China Court Sets ’Should Have Known’ Standard for Crypto Laundering Cases

Chinese judiciary takes hardline stance on crypto compliance—ignorance no longer an excuse.

Legal Precedent Established

A landmark ruling now holds individuals accountable for what they 'should have known' about cryptocurrency transactions, raising the bar for due diligence across the ecosystem. The court's decision signals tighter regulatory scrutiny—because apparently, trusting strangers with digital assets requires more skepticism than buying meme stocks.

Compliance Just Got Complicated

This standard forces participants to actively monitor transaction origins or face consequences. No more pleading ignorance when questionable funds flow through wallets—the burden of proof shifts squarely to users. It’s the financial equivalent of 'you should’ve known that sushi from a gas station was risky.'

Global Implications Brewing

While specific to China, this precedent could inspire similar frameworks worldwide. Regulatory dominoes are falling—and crypto’s wild west era might be heading for a sheriff. Because nothing says 'mature asset class' like needing a legal team to send Ethereum.

Court Establishes New Precedent for Crypto-Related Money Laundering

In August 2024, the defendant, who appears as Liu in the press report, knowingly sold USDT tokens to someone else in exchange for 200,000 yuan, $27,850 in cash. The court determined Liu was aware that the money came from fraud victims. Authorities could not trace where the illicit funds ultimately went.

Liu’s conviction marks a significant legal precedent in China’s cryptocurrency enforcement landscape. The court ruled that Liu’s actions constituted concealing and disguising criminal proceeds under Chinese law. Liu received a 3.5-year prison sentence plus a 40,000 yuan, $5,570 fine.

The case highlights China’s increasingly strict approach to cryptocurrency-related crimes. Semi-official media coverage suggests authorities are sending a clear warning to market participants. Previously, courts lacked clear precedents for prosecuting suspicious digital currency transactions.

Legal experts note the ruling’s emphasis on the defendant’s knowledge of criminal origins. Courts determined Liu understood the cash’s illicit nature despite his denials. The “should have known” legal standard applies even when defendants claim ignorance.

Enforcement Escalating

Last year, a Beijing court sentenced a tech executive to 14 years for orchestrating a $19.5 million cryptocurrency laundering scheme. Chinese courts have also sentenced gangs for money laundering using the digital yuan, with prison terms ranging from 7 to 16 months. Police in Qingdao are prosecuting a case involving USDT laundering of over 8 million yuan.

China’s Supreme People’s Procuratorate reported prosecuting 2,971 people for money laundering in 2023, representing a 20-fold increase from 2019. In August 2024, China’s Supreme Court revised anti-money laundering laws to explicitly recognize crypto transactions as money laundering methods. Authorities now consider laundering amounts over 5 million yuan serious offenses under the law.

The precedent establishes more precise boundaries for cryptocurrency trading in China’s restrictive regulatory environment. Market participants now face heightened legal risks when engaging in digital asset transactions.