China is Taking Another Decisive Action against Blockchain Cybercrimes

China’s Supreme People’s Procuratorate (SPP), the highest prosecutorial authority in the country, has announced measures to address the escalating issue of cybercrimes, particularly those involving blockchain and metaverse projects.

The SPP’s action comes in response to a surge in online fraud, cyber violence, and personal information infringement. The SPP report outlined eight specific instances where prosecutorial bodies enforced laws to combat cybercrimes and advocated for comprehensive cyberspace management, aiming to deter future offenses.

Blockchain Cybercrimes Escalation

This is as cybercrimes committed on blockchains and within the metaverse have increased significantly with criminals leveraging cryptocurrencies to launder money, posing challenges to authorities in tracing their illicit proceeds.

Deputy Prosecutor-General Ge Xiaoyan revealed that charges related to cybercrime, particularly telecom fraud, have seen a substantial increase of 64% year-on-year. In addition to blockchain-related offenses, traditional crimes such as gambling, theft, pyramid schemes, and counterfeiting have also migrated to cyberspace.

Others highlighted by Xiaoyan were a near 23% rise in charges related to internet theft and an 86% surge in charges linked to online counterfeiting and sales of inferior goods.

Prosecutorial Measures to Curb Blockchain Cybercrime

The SPP reported that Procuratorates pressed charges against 280,000 individuals in cybercrime cases involving blockchain between January and November, marking a 36% year-on-year increase and constituting 19% of all criminal offenses.

Zhang Xiaojin, director of the Fourth Procuratorate of the SPP, cautioned citizens and participants in the digital asset space about investment scams prevalent in the local crypto economy. Xiaojin flagged the emergence of new cybercrimes leveraging the metaverse, blockchain, and binary options platforms, with digital currencies becoming prime targets for illicit activities.

In September 2022, authorities apprehended a criminal syndicate suspected of exploiting the CBDC in a money laundering scheme amounting to nearly 200 million yuan (US$27.4 million).

China’s Crackdown on Digital Assets

China’s strict enforcement against digital asset-related offenses contrasts with Hong Kong’s adoption of crypto-friendly regulations designed to standardize the digital asset ecosystem, protect investors, and promote innovation.

The People’s Bank of China (PBoC) had addressed cryptocurrency regulation and decentralized finance (DeFi) in its financial stability report, emphasizing the importance of global regulatory coordination in overseeing the industry. In 2021, the PBoC announced stringent measures which included a ban on virtually all crypto transactions and mining activities, to curb crypto adoption in mainland China, despite the country remaining a significant crypto-mining hub.