Scanning and scenario writing: The impact of blockchain and cryptocurrencies

Given that blockchain has been developed to support digital cryptocurrencies, its association with crime and offending is mostly in the area of financial crime (Goodman, 2016; Houben and Snyers, 2018). However, foresight approach suggests that blockchain applications relevant for criminology are likely to be in other domains as well, such as mobility, identity, and tracking of people, goods, and services.

From 'Wild West' to 'Silk Road': Blockchain, cryptocurrencies and offending

In popular culture but also among IT professionals and coders (including my brother-in-law), cryptocuirency and blockchain users are often portrayed within the ‘Wild West’ narrative. In the cyberspace where morals and ethics are not upheld as essential values in digital relationships, all sorts of desperados, bullies, outlaws, and cowboys seem to roam and interact (for more, see Magnuson, 2020). Individuals and groups on the other side of the law have welcomed certain features of blockchain, such as its relative anonymity and untraceability. Cryptocurrencies have been used by organised crime since 2011 (Chowdhury, 2019), with several multi-million-dollar criminal enterprises built almost entirely on bitcoin (Burks, 2017; van Wegberg et al., 2018). The criminal activity enabled or supported by bitcoin has been found in both ‘legal’ bitcoin exchange markets, but also on the dark web, where technology-enabled ‘traditional’ crimes such as tax evasion, drug offences, extortion, money laundering, and corruption4 lurk. A bitcoin exchange BTC has been identified an indispensable platform for such offences. Its founder, Alexander Vinnik, served as a ‘one-stop-shop’ for major organised crime rings, handling over US$9 bn in bitcoin transactions (Magnuson, 2020). ‘Regular’ users also seem to be tempted by this technology. A study done in 2018 by researchers at Sydney University estimated that 24 million bitcoin users—some 25% of all users—accounted for illicit activities (Chowdhury, 2019; Magnuson, 2020). Blockchain technology and cryptocurrencies are used to buy illegal drugs, weapons, and other illicit goods and services. This application happens on the deep web—an unindexed part of the World Wide Web, and the dark web that hosts black markets for trading these goods and services. Users remain relatively anonymous (they are pseudonymised, not anonymised) while the information about the transaction and goods and services is detailed in the chain. Dark web markets such as Silk Road operated exclusively on bitcoin (Chowdhury, 2019; Baucherel, 2020). The use of cryptocurrencies for the drug trade, tax evasion, corruption, money laundering, terrorism financing, and other offences prompted calls to ban certain features of digital currencies such as untraceability of users (Houben and Snyers, 2018). Anonymity in blockchain, however, is not absolute; instead, it is a pseudoanonymity (Goodman, 2016) or quasi-anonymity (Campbell-Verduyn, 2018) that can be decrypted by law enforcement or other state agencies (see Magnuson, 2020).

As the technology' evolved and as authorities obtained more knowledge about it, offenders largely abandoned bitcoin and other cryptocurrencies and these platforms have recently been assessed to carry the lowest risk for such crimes (Chowdhury, 2019). Arguments that technology per se is an incentive for criminal activity, thus, have little currency (as they always do). Like every new technology, blockchain and bitcoin’s weaknesses in the early phases of its development have been exploited by a range of early adopters and those looking for an opportunity to engage in illicit activity. As the use of technology for offending started to decrease, the potential use of blockchain in combating crime gained traction.

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