On February 26, 2026, the Third Criminal Division of the Supreme People's Court publicly included virtual currency money laundering in the key crackdown scope of telecom network fraud-related crimes, sending a new round of high-pressure signals at the judicial policy level. This action is a response to the continued tightening of regulations around cryptocurrency trading and related businesses since the "9.24 Notice" in 2021, maintaining a progressively escalating regulatory chain, rather than an isolated sudden event. On one end, there are the inherent advantages of cryptocurrency assets arising from cross-border liquidity and global accessibility; on the other end, there is the judicial high pressure surrounding telecom fraud money laundering and cross-border capital flight. The two are colliding, pushing China's crypto environment further towards a direction of "zero tolerance for criminal funds."
Supreme Court Takes Action: Virtual Currency Money Laundering Named
● Public information shows that on February 26, 2026, the Third Criminal Division of the Supreme People's Court explicitly mentioned "using virtual currency for money laundering" in a release related to telecom network fraud and included it in the scope of crackdowns alongside fraud-related crimes. Based on currently available official statements, the relevant description is limited to principle-based qualifications such as "including virtual currency money laundering in the scope of fraud crackdowns," with no more detailed operational rules or quantifiable standards disclosed yet.
● Notably, the Third Criminal Division also listed using virtual currency and underground banks for money laundering as key targets for crackdowns, viewing both as critical "channels" on the same gray funding chain. This statement signals that judicial authorities have placed on-chain assets and traditional "black channels" within the same regulatory scope, meaning virtual currencies are no longer merely "emerging risks" but are structural money laundering tools, akin to underground banks.
● The call to "strengthen the application of property crimes" implies that in future cases involving virtual currency-related telecom fraud money laundering, the processes of seizing, confiscating, and applying fines on the involved assets may face stricter measures, leaning more towards a focus on "completely eliminating criminal gains." However, there currently is no specific judicial interpretation publicly available, and details regarding amount thresholds and disposal procedures remain in a gray area. One can only infer that overall, property-related sanctions will become stricter, but cannot extrapolate operational intricacies from this.
From 9.24 to Today: The Extended Line of High Pressure
● Looking back at September 24, 2021, the "9.24 Notice" jointly released by multiple departments defined cryptocurrency trading and related businesses as illegal financial activities, classifying activities such as organizing virtual currency transactions and providing matching and technical support as unlawful. This led to a sudden "emergency stop" in the domestic market and service institutions at that time. Since then, business models related to cryptocurrency assets, such as trading matching, client asset management, and marketing promotion, have been systematically compressed and cleared out within China.
● Between 2021 and 2025, Chinese judicial authorities have continuously pushed for multi-dimensional crackdowns around telecom network fraud and cross-border capital chains, gradually accumulating judicial experience in aspects such as cross-border transfers, funding channels, and upstream-downstream division through criminal judgments. The main line of regulatory and judicial practice has always revolved around "blocking capital flight channels." Within this framework, it has gradually extended from traditional underground banks and bank card "scoring" to Hong Kong, Macau, overseas accounts, and then to the transfer and liquidation of on-chain assets, forming a coherent high-pressure path.
● The prevailing interpretations in the market and legal circles suggest that this explicit inclusion of virtual currency money laundering in the crackdown on fraud is a re-upgrade regarding criminal flows of cryptocurrency, rather than a reversal of the regulatory tone established in 2021. Some opinions bluntly state that this is "another round of high-pressure upgrade against criminal financial flows of cryptocurrency assets following the '9.24 Notice' in 2021," indicating that the regulatory logic remains "to compress gray areas," while also bringing more new technical forms into the existing crackdown framework, rather than signaling any relaxation.
Telecom Fraud Capital's Cross-Border Great Escape: The Role of Virtual Currency
● In typical cross-border transfer pathways of telecom fraud capital, virtual currency is often designed as a key “stepping stone” and “cleaning agent.” Funds are first centralized through bank cards, payment accounts, and other means, then purchased on-chain assets by "card farmers" or "money laundering shops," completing the transformation from fiat currency to cryptocurrency; thereafter, through multiple chains, addresses, and platforms, they are split and transferred, ultimately landing overseas to be exchanged back for local fiat currency, achieving both "cleaning" and "escaping," significantly weakening the interception capabilities of traditional regulatory tools.
● Virtual currencies inherently possess high liquidity and global accessibility, allowing cross-border transmissions to be almost free from physical boundaries and time zone restrictions, and can be quickly exchanged and moved through multiple overseas platforms. This "around-the-clock, cross-jurisdictional" capability of fund movement makes it one of the channels closely monitored by judicial authorities. Once exploited systematically by fraud groups, massive amounts of funds can be transferred across borders in a very short time, breaking through the regulatory nets of traditional banking and exchange systems.
● In the “closed-loop crackdown” concept formed by Chinese judicial authorities regarding cross-border telecom fraud capital, blocking every key link in the capital chain is a prerequisite for reducing the scale of cases and recovering losses. Officially including the virtual currency money laundering aspect within the scope of crackdowns on fraud-related crimes fills a regulatory shortfall in new funding pathways from a system design perspective, making the "domestic collection – virtual currency stepping stone – overseas landing" chain legally tend towards complete coverage, becoming an important part of the high-pressure system.
Anonymous Addresses and Evidence Gathering Dilemma: The Practical Judicial Challenge
● Virtual currency transactions generally rely on address systems and decentralized account structures, with on-chain addresses not naturally corresponding to real identities. Coupled with multi-chain and multi-platform transitions, funds can cross-chain between different public blockchains and circulate back and forth across various exchanges and wallets, presenting structural challenges to traditional funding traceability methods that rely on account identity verification, account opening materials, and bank statements. The entire circulation path exhibits strong fragmentation and de-identification characteristics.
● For judicial bodies, how to accurately gather evidence on-chain, how to gain platform cooperation in cross-border scenarios, and how to prove "who is actually controlling these assets" in court, are all high-difficulty problems in reality. Even if transaction hashes and address movement trajectories are grasped, it is still necessary to piece together multi-source evidence such as operator records, device evidence, communication logs, and third-party platform data to bind a specific address to concrete individuals or organizations, which tests the judicial system's adaptability in both procedure and standards.
● In this context, officially including virtual currency money laundering in the crackdown on fraud-related crimes is beneficial in legally unifying the judgment reasoning and evidence standards: which on-chain actions may be considered part of the "money laundering process," how to recognize accomplices and aiders, and how to evaluate the subjective intent of technical participants, are all expected to be gradually clarified in future judicial interpretations and typical cases. However, current public information has yet to touch on these details, and related standards still await future solidification through interpretations and precedents.
Compliance and Gray Boundaries: Concerns for Ordinary Crypto Users
● From the judicial characterization perspective, what was specifically named this time was the behavior scenario of "using virtual currency to launder criminal proceeds from telecom fraud and other crimes," rather than a "one-size-fits-all" criminalization of all ordinary holding, transferring, and configuring of cryptocurrency assets. However, in practice, distinguishing "money laundering activities involving criminal proceeds" from ordinary asset management and cross-border transfers requires a comprehensive judgment that combines multiple factors such as source of funds, transaction parties, and link characteristics, with boundaries not determined by a single element.
● High risks often emerge in gray combinations involving OTC, bank card inflows and outflows, and overseas exchanges: some users, in order to evade restrictions or pursue price differentials, participate in unlicensed OTCs, borrow other people's bank cards, or complete coin listing or cashing through multiple layers of "intermediaries." If upstream funds have a fraudulent background, even if they are not direct participants in the fraud, they may still get caught up in the entire chain during judicial reviews, facing risks of being implicated in "aiding money laundering" or related charges.
● For the market, what truly requires attention is the upcoming typical cases and official interpretations, including how to describe the flow of virtual currencies in judgment documents and how to distinguish between good-faith users and malicious participants, rather than inciting excessive panic based on second-hand rumors or emotional interpretations. In a phase of highly asymmetric information, cautiously identifying the sources of information and avoiding participation in funding channels with unclear legal risks is more practical than merely discussing price fluctuations.
The High-Pressure Cycle Is Not Over: The Long-Term Game between Regulation and Crypto
From a directional perspective, this judicial pronouncement from the Supreme Court further consolidates the basic tone of China's crypto environment: stricter on criminal funds, nonease on speculative activities, continuously compressing the space for behaviors using virtual currencies as stepping stones or cleaning tools for telecom fraud. Under this logic, the legal living space for cryptocurrency assets in the Chinese context will increasingly depend on whether they can sever ties with gray funding chains, rather than the narrative of “innovation” inherent in the technology itself.
In terms of cross-border fraud governance and global compliance trends, China will likely evolve along the path of "enhancing monitoring—enriching precedents—upgrading rules" at the levels of on-chain regulation, technological cooperation, and judicial interpretation: on one hand, enhancing cross-border asset recovery abilities through information cooperation with more overseas judicial and regulatory bodies; on the other hand, gradually refining the application standards of virtual currency-related crimes using typical cases as a lever, allowing on-chain evidence to transition from "technical clues" to a judicial evidence system that can withstand court scrutiny.
For participants in the cryptocurrency industry, during a cycle where high pressure has not yet peaked and rules are still being formed, the only viable survival strategy is to migrate towards transparency and compliance: avoiding involvement with unqualified channels, maintaining verifiable records of fund sources and flows, and placing importance on compliance consulting and risk assessment. Only by proactively connecting with judicial and regulatory systems, rather than operating on the gray edges, can the industry potentially preserve a sustainable development path in the long-term game.
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