Sex, drugs, and Bitcoin

How much illegal activity is financed through cryptocurrencies?

Sean Foley, Jonathan R. Karlsen, Tālis J. Putniņš

Research output: Contribution to journalArticle

89 Citations (Scopus)


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.”
Original languageEnglish
Pages (from-to)1798-1853
Number of pages56
JournalReview of Financial Studies
Issue number5
Publication statusPublished - May 2019
Externally publishedYes

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