Since the first quarter of this year, China’s central bank has made unprecedented efforts in anti-money laundering, as the fines related to anti-money laundering have almost equal to last year. Many enterprises engaged in OTC, transaction, loan in the crypto space have been investigated more frequently recently by the local financial bureau and the police.
38 branches of the central banks in 18 provinces issued 94 anti-money laundering fines to 93 anti-money laundering obligors and relevant responsible persons, with a total penalty amount of 183 million Chinese yuan in Q1. The penalty amount increased nearly four times year-on-year, and the number of penalties increased by more than 50%.
Among them, the third-party payment institution, ‘ShangYinxin’ Payment was given a warning due to a number of violations, and the total fine exceeded 115 million Chinese yuan. ‘ShangYinxin’ has the title of “king of gambling” in the industry. This time, it was severely punished, mainly to provide payment channels for illegal networks involved in gambling.
Since last year, bitcoin and USDT have gradually become the mainstream payment channels of many platforms due to the strict investigation of gambling, money laundering, and other payment channels. At the same time, there are a lot of gambling platforms built on cryptocurrencies. For example, most of dapps built on Justin Sun’s TRON are gambling applications.
North Korea’s hacking has also attracted regulatory attention. On March 2, 2020, the U.S. Department of Justice launched a public prosecution against two Chinese people, for conspiracy of money laundering and operate remittance without the certificate, and frozen all their assets.
During December 2017 to April 2019, the two helped Lazarus group, a hacker group under the North Korean government, provide over $100 million worth of money laundering services. The hackers attacked four crypto exchanges by fishing for the private key of the exchange, including the predecessor of China’s Gate.io, with a stolen amount of $234 million.
At present, major crypto exchanges in China have close cooperation with the financial bureau, police and other regulatory agencies. For example, Huobi launched the development of the “astrology system” in July 2018, and successfully launched the internal test in September 2019. It was officially launched on April 13 this year, aiming at suspicious or malicious assets, darknet, mixed currency services, and other risky assets, to achieve the goal of active tracking, automatic disposal of the inflow platform, and horizontal attack of association analysis.
However, for small and medium-sized exchanges as well as OTC, loans and other service providers, they do not have a unified detection model, and they can only rely on KYC real-name authentication for prevention. In addition, the current laws and regulations related to cryptocurrency are relatively vague, and the laws and regulations in the traditional financial field cannot be fully adopted.
On March 22, China’s central bank (PBOC) issued warning on Weibo, saying that through the analysis of withdrawal data of the crypto trading platform, it found that bitcoin has been transferred in several times in small amount and cleared out in large amount, which conforms to the basic characteristics of money laundering. Because of its anonymity and global characteristics, the cryptocurrency like bitcoin has become an accomplice of criminals and has great social risks, PBOC says.
However, it is also argued that the amount of cryptocurrency is still relatively small compared with traditional money laundering methods such as underground banking, so it does not necessarily become the largest target of supervision. However, it can be predicted that as the price of bitcoin and the number of cryptocurrency users increases due to bitcoin halving event, the anti-money laundering supervision in China will become stricter.