China’s courts have been asked to impose restrictions on suspected money launderers using digital yuan. The country’s Supreme Court has issued guidelines authorizing lower courts to seize and confiscate illegal funds and freeze accounts used in the crime.
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Circumstances
The document spells out several circumstances in which criminal activity using digital yuan should be considered money laundering. These include the use of central bank digital currency (CBDC) to conceal, disguise or transfer proceeds of crime, terrorist financing or tax evasion. The directive comes amid China’s ongoing crackdown on money laundering through cryptocurrencies. Last month, the country’s State Council outlined measures to eradicate cryptocurrency-related crimes by 2023, including criminalizing the use of cryptocurrencies to evade capital controls.
CBDC
China’s CBDC system, which is currently in the second phase of large-scale testing, is designed to provide a more secure and controlled alternative to cryptocurrencies such as bitcoin. The digital yuan is issued by the central bank and has a number of operational differences from private cryptocurrencies, making it easier to track and manage. The new guidance emphasizes that the digital yuan is subject to the same anti-money laundering rules as traditional fiat currencies. It states that courts should treat CBDC as “property” when dealing with criminal cases involving money laundering, drug production and trafficking, and terrorist financing.
The document also recommends that courts impose fines equivalent to the amount of money laundered using digital yuan and states that seized CBDC funds should be immediately confiscated. This means that the digital RMB cannot be considered legal tender in China for individuals and entities involved in criminal activities.
Regulation
The swift action by Chinese courts reflects the country’s commitment to eradicate money laundering and other criminal activities involving digital currencies. As cryptocurrencies and CBDC continue to evolve, governments and regulators are trying to keep pace with the changing financial landscape and ensure responsible use of digital currencies within the law.
This article is intended to inform, not advise. Please seek professional advice and do your own research before making any decisions related to the topics covered in this article. This article is not intended to be used as a basis for investment decisions.
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