China's Updated Anti-Money Laundering Regulations Focus on the Precious Metals Industry
In a significant move, the People's Bank of China (PBOC) has implemented new anti-money laundering (AML) and counter-terrorism financing regulations for precious metals and gemstones institutions, effective August 1, 2025. These regulations aim to close regulatory gaps, reduce illicit financial flows, and reinforce compliance, particularly in the high-value, liquid, and cash-prevalent sectors.
The new regulations broaden the scope of surveillance and compliance, impacting traders and institutions alike. The transaction reporting threshold for these regulations has doubled to CNY 100,000 (approximately USD 13,960), focusing more on cash-based retail transactions. Dealers must now invest in robust AML compliance systems to handle reporting and record-keeping, raising operational costs—especially for smaller firms.
In the precious metals and gemstones markets, these changes are expected to lead to increased compliance burdens, market consolidation, and reduced illicit activity. Higher compliance costs may push out smaller businesses, consolidating the sector around larger, better-capitalized companies with stronger compliance capabilities. The sector's inherent risks—high value density, liquidity, anonymity, and cash prevalence—mean stricter oversight could significantly curtail money laundering and terrorist financing opportunities.
Stricter identification and reporting may affect large cash-based transactions, potentially shifting some activity elsewhere or into more opaque channels. However, over the long term, only firms with strong compliance and risk management will likely thrive, redefining the competitive landscape.
While the new rules primarily target precious metals and gemstones, the broader AML environment is tightening. Crypto businesses—especially those involved in tokenized precious metals—may face increased scrutiny and be required to strengthen their compliance infrastructure. The complexity and cost of compliance could discourage smaller operators from entering the market, favoring established firms. Financial institutions may become more cautious in servicing crypto-related businesses, reflecting a global trend toward stricter oversight of digital assets.
The immediate effect will be to reshape the competitive landscape and reinforce the dominance of larger, compliance-ready firms. Simplified, clear regulations are generally viewed positively by investors, but the added compliance burden could dampen liquidity for smaller players. The overarching aim is to close regulatory gaps and reduce illicit financial flows, but the immediate effect will be to reshape the competitive landscape and reinforce the dominance of larger, compliance-ready firms.
The new AML regulations in China reflect a broader international move toward stricter financial oversight, especially following major global events in 2024. This trend is evident in Hungary's strict crypto regulations, causing service suspensions, and the US House's endorsement of the 'Genius Bill' for cryptocurrency growth. The implementation of these new regulations may lead to tighter control at the cash and digital asset intersection, especially affecting crypto-metals exchanges.
In summary, the new AML regulations in China will raise compliance costs, likely leading to market consolidation in the precious metals and gemstones sector, while also indirectly tightening oversight of crypto businesses involved in related tokenized assets. The immediate effect will be to reshape the competitive landscape and reinforce the dominance of larger, compliance-ready firms.
- As a result of the new regulations, crypto businesses dealing with tokenized precious metals may need to strengthen their compliance infrastructure.
- The broader AML environment is tightening, with increased scrutiny for crypto businesses following major global events in 2024.
- The new regulations in China may lead to stricter oversight of digital assets, as financial institutions become more cautious in servicing crypto-related businesses.
- Higher compliance costs in China's precious metals and gemstones markets could discourage smaller operators, favoring established firms.
- The reshaping of the competitive landscape will likely see fewer smaller businesses and increased dominance of larger, better-capitalized companies with stronger compliance capabilities.
- The new regulations broaden surveillance and compliance, impacting not only traders but also institutions across different sectors, including the cryptocurrency industry.
- Technology, such as data and cloud computing, will play a crucial role in enabling dealing institutions to handle reporting and record-keeping under the new regulations.
- The integration of technology, like blockchain and cybersecurity measures, can help businesses reduce illicit activity and improve their overall compliance.
- The effects of these new regulations extend beyond the precious metals and gemstones industry, with implications for personal finance, banking and insurance, lifestyle, and even online shopping, social media, entertainment, general news, and crime and justice sectors.
