The Supreme Court cracks down on crypto money laundering, Chinese criminal networks transfer $44 million daily

On February 26, Wang Bin, the head of the Criminal Trial Third Division of China’s Supreme People’s Court, announced at a press conference on cracking down on telecom and online fraud that the next phase of court work will focus on combating crimes related to money laundering through virtual currencies and underground banks. Blockchain data analysis firm Chainalysis released a report indicating that by 2025, the Chinese-language money laundering network (CLMN) transfers approximately $44 million USD in illegal funds daily via cryptocurrencies.

Supreme Court Press Conference: Virtual Currency Money Laundering Included in Next Target List

Wang Bin clearly outlined the focus of the next crackdown, including key figures in criminal groups, the financial backers of telecom fraud, “snakeheads” organizing cross-border smuggling, organizations providing armed protection for cross-border fraud, and perpetrators committing violent crimes such as murder, injury, and kidnapping during fraud operations. Notably, “crimes involving money laundering through virtual currencies and underground banks” were explicitly named, indicating that cryptocurrencies have become a key financial crime tool under Chinese judicial surveillance.

Wang Bin also stated that the court will intensify property-based penalties against telecom fraud offenders and guide involved individuals with “two cards” (bank cards and phone cards) to voluntarily compensate victims, with restitution and remorse considered important factors for leniency in sentencing.

Chainalysis Report: Scale and Techniques of Chinese-Language Money Laundering Networks

According to Chainalysis’s latest report, Chinese-language money laundering networks mainly operate through Telegram channels and chat groups. Known as “guarantee” platforms, these intermediary services act as marketing hubs and informal third-party custodians, connecting money laundering service providers with potential clients. These posts often feature photos of large amounts of cash and customer reviews to demonstrate liquidity and service credibility.

Chainalysis National Security Intelligence Director Andrew Fierman pointed out that activities on these platforms have gone beyond money laundering, involving human trafficking and illegal transactions such as selling Starlink antennas to Southeast Asian scam centers. The client base extends from organized crime groups to sanctioned actors, including hacking organizations related to North Korea.

Main Technical Features of Chinese-Language Money Laundering Networks

Preference for Stablecoins: USDT, USDC, and other stablecoins are favored due to their low volatility and lower transaction costs, as criminals avoid market fluctuations associated with assets like Bitcoin.

Telegram as Core Platform: “Guarantee” channels provide intermediary services to evade traditional financial monitoring.

Cross-Border Layered Transfers: Funds are repeatedly transferred between multiple intermediary addresses to obscure origins.

Illicit Business Cover: Casinos and seemingly legitimate businesses are often used to artificially inflate income and facilitate cash laundering.

Law Enforcement Challenges: Cross-Border Complexity and Evolving Criminal Organizations

Mark Button, a criminology professor at Portsmouth University, stated that these criminal groups are not small-scale operations but “large, resource-rich organizations,” many of which have relocated their main activities to Southeast Asian countries like Cambodia and Myanmar, taking advantage of weaker legal frameworks and corrupt local officials. Since China banned cryptocurrency trading nationwide in 2021, partly due to its extensive use by organized crime, Chinese authorities have achieved some success. On February 26, Xinhua reported that 11 members of a Myanmar scam group were sentenced to death in China for crimes including intentional homicide and fraud.

Fierman noted that despite ongoing pressure from law enforcement worldwide, these networks remain highly adaptable: “This is how illegal activities operate—once one method is identified, they quickly shift to another.”

Frequently Asked Questions

Q: What specific behaviors are involved in the “virtual currency money laundering” highlighted by the Supreme Court?
A: According to Wang Bin, it mainly refers to using cryptocurrencies like Bitcoin and USDT or underground banks during telecom fraud crimes to layer and transfer stolen funds, concealing their illegal origin, nature, and control. Such acts constitute “money laundering” or “concealing or disguising criminal proceeds” under Chinese criminal law.

Q: Why do criminal organizations prefer using stablecoins over Bitcoin for money laundering?
A: Chainalysis’s analysis shows that stablecoins like USDT and USDC have lower volatility, reducing the risk of market price fluctuations during fund transfers. Additionally, stablecoins have lower transaction costs and faster cross-chain transfer speeds, making them more suitable for high-frequency money laundering operations.

Q: Has money laundering activity been curbed after China banned cryptocurrencies?
A: Data from Chainalysis indicates that China’s ban has not effectively eliminated related money laundering activities. Criminal groups have shifted operations to Southeast Asia, especially Cambodia and Myanmar, where regulation is weaker, continuing to transfer illegal funds via cryptocurrency channels. The complexity of cross-border enforcement and the quick adaptability of criminal organizations pose significant challenges to comprehensive suppression.