- Chinese officials engaged in bribery using cold wallets.
- Cold wallets offer anonymity and ease of transfer.
- The clandestine use of crypto undermines China’s strict crypto ban.
China, known for its stringent stance against cryptocurrencies, presents a paradox. Despite the nationwide ban on digital currencies, reports suggest officials receive bribes through crypto cold wallets.
Bribery through digital currencies and e-gift cards provides users anonymity and ease of transfer. This highlights challenges for regulating digital assets, even in countries with stringent regulations like China.Â
The Crypto Corruption Paradox in China
On Monday, January 1, a Chinese legal newspaper issued a report on new forms of bribery in the country. According to the report, Chinese officials are taking bribes via cold wallet transactions despite the country’s stringent ban on cryptocurrencies.Â
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The issue of addressing new forms of corruption was a major topic at the 2023 annual conference of the China Integrity and Legal System Research Association, a national-level social organization registered under the Ministry of Civil Affairs.
Experts at the conference emphasized the need to adapt to these new forms of corruption arising from internet-era innovations like virtual currencies and e-gift cards.
Cold wallets provide a layer of anonymity and detachment from the regulated financial systems. This, in turn, makes it difficult for authorities to track and trace these transactions.
Why Cold Wallets Are Hard to Trace
Cold wallets, or hardware or offline wallets, are physical devices that store cryptocurrencies offline. They are widely regarded as a highly secure way to store digital assets because they are not connected to the internet, reducing the risk of hacking or online theft. The characteristics of cold wallets also make them difficult to trace for several reasons.
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When cryptocurrencies are stored in a cold wallet, there is no continuous record of transactions on the blockchain until the assets are moved or transacted. Since the wallet is offline, it doesn’t leave a digital trail that can be easily followed.
Moreover, cold wallets typically do not require the user to provide personal information. Unlike online exchanges or wallets, which might require verification and link to an individual’s identity, cold wallets can be used anonymously.
On the Flipside
- While touted as secure, cold wallets are also susceptible to breaches. In December 2023, Ledger’s Connect Kit suffered a hack, leading to $600,000 in losses.
- According to the US Department of Justice, Chinese officials use crypto bribes in their clandestine operations. In October 2022, a US official was allegedly bribed with Bitcoin by Chinese intelligence officers.
Why This Matters
The case of Chinese officials using cold wallets for bribery despite a national ban on cryptocurrencies highlights the difficulty of regulating decentralized technology.
Read more about the Chinese intelligence bribing scandal:
U.S. Official Allegedly Bribed with Bitcoin by Chinese Intelligence
Read more about the impending Bitcoin ETF approval:
89% Chance of Bitcoin ETF by January, Polymarket Users Bet
