Former CSRC Director Yao Qian was expelled from the party. Are virtual currency bribes really safer?

Written by: Lawyer Liu Honglin

According to a report by Beijing Daily in November 2024, and news from the Discipline Inspection and Supervision Group of the Central Commission for Discipline Inspection (CCDI) stationed at the China Securities Regulatory Commission (CSRC), as well as the Guangdong Provincial Commission for Discipline Inspection and Supervision: Recently, with the approval of the CCDI and the National Supervisory Commission, the Discipline Inspection and Supervision Group of the CCDI stationed at the CSRC, together with the Shanwei City Supervisory Committee of Guangdong Province, conducted disciplinary review and supervisory investigation into姚前, former Director of the Technology Supervision Department and former Director of the Information Center at the China Securities Regulatory Commission, for serious violations of discipline and law. After research by the Party Committee of the CSRC, it was decided to expel姚前 from the Party; after research by the CCDI stationed at the CSRC, it was decided to remove him from public office; his illegal gains were confiscated; and after research by the Shanwei City Supervisory Committee, it was decided to transfer the suspected criminal issues of姚前 to the procuratorial authorities for review and prosecution, along with the involved property.

The news that姚前 was “double expelled” for serious violations of discipline and law made headlines. This former Director of the CSRC’s Technology Supervision Department was once regarded as an “expert” in financial technology. Now, he is under investigation for suspected corruption. A detail from the announcement states that姚前 abused his regulatory power, not only to seek personal benefits for certain enterprises but also was accused of using virtual currency to conduct quid pro quo transactions.

Virtual currency, due to its decentralization and cross-border liquidity, has been endowed with many “mysterious halos” in recent years. In numerous reports of government officials accepting bribes, virtual currency has frequently appeared. So, the question arises: is virtual currency bribery truly safer than traditional methods?

From a technical perspective, virtual currency indeed possesses a certain degree of anonymity, which is one of its main attractions. Privacy coins like Monero and Zcash use encryption technology to hide the addresses and amounts of both parties in a transaction, greatly increasing the difficulty of on-chain data analysis. Additionally, tools like mixers can split a single transaction into multiple payments and then output them again, seemingly thoroughly disrupting the money trail. However, are these methods truly “impenetrable”?

The answer is, far from it.

Public blockchains are inherently transparent; all transaction records are permanently stored on the chain. Once a wallet address is linked to an identity, past transaction records can potentially be fully reconstructed. In recent years, law enforcement agencies have used on-chain analysis tools to crack numerous cases, such as FBI’s sting operations targeting dark web crimes. In simple terms, the anonymity of virtual currency is not a true “invisibility cloak,” but more like a thin veil. No matter how advanced the disguise, it can be torn apart by improved law enforcement techniques.

Of course, a significant advantage of virtual currency bribery over traditional methods is its decentralization and the convenience of cross-border payments. For example, in countries with strict foreign exchange controls, using virtual currency to bypass traditional financial systems can indeed reduce some regulatory risks. However, this advantage also comes with higher operational thresholds. If both parties want to fully conceal the transaction trail, they must be proficient in cold wallet operations, mixing techniques, or even use offline transaction tools to transfer assets. Any slip-up—such as accidentally exposing an IP address or using a real-name account on a centralized exchange—can expose the entire money chain to law enforcement. Moreover, both parties need to trust each other highly. In high-risk areas like bribery, trust is already scarce, and the virtual currency’s lack of physical contact makes this even more complicated.

Another important change brought by virtual currency bribery is that the evidence of quid pro quo transactions shifts from physical objects to digital assets. This digital transaction method can be difficult to detect in some cases. For example, if both parties transfer assets via offline devices and do not move the funds for a long time, it can indeed increase the difficulty of tracking. However, this “long-term lurking” strategy may not be cost-effective for bribe recipients, as virtual currency prices are highly volatile, and holding the assets could result in significant losses. For instance, if a bribe paid in Bitcoin experiences a market crash after the transaction, the recipient may not only fail to gain the expected value but also face investigation due to improper holdings. In other words, the price volatility of virtual currency can make such transactions more unstable.

Price fluctuations are not the only challenge faced by virtual currency bribery. Globally, regulations on virtual currency transactions are gradually tightening. Whether it’s the FATF guidelines in the US or the EU’s MiCA regulations, strict requirements are imposed on the use of virtual currency, especially in KYC (Know Your Customer) procedures at exchanges. For bribers, if the funds need to be withdrawn through centralized exchanges, regulatory records become important clues for law enforcement. Recent cases show that even when mixers or privacy coins are used to obfuscate, the final flow of funds can still be traced. This makes it difficult for bribery to be truly “untraceable,” and in some cases, leaves more evidence than cash transactions.

Another noteworthy aspect of姚前’s case is the particular environment of virtual currency bribery in China. The country’s comprehensive ban on virtual currency trading makes virtual currency flows more likely to attract law enforcement attention. Although some bribe recipients may attempt cross-border transactions to evade domestic regulation, such operations introduce more uncertainties. For example, if the recipient withdraws or spends the funds domestically, the transaction records will directly come into law enforcement’s view. Additionally, the legal status of virtual currency in China remains unclear; if the bribery funds involve overseas accounts, they could be deemed illegal asset transfers or foreign exchange violations, adding legal risks. For some transnational cases, the decentralization and borderless nature of virtual currency do offer new possibilities. For example, transferring funds via distributed wallets can avoid traditional banking cross-border remittance scrutiny. However, implementing such strategies requires advanced technical support, and with increasing international law enforcement cooperation, virtual currency transactions have become a key focus of monitoring. Cases of cooperation between the FBI and EU law enforcement agencies in recent years show that virtual currency is not as “safe” as imagined; instead, its global liquidity makes it a bigger target for regulation.

In summary, virtual currency bribery indeed offers some advantages that are difficult to match with traditional methods, especially in cross-border transactions and circumventing banking systems. However, it also involves higher operational complexity, greater trust risks, and increased legal and technical tracking pressures. From the details publicly available in姚前’s case, virtual currency bribery did not exempt him from investigation; rather, the on-chain records may serve as crucial evidence. This indicates that the so-called “security” of virtual currency is more a temporary advantage of technology rather than an absolute barrier.

Finally, Lawyer Honglin would like to emphasize again that the technical attributes of virtual currency are neutral. The potential for bribers to exploit this tool and law enforcement to utilize the same tool are two sides of the same coin. As technology advances, the transparency and permanence of on-chain data may make bribery easier to trace. From this perspective, virtual currency bribery is more like a “technological game.” The outcome of姚前’s case shows that the winner in this game is not necessarily the briber. Virtual currency is not a get-out-of-jail-free card but a double-edged sword—any misstep can expose one to law enforcement scrutiny.