Did China Just Impact Crypto’s Worldwide Money Laundering Viability?
Last week China instituted a blanket ban on all cryptocurrency transactions and mining, a move that could irreparably damage the cryptocurrency market worldwide and its viability as a money laundering channel. This ban was supported by the Chinese central bank, its securities and foreign exchange regulators and eight other agencies. According to Reuters, the Chinese government and these agencies have agreed to work together, which is apparently a big deal, to stop “illegal” cryptocurrency activity.
The illegal activity they are referring to is, of course, money laundering. As I have covered in the past few weeks, cryptocurrencies are ripe for money laundering activity. There is basically zero oversight on the crypto exchanges. The Chinese are having none of it. According to a statement from the People’s Bank of China, cryptocurrencies have disturbed the country’s financial order and have, “led to money laundering, illegal fundraising, fraud, pyramid scams and other illegal and criminal activities.”
There has been some confusion since the announcement, at least for those outside of China, considering that this is not the country’s first ban on cryptocurrency. The key this time around is that the country has issued a blanket statement banning all transactions and business dealings that even remotely touch cryptocurrencies. It holds everyone in China accountable for their dealings.
Is this the end game for a large swath of crypto-money launderers?
The Chinese government has been putting the pieces in place to establish this ban for months, and so last week’s announcement comes as no surprise to anyone who was actually paying attention. Smart CryptoCriminals with operations in China certainly heard these warnings and stopped their crypto-laundering operations in China months ago, or moved them elsewhere. The only type of money laundering that can take place in China today, or at least until it launches its own homegrown cyber currency, the digital Yuan, will be the old fashioned kind — gambling, real estate, startup ventures, etc.
The ban on cryptocurrency mining operations will also adversely affect crypto-money laundering operations. Nearly half of the world’s crypto mining operations were based in China, with the US a distant second at nearly 17%. For those who don’t know what cryptocurrency mining is, it is the process through which bitcoin and other cryptocurrency tokens are created by solving extremely complex, computational math problems. It is how new transactions are verified by the network, which are added to the blockchain. If there are suddenly 50% fewer crypto coins being mined (created) worldwide, that greatly reduces the crook’s ability to avoid detection. He or she goes from swimming in a blue ocean to a red ocean quickly because the visibility and value of each coin increases dramatically.
No one survives in a red ocean.
Pro-cryptocurrency activists have no means to fight the Chinese government’s decision. They are also swimming in a red sea. Not only does Bitcoin, Ethereum, etc., threaten the communist country’s established currency, which is a dicey move, but the mining of cryptocurrency has also been positioned in the Chinese press, by the Chinese government, as a huge waste of valuable energy resources. At the end of the day, they win the PR war by simply spinning the production of cryptocurrency as harmful to the planet. And in China, the Chinese government is never wrong, so it should be an easy win.
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