Privacy coins outperformed the broader crypto market on July 14 after Chinese prosecutors proposed stricter rules against cryptocurrency mixers and anonymous transactions in a research paper. Zcash (ZEC) surged 10.5%, while the total privacy coin market cap rose 7% to $16.1 billion.
China's Proposal Targets Crypto Money Laundering
The Supreme People's Procuratorate of China published a research paper on its official website calling for a revamp of the investigation and prosecution system for crypto-related money laundering. The paper argues that existing criminal laws cannot keep pace with financial crimes enabled by blockchain's anonymity, decentralization, and cross-border payment capabilities. It notes that these features provide unprecedented convenience for money laundering.
The proposal recommends a "double investigation" approach, where authorities simultaneously examine the predicate crime and money laundering clues. Investigators would be required to produce blockchain fund flow analysis reports during investigations, while prosecutors independently assess the likelihood of money laundering charges before indictment.
Evidence Rules and Surveillance Measures
The paper suggests new evidence rules that would allow courts to infer money laundering intent from certain blockchain activities, unless the defendant provides a reasonable explanation. The use of crypto mixers or privacy coins would be treated as circumstantial evidence of intent to launder money. Other triggers include selling large amounts of crypto at clearly unreasonable prices or methods within a short period, or frequent large transfers through anonymous wallets without explaining the fund source.
The paper calls for real-time blockchain monitoring, communications traffic analysis, and technical investigative measures, while also demanding procedures to protect personal information. It further proposes a national platform for storing, valuing, and legally converting seized crypto assets, as well as enhanced international judicial cooperation through blockchain-based information sharing.
Privacy Coin Rally Amid Macro Tailwinds
Following the paper's release, the privacy coin market rose 7%, outpacing the broader crypto market's 4% gain on Tuesday, according to CoinGecko. Zcash led the rally with a 10%+ increase to around $545 and trading volume exceeding $435 million. Monero (XMR) climbed 2.5% to $329.44, with a market cap above $6 billion. Decred (DCR) rose 7.5%, while smaller privacy tokens also posted double-digit gains as traders rotated capital into the sector.
The rally coincided with improved crypto market sentiment, driven by supportive comments from Federal Reserve officials and a joint U.S.-UK statement backing regulated stablecoins for cross-border payments and tokenized financial markets.