judicial interpretation of the "two highs" to clarify the identification standards of money laundering crimes, "virtual asset" transactions are included, where is the future of the crypto industry? ]
The event invited the following five guests:
Ji Fengjian | Doctor of Law, former legal advisor of Huobi Group
Liu Honglin | Founder and Director of Shanghai Mankiw LLP
Yang Mingzhen | Executive Director of Beijing Zhongkai (Hangzhou) Law Firm
Amber | OKLink Community Lead
Xiaoxiao | OTC Representative
This article records Space's in-depth discussion of the role of new regulations in promoting industry practices and transparency, the areas of growth and innovation that may emerge under compliance requirements, and the impact of these changes on China's position in the global cryptocurrency market. Through this discussion, you will have a better understanding of how industry parties can respond to challenges and seize new development opportunities under the new regulatory environment.
Q1
The historical background of China's money laundering laws. The key changes in the new judicial interpretation, especially the inclusion of virtual assets. Why have virtual assets become the focus of money laundering supervision?
Dr. Ji pointed out that the historical background of China's money laundering laws can be traced back to 2009, when the Supreme People's Court had already explained the transfer and conversion of criminal proceeds through "other means", which included virtual assets. The latest judicial interpretation in 2024 clearly defines virtual asset transactions as a form of money laundering. Although this is formally clarified, it does not mean that there are no relevant provisions in the law. In fact, as early as after the amendment of the Criminal Law in 2020, the use of virtual currency can be identified as money laundering, which may have been previously classified as embezzlement or bribery.
The new judicial interpretation clarifies the definition of virtual assets. Although virtual currency has been confirmed at the press conference, whether virtual assets in a broad sense, such as NFT, are included still needs to wait for further interpretation from the "two highs". This judicial interpretation was jointly issued by the Supreme People's Court and the Supreme People's Procuratorate, and its effectiveness is more comprehensive than the interpretation in 2009, so its application in practice will also be stricter.
Dr. Ji analyzed that the reason why virtual assets have become the focus of money laundering supervision is mainly because they play an important role in money laundering activities. For example, corrupt officials may use virtual currencies to launder bribes or transfer assets overseas. Previously, these behaviors may only be classified as embezzlement or bribery, but the newly revised criminal law allows them to be identified as embezzlement or bribery and money laundering at the same time. This judicial interpretation further clarifies the specific role of virtual assets in money laundering.
Dr. Ji mentioned that although the new judicial interpretation makes the regulation of virtual assets clearer, it does not mean that it is necessary to completely withdraw from the virtual asset field. He believes that although the law is becoming stricter, the virtual asset market still has room to exist. It is recommended that practitioners minimize OTC (over-the-counter) operations, especially frequent OTC transactions, to reduce legal risks.
In general, the new judicial interpretation strengthens the supervision of virtual assets, but at the same time does not completely exclude the legal use of virtual assets. Industry players should pay attention to comply with the new regulations to avoid legal risks due to the use of virtual assets.
Lawyer Liu analyzed the reasons why virtual assets have become the focus of money laundering supervision. He pointed out that the use of virtual currency as a money laundering tool is becoming more and more common, and data shows that about 60% of money laundering criminal gangs use virtual currency to launder money. This phenomenon makes virtual assets the focus of supervision. Lawyer Liu also pointed out that the media's reports on the new judicial interpretation are misleading, believing that trading virtual currency is equivalent to money laundering. In fact, this interpretation does not mean that virtual asset trading itself is money laundering. The public should not be misled by such unprofessional reports.
In addition, Lawyer Liu believes that the new judicial interpretation does not mean that mainland China's policies and regulations on virtual currencies will be tightened significantly. Although the policy has refined the supervision of virtual assets, from the perspective of overall industry construction and practitioners, there is no need to worry or panic too much. With the strengthening of virtual asset supervision, the demand for security services may also increase, so security service providers like OKLink may see an increase in business. For individual users, it has become particularly important to ensure the security of counterparties' assets, which also reflects the market demand for security services.
Q2
What are the impacts of the new regulations on virtual asset trading platforms and exchanges? What are the challenges facing OTC merchants and users, especially the troubles in dealing with "black U"? How can the global consensus on virtual asset trading volume attract government attention?
Dr. Ji analyzed the impact of new regulations on virtual asset trading platforms and exchanges, and discussed the challenges OTC merchants and users face when dealing with "black U". He pointed out that during the law enforcement process, many investigators tend to mislead those involved, falsely implying that the possession and trading of virtual currencies is completely prohibited, when in fact this is not the case. New judicial interpretations and documents confirm that it is legal to hold and even trade virtual currencies, but try to avoid involving "black money" and "black coins" when trading. Therefore, users and merchants need to be particularly cautious when trading, especially in extreme market conditions where price fluctuations may cause unnecessary legal risks.
Regarding the risks of exchanges, Dr. Ji mentioned that exchanges may touch upon the policy risks of illegal fundraising or other criminal activities due to the existence of centralized wallets and related businesses. Exchanges need to strictly implement KYC policies, follow the anti-money laundering (AML) regulations of various countries, and fulfill their responsibilities when preserving relevant data and cooperating with investigation units to prevent being identified as an accomplice to money laundering or other crimes. Although exchanges can prevent illegal activities by identifying specific addresses and taking other internal management measures, it is still challenging to completely eliminate risks due to the anonymity and decentralized nature of virtual currencies.
Dr. Ji also stressed that the global consensus on virtual asset trading volume has attracted the attention of the government. As more and more transactions occur around the world, regulators are concerned that cross-border transfers of virtual assets may be used to circumvent regulatory and legal restrictions, which is one of the reasons why virtual assets have become a regulatory focus. Governments are actively taking measures to ensure that financial order and security are maintained in this emerging market.
Amber analyzed the impact of the new regulations on virtual asset trading platforms and exchanges, especially the challenges users face when dealing with the "black U" problem. She pointed out that when using some trading platforms, users often need to query the on-chain details of transactions, and in the process may encounter risks such as unknown asset sources or fraudulent authorization. Therefore, Amber emphasized the importance of on-chain data query, especially using tools that support multi-chain query such as OKLink browser, which can help users verify the source of assets and avoid losses caused by credulity or misoperation.
Amber further pointed out that identifying and marking transaction addresses is crucial to user security. The "Private Label" function provided by OKLink allows users to customize labels that are only visible to themselves to effectively record and track suspicious addresses. This is especially useful when dealing with asset transactions like USDT (Tether), because users can view detailed information such as on-chain transaction volume, market value, circulation, etc. This identification mechanism helps users avoid interacting with high-risk addresses.
Amber mentioned the need for increased user risk awareness and on-chain data transparency. With the globalization trend of virtual asset transactions and the increase in trading volume, governments around the world are gradually aware of the risks of money laundering and other illegal activities that these transactions may bring. This global consensus has prompted regulators to increase supervision of exchanges and platforms to maintain the security and order of the financial market.
In summary, Amber recommends that users improve their risk prevention awareness in virtual asset transactions, better understand and manage transaction addresses through on-chain data query tools and private label functions, and promptly contact platform customer service and provide feedback on issues to reduce risks such as "black U". Her suggestions have practical guiding significance for responding to regulatory challenges under new regulations and ensuring user safety.
Xiaoxiao analyzed the impact of the new regulations on virtual asset trading platforms and exchanges, especially the challenges to OTC merchants and users, especially the difficulties faced in dealing with "black U". She pointed out that the new regulations have the greatest impact on OTC merchants, because exchanges generally do not directly participate in the profit distribution of the OTC sector. Exchanges usually allow merchants to trade freely and make profits, while also transferring risks to merchants. Xiaoxiao mentioned that the biggest challenge of the current regulations lies in the withdrawal of OTC and users. Due to the large amount of black money circulating in exchanges, it is more difficult for new users to purchase U on exchanges.
Xiaoxiao further explained how this regulatory pressure affects the entry and operation of newcomers in the industry. Since virtual currency is defined as a means of money laundering, many new users encounter various problems when trying to buy USDT, such as strict identity verification and increased risk of transaction freezing. She also mentioned that OTC merchants will check the buyer's transaction records when trading, especially the number of transactions of new users. If there are few transaction records or other suspicious situations, merchants are usually unwilling to trade with them. This situation makes it difficult for new users to successfully deposit funds through the OTC sector, and also has a negative impact on the entire industry.
However, Xiaoxiao also mentioned that the new regulations also have certain positive aspects for OTC merchants and users. The regulations help eliminate those merchants who operate irregularly, so that the merchants who survive the regulatory reshuffle can provide users with safer and more reliable services, thereby improving the health of the overall market. She suggested that when users conduct transactions, especially in over-the-counter transactions, they can ask the other party to conduct a transfer test or transfer to the exchange for verification to confirm the innocence of the funds and avoid encountering "black U".
When talking about how the global consensus on virtual asset trading volume has attracted the attention of governments, Xiao Xiao described the challenges and risks, especially "black money" and money laundering activities, reflecting the potential problems brought about by virtual asset trading in the context of globalization. These problems are the key driving forces for governments to strengthen supervision and introduce new regulations. Therefore, the implementation of new regulations and strengthened supervision around the world are in line with the attention and risk prevention strategies of governments on virtual asset exchanges and platforms.
Overall, Xiaoxiao emphasized the far-reaching impact of the new regulations on OTC merchants and users, especially the challenges and opportunities in dealing with "black U" and industry reshuffle.
Q3
What are the best practices for avoiding association with illegal activities, especially in the field of virtual assets? The importance of using professional on-chain tracking tools to ensure compliance. Case studies of companies that have successfully navigated similar regulatory environments.
Amber introduced best practices on how to avoid being associated with illegal activities in the virtual asset field, and particularly emphasized the importance of using professional on-chain tracking tools to ensure compliance.
She first mentioned that users should conduct sufficient independent research (DYOR) during the investment process, just like doctors need to rely on examination report data when seeing a patient, and on-chain data can also reveal many clues. Therefore, using on-chain tracking tools is very important for virtual asset users.
Amber introduced some on-chain tools provided by OKLink to help users conduct compliance checks. She specifically mentioned several important tools and features:
Token Authorization Management Tool: Users can use this tool to view the counterparties that their wallet addresses have authorized. This is very important to prevent assets from being accidentally transferred to criminals. Many times, users may accidentally click on a link or scan a QR code, resulting in the authorization of the transfer of assets. This tool can help users manage and cancel unnecessary or dangerous authorizations.
Address Analysis Tool: This tool is similar to the ChainEye, which is mainly used by institutions, but ordinary users can also use it through OKLink's Web3 toolkit. This tool can analyze the flow of funds of on-chain addresses, including the source and destination of funds, counterparties, etc. Through this tool, users can clearly track every link of the flow of funds, identify risky addresses and potential illegal activities. For example, relevant on-chain information on USDT fraud and hacker bankruptcy cases can be queried, as well as the flow of funds of celebrity addresses.
Amber emphasized that the visualization function of these tools can help users better understand on-chain data. She pointed out that although the on-chain query process may be dazzling, through OKLink's compliance analysis tools, users can more intuitively see the capital flow path and the relationship links related to it, so as to make more informed decisions.
She encouraged users to make more use of these on-chain tracking tools to ensure the safety of their funds and comply with compliance. If users have any data query needs, the OKLink team can also provide support to help users with data analysis and problem solving.
Q4
An in-depth discussion of the legal consequences for individuals and businesses in the crypto industry under the new regulations. What behaviors constitute crimes under the new regulations and what behaviors do not constitute crimes? How can you protect yourself and your business under the new legal environment?
Dr. Ji first clarified some misunderstandings when discussing the legal consequences of the new regulations on individuals and companies in the crypto industry. He pointed out that for most ordinary investors, the regulations and related crimes in the new judicial interpretation will not pose a direct threat to them because they cannot access funds related to the seven types of crimes. Therefore, ordinary investors do not need to worry too much about the impact of these regulations on themselves. Instead, they need to pay more attention to whether their investment behavior is compliant and ensure that they do not cross the legal red line.
However, for OTC merchants, the risk is relatively large. Dr. Ji specifically mentioned that some OTC merchants have indescribable connections with illegal activities such as underground banks and may have participated in money laundering activities related to seven types of crimes. The introduction of the new judicial interpretation is aimed at cracking down on these money laundering activities carried out through virtual currencies. The implementation of this policy will help reduce the possibility of black money in the industry and purify the market environment. Despite this, Dr. Ji believes that this is a good thing for the crypto industry because it can improve the transparency and legitimacy of the industry.
Dr. Ji made specific legal suggestions on how to protect yourself and your business under the new regulations. First, it is necessary to clarify what acts constitute a crime under the new regulations and what does not. Acts involving money laundering with virtual currencies will be considered crimes, especially those that cooperate with underground banks or help them transfer funds. In contrast, ordinary users who conduct legal transactions on compliant trading platforms and comply with laws and regulations such as KYC (Know Your Customer) and AML (Anti-Money Laundering) will generally not be considered criminal acts. For OTC merchants, special care is needed to ensure the legitimacy of transactions and the clear source of funds, and avoid transactions with any counterparties that may be involved in money laundering or other illegal activities.
Dr. Ji also suggested that ordinary investors should choose exchanges with good reputations and in compliance with regulatory requirements for trading. At the same time, use on-chain tracking tools to ensure the legitimacy of counterparties and stay away from any suspicious activities or unauthorized links and websites. For enterprises, the new regulations require enterprises to strengthen anti-money laundering measures and ensure compliance operations. Enterprises need to establish a sound internal control and compliance review mechanism to ensure the legitimacy of all transactions and the clarity of the source of funds, and regularly train employees to understand the latest laws and regulations.
Overall, although the implementation of the new regulations may have some negative impact on the short-term liquidity of the market, Dr. Ji believes that in the long run, these regulations will help purify the market and enhance the transparency and security of the entire industry. He encouraged industry practitioners to take a positive attitude towards the new regulations and hoped that the judicial interpretation could play its due role in regulating and purifying the entire crypto industry.
When discussing the legal consequences of the new regulations on individuals and companies in the crypto industry, Lawyer Liu first emphasized the changes in the environment for the use of crypto assets. He believes that virtual assets in the current crypto industry, especially mainstream stablecoins such as USDT, are facing increasing risks of gray and black industries. Compared with traditional virtual asset users, most users now are actually those engaged in foreign trade, compliant regions, and gray and black industry institutions abroad. Therefore, the probability of individual investors encountering "black U" during transactions may increase, which is not good for the short-term healthy development of the market.
However, Lawyer Liu pointed out that this situation will gradually improve. In the traditional financial system, the compliance responsibility for anti-money laundering is usually borne by financial institutions and enterprises, not ordinary users. Similarly, in the crypto industry, the future anti-money laundering and KYC compliance pressure will also be transferred to B-side enterprises, such as stablecoin issuers, crypto trading platforms, licensed OTC merchants, etc. This means that end users only need to choose platforms or service providers with high security levels to trade, thereby reducing the compliance burden of individual users. Therefore, the importance of security service providers and API service providers will become more prominent.
Lawyer Liu’s second point focused on the advice for Web3 entrepreneurs, especially those teams planning to go overseas or engage in native Web3 projects. He emphasized that the biggest legal risk of these projects does not come from the token issuance or business model itself, but from the anti-money laundering compliance work on the chain. Although each country has different attitudes towards the issuance of ICOs or tokens, they are consistent in anti-money laundering supervision. Therefore, for those DApp developers who conduct fund inflows and outflows and asset interactions on the chain, how to do a good job of anti-money laundering and compliance work on the chain has become a key issue. This includes how to ensure the legitimacy of user funds and how to ensure the safety and transparency of various asset interactions on the platform.
In summary, Lawyer Liu suggested that individual investors should give priority to compliance and security when choosing a platform, while for enterprises and Web3 entrepreneurs, the focus should be on anti-money laundering compliance on the chain. He believes that only by complying with the new regulatory environment can the crypto industry develop in the long term.
Q5
Please address common misunderstandings crypto users have about the new regulations. Clarify that not all virtual asset transactions are criminal, and it is crucial to understand the prerequisites for legality, helping them correctly understand these legal distinctions.
Attorney Liu clarified common misunderstandings among encryption users about the new regulations and provided relevant suggestions. First of all, he pointed out that China’s current regulatory policies on virtual currencies have not changed significantly. Since 2013, regulation has clearly prohibited three activities: public fundraising and currency issuance, business activities of virtual currency exchanges in mainland China, and high-energy Consumed virtual currency mining. However, this does not mean that all virtual asset transactions are criminal acts, and the legality depends on the specific operation and transaction behavior. For example, private placement of coins is tacitly allowed in China, and low-energy mining activities can still be carried out legally. Therefore, understanding the boundaries between legal and illegal is crucial for crypto users.
On this basis, Lawyer Liu further explained the common legal traps in the crypto field. He reminded users to be careful of so-called "investment opportunities", especially investment or proxy investment led by middlemen. These behaviors are not protected by law in China. If there is a runaway or refusal to pay, investors usually cannot seek compensation through legal channels. In addition, he also mentioned some on-chain fraud activities. When participating in staking mining, airdrops or other on-chain activities, users are prone to phishing. There may be some gains at the beginning, but when the user increases the investment, the other party may suddenly disappear. In this case, it is also quite difficult to recover the losses.
Regarding how to educate users and the community, Lawyer Liu suggested that users take some precautions. For example, when participating in on-chain activities, use a dedicated wallet or mobile phone to avoid concentrating all assets in one place, thereby reducing the risk of hacker attacks or virus infections. In addition, he also reminded users to be particularly cautious when choosing OTC traders, because some unscrupulous merchants may cause users' bank accounts or exchange accounts to be contaminated, thereby freezing assets.
Finally, Lawyer Liu made two specific suggestions for crypto users. First, try to earn income and spend it in the cryptocurrency circle, and avoid withdrawing funds to reduce compliance risks. Second, if you really need to withdraw money, you can choose to open an account with a licensed institution or crypto-friendly bank abroad. These banks usually provide virtual asset accounts and traditional legal accounts, which are convenient for conversion between accounts. Although the cost is higher, it is also more secure.
In summary, Lawyer Liu recommends that users and communities should maintain a clear understanding of the legal issues in virtual asset transactions, be familiar with relevant domestic and international laws and regulations, and adopt compliant and safe investment and trading methods to reduce potential legal risks.
Q6
How will the new regulations promote more robust and transparent industry practices? What areas of growth and innovation may emerge within the industry driven by compliance requirements? How may these changes affect China’s position in the global cryptocurrency market?
Amber mentioned that as the data infrastructure continues to improve, the on-chain address tag library will become more accurate and comprehensive. By combining advanced AI technology, the transaction behavior of addresses on the chain can be analyzed and more subdivided labels can be intelligently added to addresses. This will significantly improve risk detection capabilities, allowing Web3 users to conduct more in-depth risk assessments when accessing links or querying addresses, thereby minimizing risks.
In addition, Amber pointed out that with the diversification of the on-chain ecosystem, more and more blockchain network platforms are emerging, and users will be exposed to more diverse assets. In this context, it is particularly important to provide users with intelligent and efficient data tools. For example, OKLink recently launched the EaaS (Explorer As A Service) service, which is a zero-cost blockchain browser solution. Any network platform, especially a public chain or rollup platform, can build its own blockchain browser in a few days. This will greatly facilitate users to query and obtain diverse data, and provide data support for rational investment decisions.
Amber further emphasized that API is also an important direction for future development. She mentioned that OKLink's Open API has been recently upgraded to adapt to more diversified scenarios. The newly upgraded API provides developers with more calls and different gradients, and is competitive in the industry. These improvements are based on multiple data surveys and are designed to better serve project parties and users with technical needs, allowing them to more conveniently call diverse data such as transaction addresses and block contracts.
In summary, driven by compliance requirements, Amber believes that in the future, users will be able to obtain on-chain address data in a smarter and more convenient way, and the richness and segmentation of data will be further improved. These advances will not only help users better manage risks, but will also promote the rapid development of the Web3 industry. The new regulations will make the industry more robust and transparent in terms of data infrastructure and risk management, while stimulating growth in more innovative areas, thereby enhancing China's position in the global cryptocurrency market.
Xiaoxiao pointed out that the core of the new regulations is to limit capital flight and combat cryptocurrency fraud. He believes that these new regulations will help make industry funds cleaner and eliminate non-compliant OTC merchants. He mentioned that as a compliant OTC merchant who has solved bank risk control and funding source issues since 2017, the new regulations are actually beneficial.
Xiaoxiao further explained that the introduction of the new regulations proves that China's domestic regulation of cryptocurrencies is still continuing to increase. In the short term, he does not think that this regulatory attitude will change, and it may even be improved. Although Hong Kong is gradually opening up its cryptocurrency-related policies, due to the risks of capital flight and fraud, the opening of these policies is difficult to flow into the mainstream market in mainland China.
From another perspective, Xiaoxiao believes that these policies may be preparing for future market access. Just like gold was used as a way to launder money in the past, although there is a risk of money laundering, as long as the source of funds is legal, users do not need to worry. For example, users buying or selling game equipment will not be considered money laundering. Therefore, the key to the problem lies in whether the funds are clean or not.
He also mentioned that most people do not flee large amounts of money, so for ordinary users, as long as they follow the normal process, the risk is controllable. If large transactions are required, users can choose to withdraw funds through some crypto-friendly institutions in Hong Kong and other places.
In summary, Xiaoxiao believes that the impact of the new regulations will not be particularly large, because these regulations are, to some extent, just a further refinement of previous regulations. He emphasized that the focus of regulation is on the legality of the source of funds, rather than suppressing all cryptocurrency traders. He concluded that the new regulations will help promote the steady development of the industry, but the actual impact on ordinary users will be small.
Conclusion
Through an in-depth discussion of the new judicial interpretation in the field of virtual asset supervision, we can see that the introduction of this new regulation has established a clearer and stricter compliance framework for China's cryptocurrency market. The new judicial interpretation not only improves the transparency of supervision, but also strengthens the crackdown on money laundering, laying the foundation for the healthy development of the market. In this discussion, experts unanimously agreed that although supervision is tightening, there is still room for compliance development in the virtual asset market. This is both a challenge and an opportunity for practitioners and users - under the premise of compliance, the use of virtual assets still has its legal and reasonable side. With the increase in demand for security services, the market will continue to evolve and develop. Whether you are an investor or a practitioner in the field of virtual assets, you should keep up with policy changes and seek compliance operations and business opportunities under the new regulations. We all look forward to the new regulations bringing a more robust and transparent development path to the industry.
#OTC #合规 #3Friends
