Different sentences for similar virtual currency crimes? This Shanghai Second Intermediate Court seminar summary provides the answer.

Chief Editor | Zhai Jun, Shanghai Second Intermediate People’s Court

Text Compilation | Li Feng, Xu Hanchen

Page Layout | Zhou Yanyu

On November 25, 2025, the fourth “Zhi Zheng · Theory and Practice Colleague” Criminal Trial Seminar (click to view), organized jointly by the Chinese Criminal Law Society, the Shanghai Higher People’s Court, the Shanghai Second Intermediate People’s Court, and the Law School of Renmin University of China, was held at Shanghai Second Intermediate People’s Court. This seminar focused on the theme “Legal Uniformity in Virtual Currency Crime Cases”, adopting a “Theory and Practice 2+2” discussion format. The content of the seminar is summarized as follows:

Topic 1: Determination of “Subjective Knowledge” in Money Laundering Crimes Involving Virtual Currency

Case 1:

Cai holds a large amount of U coins. He learned online that someone was purchasing U coins at a premium of over 10% above market price, so he contacted the buyer to sell all his U coins, making a profit of 1 million yuan. Later, it was found that the funds used by the buyer to purchase U coins came from a pyramid scheme. Cai claimed he knew that the high-priced U coin transactions online were somewhat abnormal.

Case 2:

Yang purchased U coins at normal prices on a platform, then used Telegram instant messaging to find people needing to exchange U coins, and sold U coins at a price 5 cents above market price per coin. Over six months, Yang conducted more than ten thousand U coin transactions with multiple people, earning 1.2 million yuan. It was later found that 4.8 million yuan of the proceeds from Yang’s U coin sales came from others’ loan frauds.

In practice, there is controversy over how to grasp “subjective knowledge” in money laundering crimes involving virtual currency. For cases 1 and 2,

• The first view holds that, based on the recognition law of subjective to objective, the determination of subjective knowledge in money laundering should be inferred from the behavior and common sense. In case 1, Cai clearly recognized the abnormality of the transaction, and the premium was significantly beyond normal commercial logic; in case 2, Yang’s high-frequency, small-amount, anonymous transactions to steadily earn profits exhibit typical “money-muling” laundering features. Combining the transaction volume and frequency of Cai and Yang, it can be presumed that both knew or should have known that the funds involved in U coin transactions originated from upstream crimes like financial fraud, and that the proceeds were derived from such crimes, thus possessing subjective knowledge.
• The second view advocates for a comprehensive judgment of subjective knowledge in virtual currency money laundering. In case 1, Cai’s perception of the abnormality of the transaction does not equate to knowing that the funds came from seven specific upstream crimes; in case 2, Yang’s high-frequency, small-amount transactions earning minor profits do not clearly exceed reasonable bounds, and thus do not reach the level of presumed knowledge. Therefore, without premeditated conspiracy, explicit warnings, specific instructions, or abnormal communications as evidence, and considering the transaction background, professional experience, relationships with upstream criminals, and whether reasonable review obligations were fulfilled, the subjective knowledge of the behavior should be cautiously determined to prevent objective guilt.

The core of the above controversy is:

• First, whether “subjective knowledge” still constitutes the recognition content of the mental element of money laundering crime;
• Second, how to grasp the standards and methods for determining “subjective knowledge” in virtual currency money laundering cases. After discussion, the following tendencies have been formed:

The Criminal Law Amendment (Eleven) effective from March 1, 2021, made significant revisions to the criminal law provisions on money laundering, removing terms like “knowing” from the original text. It is generally believed that this was a textual adjustment to meet the needs of criminalizing money laundering behaviors, without changing the criminal structure of money laundering as a deliberate crime, nor lowering the standard of proof for the subjective element. According to the general provisions of the Criminal Law on intentional crimes and the principle of responsibility, subjective knowledge remains an essential element of money laundering, requiring the actor to know or should know that the object of concealment or disguise is the proceeds and benefits from seven categories of upstream crimes as stipulated by law. If the actor genuinely does not know the source and nature of the object, it does not constitute money laundering. Since money laundering is a special provision related to the crime of concealing or disguising criminal proceeds or benefits, when two crimes are concurrent, priority should be given to applying the money laundering offense. Moreover, if it cannot be presumed that the actor should know that the object of concealment or disguise is proceeds from the seven upstream crimes, then it does not constitute money laundering. However, based on abnormal behavior or other circumstances, if it can be inferred that the actor should have known that the object was criminal proceeds or benefits, it may constitute the crime of concealing or disguising criminal proceeds or benefits.

Regarding the standards and methods for determining “subjective knowledge” in virtual currency money laundering, the following four aspects should be grasped:

• First, the subjective knowledge element of “self-laundering” does not require special proof. When the actor commits one of the seven upstream crimes and further engages in concealing or disguising the proceeds or benefits, they obviously know the source and nature of the laundering object. But for laundering on behalf of others, it is necessary to judge whether the actor subjectively knew or should have known that the object of concealment or disguise was proceeds or benefits from the seven upstream crimes, based on evidence rules.
• Second, the subjective knowledge in “third-party laundering” includes two types: “knowing or should know.” It does not include “possibly knowing,” nor should subjective knowledge be inferred solely from abnormal behavior. Judging whether the actor has subjective knowledge generally involves evidence-based verification and factual inference. The “Interpretation of Several Issues Concerning the Application of Law in Handling Criminal Money Laundering Cases” issued by the Supreme People’s Court and the Supreme People’s Procuratorate on August 20, 2024 (hereinafter “Money Laundering Interpretation”) generally adopts a “rebuttable presumption of facts” model. To establish that the actor knew the source and nature of the laundering object, direct evidence such as confessions, co-defendants or witnesses’ testimony, and communication records are used; to establish that the actor “should know,” the “rebuttable presumption of facts” method is employed, which considers the information received, the circumstances of the transfer or conversion of criminal proceeds and benefits, the type, amount, transfer, and conversion methods, abnormal transaction behaviors, and the actor’s professional background, relationships with upstream criminals, and other evidence.
• Third, factual inference is not a legal fiction but a judicial proof method consistent with objective laws. The basic facts used for inference are usually the “cause” and “effect” facts of the case, which must be verified as true. Basic facts cannot rely solely on inference to avoid “double inference.” Based on the basic facts and evidence, common sense, customary practices, and rationality are used to form presumed facts. To ensure the reliability of factual inference, and to prevent special or exceptional circumstances, it is necessary to accurately understand and apply the “exclusion of rebuttal evidence” rule in the “Money Laundering Interpretation,” which emphasizes giving the defendant opportunities to explain, rebut, or provide counter-evidence. If there is sufficient evidence proving that the defendant was unaware of the source and nature of the object, the presumption does not stand, and the crime of money laundering should not be established. It should be noted that regardless of the standard and method used, the degree of knowledge only needs to prove that the actor knew or should have known that the object of the laundering came from the seven upstream crimes.
• Fourth, in the context of virtual currency money laundering crimes, the characteristics of virtual currency must be fully considered when determining subjective knowledge. Virtual currency does not have the same legal status as fiat currency, does not have legal tender status, and should not and cannot be used as currency in the market. Stablecoins and other virtual currencies currently cannot effectively meet requirements such as customer identity verification and anti-money laundering. Engaging in activities such as exchange between fiat and virtual currency or between different virtual currencies is considered illegal financial activity. Therefore, in cases of virtual currency third-party money laundering, a comprehensive consideration of behaviors such as choosing to transfer or convert funds via virtual currency, abnormal transaction behaviors, account details, amounts, frequency, professional experience, contact and receipt of information, relationships with upstream criminals, or communication records, can lead to a correct determination of whether the actor possesses subjective knowledge.

Based on the above, in cases 1 and 2, merely relying on abnormal transaction behavior to infer that the actor knew the source of the funds is doubtful; further inference that they knew the funds came from the seven upstream crimes of money laundering requires more evidence support. Therefore, the second view is more comprehensive and reasonable in judicial practice.

Topic 2: Types of Virtual Currency Money Laundering and the Determination of Completion Standards

Case 3:

Wang transferred 9 million yuan of embezzled funds in multiple offline transactions to purchase U coins, then fled abroad. In the US, with the help of Li, who operates a virtual currency business, all his U coins were exchanged into US dollars, with Li charging a 1.5% service fee.

Case 4:

Zhang illegally obtained 50 million yuan through illegal fundraising within China. To transfer assets abroad, he arranged with Li overseas to provide money laundering services via virtual currency, charging a 15% commission. Zhang used dozens of bank cards to buy U coins equivalent to 50 million yuan, then transferred all U coins in his wallet to an account registered with an overseas virtual currency exchange operated by Li. This transaction left a record on the blockchain. Li then used multiple “coin-mixing” and transfer steps to “clean” the U coins and transferred them into an account B registered with a foreign virtual currency exchange. He then sold the virtual currency off-market to convert into US dollars, depositing into Zhang’s overseas dollar account.

In practice, there is disagreement on what type of money laundering involves transferring assets abroad via virtual currency, and how to determine the completion of the crime. For cases 3 and 4,

• The first view holds that when Wang transfers U coins to his controlled wallet, and Zhang transfers U coins into Li’s provided wallet A, both constitute “cross-border asset transfer” and are completed. Virtual currency on-chain transfers are instantaneous, technical, and borderless; once the criminal proceeds are exchanged into U coins, effective control over the proceeds is achieved, and offshore transfer is realized. Money laundering is technically completed at the moment of transfer of U coins.
• The second view believes that the crime is completed only when Wang and Zhang successfully convert U coins into legal tender. Only when virtual currency is successfully converted into widely circulated legal currency, such as USD, are the proceeds truly “laundered.” The previous exchanges and transfers are intermediate steps; only when the value of the proceeds is realized does the “cleaning” complete. A third view suggests that the concept of physical borders should be set aside, and the completion standard should be the transfer of funds outside the original jurisdiction and under the actual control of the actor. When Wang and Zhang transfer U coins into anonymous wallets outside China’s jurisdiction, the main harmful result of money laundering has already occurred, and this can be regarded as the crime being completed.

The core of the above controversy is:

• First, how to grasp the essence of money laundering and the completion standard;
• Second, what type of behavior does money laundering via virtual currency belong to, and how to judge the completion of the crime. After discussion, the following opinions are formed:

Regarding the essence of money laundering and the completion standard, three aspects should be grasped:

• First, accurately understand the criminal nature of “concealing or disguising the source and nature of criminal proceeds and benefits.” In practice, there are misconceptions that limit money laundering to “whitewashing black money” or “banking operations,” and a tendency to focus on methods rather than objects. In fact, any act of transferring, converting, or hiding the source and nature of criminal proceeds and benefits constitutes money laundering. The Criminal Law explicitly evaluates self-laundering separately. If the actor, after committing an upstream crime, further engages in transfer or conversion activities such as real estate or vehicle purchases to cover the source and nature of the proceeds, with intent and behavior to conceal, it should be regarded as money laundering, not merely a natural extension of the upstream crime.
• Second, the act of concealing or disguising the proceeds or benefits as stipulated in the crime of money laundering is itself a completed crime. Whether the source and nature of the proceeds can be verified after multiple rounds of cleaning is relative and does not affect the completion of the crime.
• Third, strictly crack down on money laundering crimes to safeguard national financial security. In the face of new situations, changes, methods, and features of money laundering, it is necessary to understand the essential characteristics and subjective-objective elements of money laundering behaviors in complex, layered, and nested methods, to effectively improve the quality and effectiveness of combating money laundering.

Regarding the classification and completion standard of virtual currency money laundering, on one hand, the crime of money laundering adopts a “list + fallback” legislative approach, classifying types of laundering behaviors. Overall, money laundering involves two main types: transferring and converting criminal proceeds and benefits, along with several specific methods. In practice, since most behaviors involve transferring assets out of the country via virtual currency, some believe it belongs to “cross-border asset transfer” type of money laundering. However, this understanding raises issues about how to define borders and grasp the standard of completion. The “Interpretation of Several Issues Concerning the Application of Law in Handling Criminal Money Laundering Cases” (Article 5, item 6) explicitly states that transferring or converting criminal proceeds and benefits through “virtual assets” is one of the methods of money laundering, providing an answer to the above disputes and facilitating the determination of the completion standard for virtual currency money laundering.

On the other hand, according to the “Money Laundering Interpretation,” transferring or converting criminal proceeds and benefits via “virtual assets” constitutes money laundering completion. Although virtual currency does not have legal tender status, considering its actual exchange value, disposability, and practical use, it has certain property attributes and can be classified as “virtual assets” as defined in the interpretation. Moreover, once a virtual asset transaction occurs, the transfer or conversion of proceeds and benefits is realized. Therefore, when the actor exchanges criminal proceeds into virtual currency, the traditional asset becomes on-chain virtual assets, completing position transfer and form conversion, and the crime of money laundering is considered completed.

Based on the above, the three viewpoints in cases 3 and 4 all have shortcomings. When Wang and Zhang exchange criminal proceeds into virtual currency, the act of converting proceeds and benefits is completed, and the crime of money laundering is fulfilled. If considering behaviors such as gathering or dispersing funds across different accounts or other transfer or conversion activities for the purpose of exchange, the completion point is even earlier.

Topic 3: Determination of Illegal Virtual Currency Business Crime

Case 5:

Li discovered that virtual currency trading was profitable, so he opened accounts domestically and abroad to engage in “arbitrage” by buying low and selling high, using RMB to buy U coins at low prices and selling at high prices in USD, or vice versa, earning a profit of 10 million yuan over several years.

Case 6:

Hu operates a virtual currency trading business in the US. Some Chinese clients need to exchange USD, and some US clients need to exchange RMB. Hu helps Chinese clients convert U coins into USD and transfer to designated overseas accounts, and helps US clients convert U coins into RMB and transfer to designated domestic accounts, earning over 3 million yuan in fees.

In practice, there is controversy over whether behaviors involving cross-border two-way exchange of virtual currency constitute " disguised foreign exchange trading," and how to determine the crime of illegal operation. For cases 5 and 6,

• The first view believes that Li and Hu’s behaviors both constitute disguised foreign exchange trading, and should be prosecuted for illegal operation. Essentially, they use virtual currency as a medium in a cross-border context to complete RMB-USD exchange, fitting the characteristics of disguised foreign exchange trading, severely disrupting the national foreign exchange management order.
• The second view argues that Li and Hu do not constitute illegal operation. The currency conversion activities linked by U coins are not directly equivalent to foreign exchange trading, and Li has no subjective intent to help others exchange foreign currency, merely objectively causing conversion between different currencies; Hu’s operation in the US is permitted by local law. Their transactions involve virtual currency, not foreign exchange, and should not be regarded as illegal operation; if evidence shows their behavior meets the elements of money laundering, they can be prosecuted for money laundering.

The core of the above controversy is: whether behaviors of using virtual currency as a medium to realize RMB and foreign currency exchange constitute disguised foreign exchange trading in violation of national regulations, and whether serious circumstances can lead to criminal conviction for illegal operation. After discussion, the following opinions are formed:

Illegal operation is an administrative offense. When using virtual currency as a medium to realize RMB and foreign currency exchange, whether it constitutes disguised foreign exchange trading as an illegal operation requires attention to the following:

• First, the characteristic features of illegal operation include business nature and profit motive, distinguishing it from non-commercial activities. Business nature refers to continuous and repeated activities, not occasional or one-time; profit motive emphasizes the pursuit of economic benefits. For virtual currency transactions, it is necessary to distinguish whether the behavior involves OTC off-market trading, virtual currency exchange, market-making, providing information or pricing services, token issuance and financing, or derivatives trading, or merely personal holding and trading.
• Second, based on the essential features of illegal operation, the key is to judge whether the behavior violates national regulations and seriously disrupts financial market order, to distinguish between crime and non-crime. For example, if the behavior involves using virtual currency as a medium to bypass foreign exchange controls, providing RMB-foreign currency exchange services for others, and earning fees or exchange rate spreads, it constitutes disguised foreign exchange trading outside the designated trading venues, disrupting financial order, and if circumstances are serious, it can be prosecuted for illegal operation.
• Third, comprehensively consider the subjective cognition, objective conduct, and profit methods of the actor to accurately determine whether it is a joint crime. In complex money laundering schemes involving cross-border transfers, layered transactions, and chain operations, organization and gang-like features are prominent. If it is known that others are illegally buying and selling or disguising foreign exchange, or there is premeditated conspiracy, and virtual currency transactions are used to help others realize RMB-foreign currency value conversion, with serious circumstances, it can be prosecuted as an accomplice of illegal operation.

Accordingly, in case 5, if Li’s behavior lacks the characteristics of business operation and is merely personal holding or trading, it generally does not constitute illegal operation. But if he knowingly assists others in illegal foreign exchange activities or disguised foreign exchange trading, and circumstances are serious, he should be considered an accomplice of illegal operation.

In case 6, Hu’s behavior exhibits characteristics of business operation and profit motive, and he knowingly provides “domestic-virtual currency-foreign currency” exchange and payment services outside the designated trading venues, constituting disguised foreign exchange trading, and illegally profits over 3 million yuan, which should be recognized as illegal operation.

Summary and Comment

Huang Xiangqing, Deputy Director of the Social and Legal Committee of the Shanghai CPPCC, former Vice President of Shanghai Higher People’s Court:

• First, regarding the determination of “subjective knowledge” in virtual currency money laundering crimes, subjective knowledge is an essential element of intentional crimes. There are two methods for establishing subjective facts: evidence-based verification and factual inference. When applying factual inference, attention should be paid to providing defendants with opportunities to explain and rebut.
• Second, regarding the completion of “cross-border asset transfer” in virtual currency cases, the standard should be based on the common state at the time of the specific crime. Therefore, money laundering is generally regarded as a conduct crime.
• Third, regarding the determination of illegal operation involving virtual currency, firstly, the essential features of illegal operation should be emphasized, namely the legal interests protected by the crime; secondly, the evaluation should focus on the integrity of the conduct and avoid fragmentary conclusions; finally, the appearance of the conduct should match the elements, and illegal operation usually has stages, repetition, and illegal profit motives.

Yang Dong, Vice President of the China Securities Law Society and Dean of the Law School of Renmin University of China:

• First, on subjective recognition, in the absence of legislation and insufficient financial regulation for virtual currency in China, it is necessary to cautiously use presumption based on national conditions and policy guidance, strictly controlling the scope of “knowing.”
• Second, on the completion of money laundering, it should be recognized from a unified legal perspective that virtual currency has property attributes and deny its financial attributes, with the transformation of proceeds’ form—such as transfer or conversion from off-chain assets to on-chain assets—as the mark of completion, and strictly crack down on money laundering.
• Third, on illegal operation of virtual currency, the legal elements of the crime should be the starting point, considering the decentralization, borderless nature, and high volatility of virtual currency transactions. It is also necessary to implement the policy of the central bank to ban virtual currency trading platforms, accurately distinguish between platform operations and individual trading activities, and separate illegal domestic transactions from legal foreign virtual currency operations, to effectively combat crime and prevent risks from abroad from spreading domestically, while respecting public needs and avoiding excessive suppression that could impact foreign-related legal development, ensuring the public perceives judicial fairness and justice.