At the beginning of 2026, Shanghai Second Intermediate People's Court held a seminar on cryptocurrency-related crimes, forming a tendency opinion on the adjudication standards for related cases, which attracted attention in both the legal community and the cryptocurrency industry. As an internal consensus of judicial guidance, this opinion is not an official judicial interpretation, but it provides an important reference for courts and law enforcement agencies at all levels in handling cryptocurrency-related cases. One of the most frequently cited conclusions from the seminar is the redefinition of personal cryptocurrency holding and general trading behavior: in principle, it will not be recognized as illegal business operations, nor will it meet the strict requirements of "subjective knowledge" in money laundering offenses. With this conclusion emerging, the traditional panic narrative of "holding cryptocurrency is guilty" and "trading cryptocurrency is always highly risky" has been partially corrected. The challenge of how to combat serious crimes such as fraud and money laundering using cryptocurrency while avoiding collateral damage to technological innovation and ordinary investors has also been brought to the forefront, becoming a practical issue that Chinese judiciary must address in the emerging asset field.
Holding Cryptocurrency Does Not Equal Crime: The Safety Boundary for Retail Investors
Among the tendency opinions formed at this seminar, the most direct impact on retail investors' sentiments is the positioning of personal cryptocurrency holding and general trading behavior. According to the briefing, the Shanghai Second Intermediate Court excludes personal investments in the cryptocurrency market, based on one's own funds, from the typical evaluation category of illegal business operations, as long as they are unorganized and non-professional. The starting point of this logic is to distinguish the essential difference between "asset allocation choices" and "organized business activities": the former is closer to personal financial management, while the latter involves providing trading channels, matchmaking services, or disguised asset sales to unspecified members of the public, thus touching upon the regulatory bottom line of the state regarding financial order and fundraising activities. In terms of adjudication thinking, the seminar opinion emphasizes several key levels: first, individuals who bear their own profits and losses and do not engage in large-scale marketing or recruitment activities are generally not linked to illegal business operations; second, those models structurally similar to illegal fundraising, over-the-counter trading, or promises of capital preservation and profit will be subject to key scrutiny; third, whether the platform and organizers continuously profit through fees, spreads, or membership fees becomes the core clue for judging "operational" and "professional" status. Under this framework of distinction, the long-standing market anxiety over whether trading cryptocurrency is universally criminalized has been partially clarified, and many retail investors who previously had doubts about the safety of holding cryptocurrency have found that as long as there are no behaviors such as proxy holding, proxy trading, or proxy fundraising, their identity as "end investors" has a clearer safety boundary in the judicial context, directly responding to the popular misinterpretation that "buying cryptocurrency may be classified as a crime at any time."
Subjective Knowledge Becomes Key: The Burden of Proof for Money Laundering Charges
If the redefinition of holding and trading cryptocurrency provides a buffer zone to alleviate panic, then the Shanghai Second Intermediate Court has clearly raised the threshold for establishing money laundering offenses. According to the seminar opinion, one of the prerequisites for convicting cryptocurrency-related money laundering cases is that it must be proven that the actor had "subjective knowledge" of the upstream crime. Merely participating in asset conversion or transfer without sufficient proof of knowledge of the illegal source of funds cannot simply be inferred as subjective malice based on the outcome. The importance of this requirement in judicial practice is that law enforcement agencies cannot automatically presume that participants "knew or should have known" that the funds were criminal proceeds just because they discovered that the funds flowed through on-chain addresses and ultimately entered the cryptocurrency asset field. Instead, they need to substantively prove subjective knowledge through comprehensive evidence such as chat records, trading habits, price anomalies, and the identity background of counterparties.
However, in the reality of highly anonymous and layered technology in cryptocurrency assets, meeting this burden of proof is not easy. On-chain addresses are highly decoupled from real identities, and mixing services and privacy coin technologies further obscure the trajectory of funds. There is a natural disconnection between on-chain visible data and offline real relationships, which poses systemic challenges for investigation and evidence collection. The seminar also emphasized that once the transformation of cryptocurrency forms is completed, meaning that a complex closed loop of conversion from fiat to cryptocurrency or between cryptocurrencies has been achieved, it is considered that the money laundering behavior is "completed." This places greater compliance pressure on over-the-counter merchants and intermediaries at the front and middle of the chain. They can no longer use "I am just exchanging currency" or "I am just a technical intermediary" as a single shield, but must actively identify and block suspicious fund flows in their business processes. If they continue to turn a blind eye to abnormal sources in multiple transactions, even if it is difficult to prove that they fully grasp the facts of upstream crimes, the judiciary may examine their subjective state through the path of "knowing that it is highly likely to be criminal proceeds and allowing it." In the dual game of "subjective knowledge" and "technical anonymity," the boundaries of money laundering offenses are both highlighted as stricter and present complex characteristics that highly depend on detailed evidence in practice.
From Exchanges to OTC: Who Stands on the Edge of the Red Line
For the market, a significant value of this seminar opinion is that it delineates more operational compliance red lines for exchanges and OTC merchants. As some media commentators have noted, this opinion provides structural references for platform entities on "what they can do and what they cannot touch." Traditionally, centralized trading platforms often combine matching and some self-operated functions, acting as order matchers while enhancing liquidity through market-making strategies. However, from a criminal risk perspective, if matching is limited to providing technical matching between already verified users, and the platform is not involved in centralized fund pool management, it is closer to information technology services. But once the platform obtains excess profits through self-operated market-making, reverse betting, or price manipulation, or forms stable channels with suspected upstream criminal funds, its role in the industry chain may be re-examined.
Similarly, OTC merchants active at the fiat entry point are also in the midst of controversy. Structurally, there is a clear gradient in the OTC business model from "pure matching" to "self-operated counterparties": the former often introduces buyers and sellers to complete transactions privately through information matching, with the platform or intermediary charging a matching fee; while the latter directly acts as a counterparty, bearing the risk of price fluctuations and enjoying the profit from price differences. From the perspective of the tendency opinion, if information matching can achieve "visibility and retention" in KYC and anti-money laundering screening, criminal risks can still be controlled; but when self-operated market-making is combined with high-frequency connections to suspicious addresses, and lacks necessary suspicious transaction reporting and blacklist filtering mechanisms, it is easy to be deemed as having "should have known the source of funds but failed to fulfill due diligence." This means that both centralized platforms and over-the-counter market makers need to upgrade their compliance in KYC processes, transaction monitoring, on-chain address risk profiling, and suspicious transaction reporting, by introducing on-chain analysis tools, internal risk control models, and mechanisms for connecting with regulatory authorities, to build a "compliance evidence chain" that can withstand judicial scrutiny. Otherwise, when faced with a wave of cases, it will be difficult to escape solely based on post-facto verbal defenses.
Chinese-style Balancing Act: Combating Crime and Technical Space
"Finding a balance between combating crime and protecting technological innovation" is a description used by several overseas media to summarize the current stance of the Chinese judicial system. Looking back over the past few years, China's series of regulatory practices targeting ICOs, mining, and over-the-counter trading have fundamentally aimed to rapidly compress the gray space of high-risk activities through the linkage of administrative and criminal measures, such as cleaning up projects that illegally raise funds under the guise of ICOs, implementing exits for large-scale energy-consuming mining, and investigating the capital inflow and outflow chains centered on over-the-counter trading. In this governance path, the tendency opinion formed by the Shanghai Second Intermediate Court continues the main line of "severe crackdown on traditional crimes using new technologies," maintaining a high-pressure stance on fraud, money laundering, and illegal fundraising; on the other hand, it attempts to delineate a buffer zone that is not easily criminalized in terms of individual cryptocurrency holding, general investment activities, and the development of technological infrastructure.
This change is reflected in the language of adjudication, which places greater emphasis on behavioral methods, organizational levels, profit models, and substantive connections with upstream crimes, rather than making a blanket negative judgment on "whether it involves the cryptocurrency sector." For technological innovation, this leaves operational space for the development of on-chain analysis tools, compliance risk control technologies, and compliant custody applications: as long as they do not embed fundraising schemes or become illegal capital entry and exit points, but instead serve compliant financial institutions and law enforcement needs, their legal risks will decrease accordingly. At the same time, the infrastructure for fraud and money laundering crimes that relies on the cryptocurrency sector is being purposefully "defunctionalized," with highly liquid anonymous exchange tools and no-threshold cross-border transfer channels continuing to be included in the regulatory and criminal enforcement vision. It can be said that this tendency opinion is both an extension of existing regulatory practices and a fine-tuning from a "project-centered" to a "behavior-centered" approach, reserving a certain degree of institutional flexibility for compliant technologies and ordinary investors while maintaining a high-pressure stance.
The Privacy Coin Storm and Global Regulatory Shadows
The judicial attitude of the Shanghai Second Intermediate Court, when viewed within the global regulatory landscape, presents a more concrete policy orientation of "regulatory priority." The collective resignation of the Zcash core team on January 7, 2026, is seen as a watershed moment for the privacy coin sector, sparking intense discussions about whether on-chain anonymity can continue to exist under regulatory pressure. Some observers believe that the original technical intention of privacy coins is to protect user privacy and resist censorship, but in practical operation, their high anonymity provides a natural shelter for money laundering and dark web transactions, making them one of the most unacceptable asset forms in the eyes of regulators worldwide. Meanwhile, regulatory agencies in multiple countries, including South Korea, are promoting a new round of rule-making guided by "regulatory feasibility," such as South Korea's plan to launch a regulatory framework for specific cryptocurrency assets in 2026, with core concerns also revolving around transaction traceability, participant identification, and enforceable regulatory cooperation.
In this international context, the Shanghai Second Intermediate Court emphasizes judicial nodes such as "subjective knowledge" and "completion of form transformation," which is also about how to effectively control key risk links without completely denying the value of new technologies. Unlike directly blocking at the technical level, the tendency opinion chooses to focus on behavioral aspects—being moderately tolerant of ordinary holders while strictly examining intermediaries and platforms that knowingly or highly suspectively allow funds to be laundered. This resonates with the global regulatory trend of shifting from "asset labeling" to "behavioral substance." In domestic judicial practice, although this opinion has not yet risen to a nationally unified judicial interpretation, it is expected to have a magnifying effect in subsequent case hearings, judicial training, and regulatory policy coordination due to its origin from a municipal intermediate court and its strong demonstrative significance, making the understanding of on-chain anonymity, privacy technology, and compliance boundaries in China more aligned with mainstream international regulatory directions.
Initial Judicial Boundaries: Opportunities and Challenges for Compliant Players
In summary, the tendency opinion released by the Shanghai Second Intermediate Court sends two clear yet mutually constraining signals: on one hand, under the premise that "personal holding and general trading of cryptocurrency are not criminalized in principle," it delineates a relatively clear safety zone for a large number of ordinary investors, correcting the extreme notion in the market that "involvement in cryptocurrency is guilty"; on the other hand, for participants in the upstream criminal chain, especially intermediaries and platforms with professional capabilities and repeated behavioral characteristics, it issues a stronger high-pressure warning through the standards of "subjective knowledge" and "completion of form transformation." It is important to emphasize that this opinion currently remains a tendency view formed at the seminar and has not been formally recognized as a nationwide judicial interpretation. Its specific application still needs to be observed in the subsequent movements of higher-level judicial authorities and the implementation paths in the practices of courts across various regions.
For compliant players, although the boundaries have not been completely solidified, they have outlined the institutional contours that may take shape in the coming years: on one hand, technical services such as on-chain analysis, wallet profiling, and address risk rating will become essential needs for judicial and compliance departments by "helping to identify subjective knowledge"; on the other hand, trading platforms, OTC merchants, and various market-making institutions must invest greater resources in KYC, AML, suspicious transaction reporting, and cross-border compliance communication to provide strong "due diligence evidence" in potential cases. Meanwhile, the debate surrounding the tension between privacy protection and regulatory feasibility will not disappear; tracks related to privacy protocols, cross-chain bridges, and cross-border payment tools will continue to face compliance pressure while enjoying technological dividends. For institutions and developers truly willing to operate in the open, this preliminary delineation of judicial boundaries serves both as a warning line and a roadmap, with future opportunities increasingly concentrated on those technologies and business models that can be explained, traced, and incorporated into the regulatory framework.
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