Supreme People’s Procuratorate (SPP) Ramps Up Anti-Cybercrime Campaign

China's Supreme People’s Procuratorate (SPP) is intensifying its efforts to combat the surge in cybercrimes, particularly those exploiting blockchain and metaverse projects for illegal activities. In a recent press release, the SPP expressed grave concern over the escalating incidents of online fraud, cyber violence, and personal information infringement.

Rise in Cybercrimes and Financial Frauds

The SPP has noted a significant uptick in cybercrimes committed on blockchains and within the metaverse, with criminals increasingly turning to cryptocurrencies for money laundering, making it difficult to track their illicit gains. Deputy prosecutor-general Ge Xiaoyan highlighted a staggering 64% year-on-year increase in charges related to cybercrime and telecom fraud, underlining the growing severity of the issue.

Expansion of Criminal Activities into Cyberspace

Traditional crimes such as gambling, theft, pyramid schemes, and counterfeiting have expanded their operations into cyberspace, exacerbating the challenge for law enforcement agencies. Charges related to internet theft have surged by nearly 23%, while charges linked to online counterfeiting and the sale of substandard goods have seen an alarming increase of almost 86%.

Cautionary Warning to Citizens and Investors

Zhang Xiaojin, director of the Fourth Procuratorate of the SPP, issued a stern warning regarding investment scams in the local crypto economy. He highlighted the emergence of new cybercrimes exploiting the metaverse, blockchain, and binary options platforms, stressing the need for heightened vigilance among citizens and digital asset investors.

Divergent Regulatory Approaches

China's approach to combating digital asset-related crimes differs markedly from that of Hong Kong. While Hong Kong has adopted crypto-friendly regulations to foster innovation while safeguarding investors, China has opted for a more stringent regulatory stance to curb illicit activities in the digital asset space.

Central Bank's Emphasis on Regulatory Cooperation

In its latest financial stability report, the People’s Bank of China (PBoC) underscored the importance of collaborative efforts among nations to effectively regulate the cryptocurrency industry. Despite imposing bans on most crypto transactions and mining activities, mainland China has retained its status as a significant crypto-mining hub, necessitating comprehensive regulatory measures.

Proposed Legislative Amendments

China is poised to overhaul its outdated Anti-Money-Laundering (AML) legislation to address the escalating risks associated with virtual assets. The draft amendment, discussed at a State Council meeting chaired by Chinese Premier Li Qiang, will soon undergo scrutiny by the national legislature. While specifics of the proposed amendment remain undisclosed, legal experts suggest its primary aim is to combat money laundering facilitated by virtual assets.

Strengthening Regulatory Frameworks

China's proactive stance reflects a growing recognition of the urgent need to tackle cybercrimes linked to blockchain and the metaverse. As digital landscapes evolve, regulatory frameworks must evolve in tandem to mitigate risks and safeguard investors. The collaborative approach advocated by the PBoC underscores the global nature of the challenge, emphasising the imperative of concerted action to fortify financial systems against emerging threats.

Striking a Balance

As China escalates its crackdown on cybercrimes, particularly those exploiting blockchain and the metaverse, it highlights the growing need for robust regulation in the digital asset space. While the measures aim to curb illicit activities, they also pose challenges for innovation and legitimate ventures within these emerging technologies. Balancing regulatory oversight with fostering technological advancement remains a key challenge for policymakers globally.