How much illegal activity is financed through digital currencies

Foley, Sean (Primary Chief Investigator)

Department of Applied Finance

Project: Research

Description

This research collaboration sought to understand what proportion of of Bitcoin transactions were used to purchase illicit substances - particularly drugs online. The findings indicate that upwards of 46% of bitcoin transactions to 2019 were for illicit purposes, though this number has recently been reducing due to increasing speculation in this asset class.

Short title	$45,000 over 1 year
Acronym	$45,000 Industry Collaboration - Digicash
Status	Finished
Effective start/end date	1/07/17 → 6/07/18

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Cryptocurrencies are among the largest unregulated markets in the world. We find that approximately one-quarter of bitcoin users are involved in illegal activity. We estimate that around $76 billion of illegal activity per year involve bitcoin (46% of bitcoin transactions), which is close to the scale of the U.S. and European markets for illegal drugs. The illegal share of bitcoin activity declines with mainstream interest in bitcoin and with the emergence of more opaque cryptocurrencies. The techniques developed in this paper have applications in cryptocurrency surveillance. Our findings suggest that cryptocurrencies are transforming the black markets by enabling “black e-commerce.” Received June 1, 2017; editorial decision December 8, 2018 by Editor Andrew Karolyi. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

How much illegal activity is financed through digital currencies

Project Details

Description

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