China has already cracked down the entire crypto industry. Today, during the 2021 First Lujiazui National Financial Security Summit and the 11th China Anti-Money Laundering Summit, People’s Bank of China’s Anti-Money Laundering Monitoring and Analysis Center stated that digital assets can satisfy the privacy, wealth appreciation, and currency trust of some people.
Gou Wenjun, the director of the analysis center, said that at the same time, crypto’s decentralized, anonymous, and borderless features bring many underlying risks, including tax evasion, terrorist financing, gambling, money laundering, drug trafficking, extortion, and other illegal activities.
China mentions four aspects to look into
Wenjun thinks that crypto’s innovative nature and iteration speed make it extremely fast, and therefore, it requires better risk supervision and governance. He further added that there are four aspects to pay attention to while managing risks involved in digital assets:
- Define the non-financial characteristics of digital assets and improve regulatory procedures for new virtual assets. They are inherently separated from the outside world and have some interoperability, making them ideal for criminals to use as a money-laundering method.
- Improve virtual asset transaction assessment and analysis to penetrate and uncover the essence of digital asset transactions. As the exchange link between legal currency and virtual assets, banks and payment institutions should verify virtual asset transaction participants with real names and enhance the ability to spot fraudulent activity.
- Establish a virtual asset transaction traceability and scene tracking system and boost the innovative application of new technologies. One approach is to widely deploy address probes and use artificial intelligence, machine learning, and other technologies to label accounts that transact with the probe address directly or indirectly. The second step is to create a transaction value model that can be used to detect different transaction scenarios from massive transaction data using clustering and other technological methods. The final step is to use address labeling and transaction scenario feature clustering to combine the information given by law enforcement agencies, trading platforms, and foreign financial intelligence agencies.
- To build an international collaborative force against crimes involving virtual assets, improve information sharing and collaboration with abroad financial intelligence agencies. With 60 foreign financial intelligence agencies, the Anti-Money Laundering Center of China will continue to strengthen sharing of information and co-investigation coordination.