Cryptocurrency bribery: Five cases! Taiwanese prosecutor "Zhonghua Yan" uses metaphor to describe the hidden nature, smart contract bribery in the 2024 election may emerge

Taiwanese prosecutors Li Bingqi and Gu Huizhen from the Ministry of Justice's Public Prosecution Office co-authored a report titled "Preventing the Use of Cryptocurrencies for Bribery and Election Crimes," in which they use the example of Chinese brand "Zhonghua Cigarettes" to analogize the difficulty of tracing and the convenience of movement in cryptocurrencies, as well as simulate the use of cryptocurrencies and NFTs in bribery.

Ministry of Justice: Taiwan 2024 Election Must Guard Against Cryptocurrency Bribery

The Ministry of Justice in Taiwan reported that from the year 2000 to the end of May 2023, a total of over NT$1.254 billion has been rewarded for reporting election bribery over the past 23 years, with an estimated amount of nearly NT$50 million awarded just in last year's local elections. In 2023 alone, there were 1,335 cases reported. The Ministry of Justice also warned that cryptocurrencies such as Bitcoin and Ethereum could be used as tools for bribery, and law enforcement agencies are actively taking precautions to prevent such bribery in the 2024 elections.

Ministry of Justice in Taiwan Uses "Chinese Cigarettes" as Analogy for Cryptocurrency Anonymity

Prosecutors from the Ministry of Justice in Taiwan mentioned that Chinese cigarettes have limited production and have been used in the past as a tool for bribing officials, with the ability to be sold at prices about 10 times their actual value in specific stores. Cryptocurrencies could have the same effect as Chinese cigarettes, making it difficult to trace movement between parties and providing convenient mobility. The traditional detection rate is extremely low, making illegal exploitation more effective.

Three Categories of Cryptocurrency Bribery Targets

• Bribing candidates
• Bribing eligible voters
• Bribing organizations under the guise of donations

Five Hypothetical Cases of Cryptocurrency Bribery

Prosecutors have outlined potential scenarios for cryptocurrency bribery and analyzed the technical and legal sources for investigating personnel to analyze possible investigation methods. Below are a few examples mentioned in the report:

Direct Transfer of Cryptocurrency for Bribery

The report stated: "Candidate Xiao Li's team wants to consolidate support from 5 key figures in the constituency with a total of NT$1 million each. They ask these key figures to assist in canvassing, and first approach a cryptocurrency exchange to purchase the equivalent of 178,600 USDT (calculated at 1:28) for NT$5 million in cash through face-to-face transactions. They prepare five hardware wallets and request the exchange to split the USDT into five equal parts, each containing 35,720 USDT, stored in the hardware wallets. These wallets are then handed over to the 5 key figures, with instructions to exchange the USDT back into cash as much as possible after the election."

Smart Contract Bribery

The report mentioned: "Candidate Xiao Wang's team designed a 'Wang Win' smart contract, where players pay 0.1 USDT (approximately 3 RMB), and upon meeting specific conditions after 60 days, automatically transfers 100 USDTC (around 3,000 RMB) from the contract's wallet address to the player. The condition is Xiao Wang's victory, and this is verified through an oracle. Prior to the contract execution, the creator must transfer 200,000 USDT to the contract's wallet address. The contract starts only after this transfer, with a maximum of 2,000 players allowed. This contract is deployed on the Ethereum blockchain."

NFT-Based Bribery

The report described: "Candidate Jiang Ge's team randomly generated 10,000 electronic images of hats with different colors and numbers 1-10,000, all marked with 'Support Jiang Ge'. They issued 10,000 NFT 'Superfan Hats' and launched an online event called 'Jiang Ge Superfans Step Up' 100 days before the election. Voters in the constituency were invited to register as super fans on the event website. Each day, 50 super fans were randomly selected to receive NFT Superfan Hats, with an additional 5,000 NFTs distributed freely to key figures. The team instructed key figures that if any voter needed assistance, they could provide NFT as a gift and report the NFT number of that voter. The voter would then list the NFT on a specific platform for sale at a price of 2,500 NTD converted to Ether, and the team would purchase it within a day, thus paying 2,500 NTD to hundreds of voters."

Challenges in Investigating Cryptocurrency Crimes in Taiwan

Prosecutors pointed out in the report that Taiwan has many unregulated gray areas, causing difficulties in investigations:

• The current regulations do not control individual cryptocurrency exchanges, leading to a regulatory gap
• Illicit use of non-custodial wallets
• Difficulty in accessing data from most foreign exchanges
• Inadequate control over Bitcoin ATMs

Frontline law enforcement officers hope for a comprehensive and hierarchical regulatory system, the establishment of a suspicious non-custodial wallet database, reinforcement of compliance awareness among individual cryptocurrency exchanges, and information sharing between public and private sectors to effectively prevent illegal activities.

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