Attorney Shao Shiwei | Bribery Using Virtual Currencies: A New Covert Means of Corruption in the Digital Age

Author | Attorney Shao Shiwei

Although domestic policies stipulate that virtual currencies are regarded merely as “virtual commodities” and do not hold the same status as fiat currency, the value inherent in virtual currencies is undeniable. Many people believe that mainstream virtual currencies such as Bitcoin, Ethereum, and Tether possess economic value that can be used for payment or exchange like “money.” Therefore, cases involving bribery using virtual currencies may be disclosed more frequently in the future.

1. Yao Qian – First Director of the Digital Currency Research Institute of the People’s Bank of China

In 2016, the central bank first proposed the goal of publicly issuing digital currency and initiated the research and development of a prototype for a digital bill trading platform based on blockchain and digital currency, completing the construction of the first-generation prototype system for statutory digital currency. In 2017, Yao Qian was appointed as the first Director of the Digital Currency Research Institute of the People’s Bank of China, playing a significant role in the early efforts to develop the central bank digital currency in China. In 2018, Yao Qian transferred to the China Securities Regulatory Commission, continuing to formulate policies related to blockchain technology and digital assets. Furthermore, Yao Qian published multiple papers on digital currency and blockchain technology, laying a theoretical foundation for the development of digital currency in China.

In November 2024, Yao Qian was expelled from the Communist Party of China and dismissed from public office due to serious violations of discipline and law. As an authority in the field of digital currency, Yao Qian’s disciplinary violations may undermine public trust in digital currency, affecting its acceptance and adoption rate. This case may also further reduce the likelihood of China reconsidering its hardline stance on the crypto asset market.

2. Xiao Yi – Former Vice Chairman of the Jiangxi Provincial Committee of the Chinese People’s Political Consultative Conference and Former Secretary of the Fuzhou Municipal Party Committee

On August 22, 2023, the Hangzhou Intermediate People’s Court of Zhejiang Province publicly announced the verdict in the case of Xiao Yi, former member of the Party Leadership Group and Vice Chairman of the Jiangxi Provincial Committee of the Chinese People’s Political Consultative Conference, for bribery and abuse of power. The defendant Xiao Yi was sentenced to life imprisonment for the crimes of bribery and abuse of power.

During his tenure as Secretary of the Fuzhou Municipal Party Committee, Xiao Yi, knowing that Jiumu Group Chuangshiji Technology Co., Ltd. was engaged in virtual currency “mining” activities, still illegally provided financial subsidies, funding support, electricity guarantees, and other assistance, causing significant losses to public property and resulting in adverse social impact. According to insiders, Xiao Yi is suspected of having accepted bribes exceeding 8,000 Bitcoins during his tenure.

3. Hai Mou – An Investigator at a Public Security Organ

In May 2024, the Nanjing Municipal People’s Procuratorate released a case study. Hai Mou served as a personnel member of a public security bureau, with primary responsibilities including monitoring trends in computer information network-related illegal and criminal activities and investigating cybercrime cases. The defendant Hai Mou exploited the convenience of his position to obtain case-related electronic data containing Bitcoin information through his subordinate Wu Mou, and sent the data to his friend Ji Moumou (the person in charge and technical staff of a certain network technology company). Ji Moumou subsequently cracked the aforementioned Bitcoin private keys and stole part of the Bitcoins, a behavior which Hai Mou tacitly approved. Later, the defendant Hai Mou failed to report and investigate the matter in a timely manner, but instead repeatedly demanded cash and Bitcoins from Ji Moumou. After the incident came to light, the handling unit liquidated the Bitcoins, obtaining proceeds amounting to over RMB 48.2272 million.

Due to their decentralization and secrecy, virtual currencies are often considered difficult to trace, leading some individuals to use them as a covert means for illicit transactions. However, the following reasons may lead to the detection and investigation of virtual currency-related activities:

1. Transparency of Blockchain Technology

Although virtual currency transactions possess a certain degree of anonymity, most crypto assets (such as Bitcoin) are based on blockchain technology, and all transactions are recorded on the blockchain. Regulatory authorities can track the flow of virtual currency transactions by analyzing public blockchain data.

Furthermore, through blockchain analysis tools (such as Chainalysis), regulatory agencies can identify clues such as suspicious large transfers and frequently transacting addresses, thereby locking onto relevant accounts.

2. Exposure of Offline Evidence

Bribery cases are inevitably accompanied by other power-for-money transactions. Once associated individuals involved in the case are investigated, the act of receiving property via virtual currencies may be exposed.

If individuals who receive virtual currencies cash them out through OTC transactions, the related fund flows may exhibit anomalies through bank transfers or third-party payment platforms, triggering alerts in bank risk control and anti-money laundering systems. Individuals involved may also attract the attention of exchanges or platforms due to frequent transactions or large transfers.

3. Violations by Enterprises or Projects

Contracts, fund disbursement records, and government support documents related to virtual currency industry projects may all serve as entry points for investigations. For instance, in the Xiao Yi case, the local government provided funding, electricity, and other support for virtual currency “mining” activities; such violations are easily discovered during corporate or administrative audits.

4. Technological Advancements and Regulatory Cooperation

With the development of regulatory technologies, the anonymity of virtual currency transactions is gradually being weakened. Law enforcement agencies utilize technical means to obtain key information through methods such as network traffic monitoring and exchange data. Countries worldwide are strengthening regulatory cooperation on virtual currencies, and relevant clues may be provided through international law enforcement agencies (such as Interpol).

Bribery cases typically involve the briber. When investigating the bribe recipient, authorities can follow the trail to uncover the specific actions, frequency, and scope of the briber’s conduct. For example, enterprises or individuals may bribe officials or other relevant personnel to obtain illegitimate benefits. Therefore,the relevant bribers will also be implicated and investigated.

In September 2021, the Central Commission for Discipline Inspection and the National Supervisory Commission, jointly with the Organization Department of the CPC Central Committee, the United Front Work Department of the CPC Central Committee, the Central Political and Legal Affairs Commission, the Supreme People’s Court, and the Supreme People’s Procuratorate, issued the “Opinions on Further Promoting the Joint Investigation of Bribery Giving and Receiving,” explicitly requiring adherence to the joint investigation of both bribery giving and receiving, with a focus on investigating repeated bribery, huge-scale bribery, and bribery involving multiple recipients. The “Amendment (XII) to the Criminal Law of the People’s Republic of China” made important modifications to the provisions on the crimes of bribery giving and receiving, adding seven circumstances for heavier punishment for bribery giving, further intensifying the crackdown on bribery crimes.

In addition to the bribers,a wide range of groups, including virtual currency exchangers (“U-Merchants”) and underground banks, may also be implicated.

The “Interpretation on Several Issues Concerning the Application of Law in Handling Criminal Cases of Money Laundering,” effective from August 20, 2024, explicitly lists transactions involving “virtual assets” as one of the methods of money laundering. It also stipulates that if the acts constitute both the crime of money laundering and the crime of concealing or disguising the proceeds of crime, the offender shall be convicted and punished for the more serious crime of money laundering.

Attorney Shao previously handled a case where a U-Merchant was suspected of the crime of illegal business operations. This occurred because, while handling a duty-related crime case, a local law enforcement unit discovered that the U-Merchant’s upstream provider assisted the defendant in the duty-related crime in converting virtual currencies into fiat currency, thereby implicating the U-Merchant.

Although virtual currency transactions possess secrecy, as ordinary citizens, we should recognize that one should not rely on luck, assuming that using virtual currencies as a payment method can evade legal scrutiny. Whether bribes are given in cash or via virtual currencies, as long as they involve the illicit transfer of benefits, they may violate criminal law and constitute criminal offenses.

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