Since the inception of Bitcoin in 2009, the market of cryptocurrencies has grown beyond the initial expectations, as witnessed by the thousands of tokenised assets available on the market, whose daily trades amount to dozens of USD billions. The pseudonymity features of these cryptocurrencies have attracted the attention of cybercriminals, who exploit them to carry out potentially untraceable scams. The wide range of cryptocurrency-based scams observed over the last ten years has fostered the research on the analysis of their effects, and the development of techniques to counter them. However, doing research in this field requires addressing several challenges: for instance, although a few data sources about cryptocurrency scams are publicly available, they often contain incomplete or misclassified data. Further, there is no standard taxonomy of scams, which leads to ambiguous and incoherent interpretations of their nature. Indeed, the unavailability of reliable datasets makes it difficult to train effective automatic classifiers that can detect and analyse cryptocurrency scams. In this paper, we perform an extensive review of the scientific literature on cryptocurrency scams, which we systematise according to a novel taxonomy. By collecting and homogenising data from different public sources, we build a uniform dataset of thousands of cryptocurrency scams.We devise an automatic tool that recognises scams and classifies them according to our taxonomy.We assess the effectiveness of our tool through standard performance metrics.We also give an in-depth analysis of the classification results, offering several insights into threat types, from their features to their connection with other types. Finally, we provide a set of guidelines that policymakers could follow to improve user protection against cryptocurrency scams.
Bitcoin was conceptualized in response to perceived shortcomings in the monetary and financialsystem, not only related to large financial institutions but also to discretionary decision makingin monetary policy. Using high-frequency data and a weekly proxy VAR model, I study theimpact of monetary policy on Bitcoin. The paper shows that monetary shocks have sizableeffects on Bitcoin prices, but that these differ in sign: a disinflationary monetary tightening bythe ECB lowers valuations - consistent with the notion of Bitcoin as a digital gold -, whereasa Fed tightening increases Bitcoin prices. I document similar differences with respect to cen-tral bank information shocks and explore potential explanations by studying various aspects ofthe Bitcoin ecosystem. Exploiting both differences in Bitcoin valuations across currencies andblockchain transaction data, the paper shows that the increased demand for Bitcoin following aUS monetary tightening is primarily driven by emerging markets. I argue that this likely reflectsthe technological and institutional particularities of Bitcoin that make it sought after as globaldigital cashwhen international economic and financial conditions deteriorate.
O presente artigo tem por objetivo analisar a prática do crime de lavagem de dinheiro por meio da criptomoeda Bitcoin para, ao final, analisar possíveis medidas jurídicas para se coibir essa prática delituosa.
Money laundering activities related to the cryptocurrency market have seen an exponential increase over the last fifteen years as a consequence of technological developments and economic distresses, as the 2008 crisis and the 2020 pandemic. This essay will analyse the European Union legislation created in order to tackle this phenomenon, dwelling on the Fifth Anti-Money Laundering Directive and its similarities among international laws. In particular, it will be displayed the importance of intermediaries, such as money mules and mixing services, to ease money laundering and increase the anonymity. In this framework, the European Union finds itself almost powerless: the legality of the virtual currency source is assessed only when entering and exiting in the virtual market and not during in-market transactions as well as a complete lack of legislation on mixing services activities. Therefore, how can the European Union steam the misuse of such intermediaries with ex-ante and ex-post interventions? And, finally, are the European privacy policies so important to outrank the risk related to money laundering activities? This paper shows that one way to prevent cryptocurrency money laundering pullulation is launching sensitization and awareness programmes since young age through educational institutions and, most importantly, a narrower legislation is required, implementing those laws that proved to be effective in other countries, in defiance of privacy policies.
Bitcoin is gaining traction as an alternative store of value. Its market capitalization transcends all other cryptocurrencies in the market. But its high monetary value also makes it an attractive target to cyber criminal actors. Hacking campaigns usually target an ecosystem’s weakest points. In Bitcoin, the exchange platforms are one of them. Each exchange breach is a threat not only to direct victims, but to the credibility of Bitcoin’s entire ecosystem. Based on an extensive analysis of 36 breaches of Bitcoin exchanges, we show the attack patterns used to exploit Bitcoin exchange platforms using an industry standard for reporting intelligence on cyber security breaches. Based on this we are able to provide an overview of the most common attack vectors, showing that all except three hacks were possible due to relatively lax security. We show that while the security regimen of Bitcoin exchanges is subpar compared to other financial service providers, the use of stolen credentials, which does not require any hacking, is decreasing. We also show that the amount of BTC taken during a breach is decreasing, as well as the exchanges that terminate after being breached. Furthermore we show that overall security posture has improved, but still has major flaws. To discover adversarial methods post-breach, we have analyzed two cases of BTC laundering. Through this analysis we provide insight into how exchange platforms with lax cyber security even further increase the intermediary risk introduced by them into the Bitcoin ecosystem.
A growing stream of research finds several relations between the economic growth and corruption. Government implements various strategies to diminish the corruption and also technology often plays a dominant role to face it. Among various technologies alterations, Block-chain technology that becomes an effective and efficient way to resolve these issues related to corruption. This paper represents a brief knowledge related to the Block-Chain technology as it is a kind of distributed database or public ledger of all transactions that have been executed and shared among participating parties. Each and every transaction in the public ledger is verified by a majority of the participants registered in the system. The possible risk related to current scenario and give brief idea for resolving that problem with the help of blockchain technology. Non-Governmental Organization (NGOs) which aim is to tackle some of the issues faced by the society. NGO faces difficulty in terms of maintaining and gaining the support from donors in terms of funds. In recent decades there have been multiple examples of corruption misconduct scandals impacting the public image and reputation of NGOs. It is clear that trust of the people in NGOs is affected adversely by such events. Doubts arise in terms of where does the donation ends up? Who is leading the organization? Is donated money are used in a proper direction? So as a part of it, a need is raised to solve such issues for the betterment of the society. For the above stated problem regarding management of funds in NGOs, we propose a solution by using the Blockchain technology among various technologies alteration available. Blockchain offers the way to eliminate the doubts by providing data security, immutability and transparency. So, Blockchain Technology can offer the NGO industry to regain the trust of public.
Hugo Benedetti, Ehsan Nikbakht, Sayan Sarkar, Andrew C. Spieler
Purpose The purpose of this paper is to develop conceptual designs for blockchain implementations aimed at reducing corporate fraud. The proposed framework consists of different levels of implementation with specific examples for each level. Design/methodology/approach The paper uses a multi-level framework to highlight the properties of blockchain technology as suitable for reducing corporate fraud. The five levels of technological complexity designed for this research include information storage, information flow, information processing, information enhancement and information and financial integration. Specific cases of corporate fraud are discussed to complement the proposed methodology. Findings The potential ability to limit fraud and increase transparency could greatly improve faith in financial reporting. These benefits accrue to all capital market participants. The blockchain infrastructure can significantly improve the existing monitoring system and provide value added in detecting, deterring, and documenting possible fraud. Originality/value The paper contributes to the growing field on corporate fraud and blockchain technology. The paper is novel in the implementation of the nascent blockchain methods to detect and deter fraud at the organizational level. The proposed five conceptual levels provide practical use.
This paper analyses the use of blockchain technology to support the governance of commons-pool resources, as studied by Elinor Ostrom. It argues that the technological guarantees of blockchain technology---in terms of ex-ante automation and ex-post verification---can replace the traditional requirements of monitoring and sanctioning. Despite its own limitations and challenges, this novel approach to governance could provide new opportunities for experimentation in the context of commons-pool resources.
A rede Bitcoin é um sucesso por permitir a transferência de criptomoeda com um baixo custo, de forma rápida, sem limites geográficos e sem a intervenção de um banco intermediador. Está sendo apontada como uma possível solução para mais de um bilhão de pessoas que não tem acesso ao sistema financeiro por causa dos altos custos. Por outro lado, a rede Biticoin é pseudo-anônima e tem sido usada para uma enorme variedade de atividades financeiras dúbias e ilegais. Este artigo investiga as atividades de lavagem de dinheiro na rede Bitcoin através de diversos mecanismos que procuram melhorar o desempenho de classificadores na análise de um conjunto de dados desbalanceado devido a uma classe minoritária com muito poucas amostras. A análise considera o conjunto de dados Elliptic com mais de 200 mil transações de Bitcoin, sendo o maior conjunto rotulado de dados publicamente disponível que existe hoje de todas as criptomoedas. Os experimentos realizados mostram a eficácia de cada estratégia na melhora da classificação das atividades de lavagem de dinheiro tais como: i) o percentual de repartição do conjunto de dados em treino e teste; ii) heurísticas de sobre-amostragem; ii) diferentes algoritmos de aprendizado de máquina; iv) algoritmo de reforço de aprendizado adaptativo e v) descoberta automática de características. Os resultados mostram um bom desempenho do algoritmo de sobre-amostragem AdaSyn e que o maior ganho em desempenho foi com o classificador floresta aleatória.
The emergency of anonymous encrypted digital currency based on blockchain brings the rapid growth of financial crimes simultaneously. However, under the condition of Know Your Customer rules, the traditional rule-based filtering and supervised pattern recognition methods are mainly built, which does not apply to the scenario of anonymous encrypted digital currency. In this paper, we attempt to tackle this problem by constructing user graph from transactions and dividing the whole user graph into tightly connected communities and clustering similar communities into groups. Experimental results on bitcoin transaction datasets show that the proposed approach has higher than 92% precision and higher than 73% recall for identifying gambling and mining pool communities.
Abstract We study the fundamental differences that separate: Litecoin; Bitcoin Gold; Bitcoin Cash; Ethereum; and Zcash from Bitcoin, and draw some analysis to how these features are appreciated by the market, to ultimately make an inference as to how future successful cryptocurrencies may be invented and behave. We use Google Trend data, as well as price, volume and market capitalization data sourced from coinmarketcap.com to support this analysis. We find that Litecoin’s shorter block times offer benefits in commerce, but drawbacks in the mining process through orphaned blocks. Zcash holds a niche use for anonymous transactions, benefitting areas of the world lacking in economic freedom. Bitcoin Cash suffers from centralization in the mining process, while the greater decentralization of Bitcoin Gold has generally left it to stagnate. Ether’s greater functionality offers the greatest threat to Bitcoin’s dominance in the market. A coin that incorporates several of these features can be technically better than Bitcoin, but the first-to-market advantage of Bitcoin should keep its dominant position in the market.
Abstract Past international trade practices have been associated with opaque information flows that have hindered traceability and created hurdles in hassle‐free trade. Blockchain and allied technologies have been investigated as a panacea for the problems faced by supply chain and logistics industry. Network analysis also uncovered twenty types of legal and antisocial entities operating on bitcoin and provided a path for uncovering these antisocial entities. However, earlier works of literature have focused on limited aspects of a typical supply chain such as monitoring assets, securing traceability, data integrity negligence, and data access. To overcome such drawbacks, this article proposes permissioned Blockchain with relevant processes and functions to obtain a holistic framework for securing the supply chain and logistic operations. The efficacy of the proposed framework was demonstrated in the case study. Comparative study was performed with the existing frameworks where the proposed framework was found to be better at four counts compared on the basis of data integrity in supply chain, decentralized decision making and traceability. It was found that critical loopholes in a current supply chain can be overcome using the proposed framework.
In the post-Bitcoin era, many cryptocurrencies with a variety of goals and purposes have emerged in the digital arena. This article aims to map cryptocurrency protocols across three main defining dimensions, which are governance decentralization, security, and scalability. We theorize about the organizational and technological features that impact these three dimensions. Such features encompass roles permissiveness, validation network size, resource expenditure, and number of transactions per second. We map the different cryptocurrency constellations based on their consensus mechanisms, discussing the organizational and technological features of the various protocols applications and how they experience and play with the tradeoffs among governance decentralization, security, and scalability.
Purpose The purpose of this paper is to investigate the role of cryptocurrencies in facilitating operations relating to modern slavery and specifically human trafficking. Over the past decade, law enforcement agencies and intergovernmental organisations have established mechanisms, including financial regulations, to curb and identify such operations. Regulation over conventional financial institutions has greatly aided in identifying cross-border and transregional trafficking operations. However, there remains concern over the role of cryptocurrencies in the modern trafficking enterprise. Design/methodology/approach This paper follows a review of the literature, discussing specific cases that have exposed the role of cryptocurrencies in facilitating human trafficking. This paper first presents a comprehensive discussion on the existing operational mechanism of organisations in human trafficking. Subsequently, it determines the potential use of cryptocurrencies in circumventing detection by law enforcement agencies. Findings This paper finds that existing controls have allowed law enforcement to identify illicit transactions concerning human trafficking through conventional financial institutions. However, the most effective mechanism of identifying such operations is becoming increasingly difficult with the use of cryptocurrencies. Although there are potential solutions to the issues, cryptocurrencies, and the anonymity they offer, have allowed criminal organisations to evade detection using a more active marketplace through the internet. Research limitations/implications Law enforcement agencies and regulators must take into account the nature of cryptocurrencies and the limitations of regulations on such global virtual assets. Instead, this paper’s findings suggest alternate methods, including regulation on exchanges, blockchain use for documentation and investments in detection technologies that allow identification of trafficking operations and forced labour. Originality/value This paper presents existing cases and growing concerns that cannot be quantified in the current circumstance. Further, the paper aims to specifically discuss the role of cryptocurrencies in the existing human trafficking supply chain, offering readers and law enforcement agencies a perspective into criminal organisations’ combination of conventional trafficking operations and modern technological resources. Further, it makes a recommendation to invest in detection mechanisms that are different from the conventional theory based on identification by “following the money”.
Flash Loan, as an emerging service in the decentralized finance ecosystem, allows traders to request a non-collateral loan as long as the debt is repaid within the transaction. While providing convenience, it brings considerable challenges that Flash Loan allows speculative traders to leverage vulnerability of deployed protocols with vast capital and few risks and responsibilities. Most recently, attackers have gained over $15M profits from Eminence Finance via exploiting Flash Loans to repeatedly swap tokens (i.e., EMN and DAI). To be aware of foxy actions, we should understand what is the behavior running with the Flash Loan by traders. In this work, we propose ThunderStorm, a 3-phase transaction-based analysis framework, to systematically study Flash Loan on the Ethereum. Specifically, ThunderStorm first identifies Flash Loan transactions by applying observed transaction patterns, and then understands the semantics of the transactions based on primitive behaviors, and finally recovers the intentions of transactions according to advanced behaviors. To perform the evaluation, we apply ThunderStorm to existing transactions and investigate 11 well-known platforms. As the result, 22,244 transactions are determined to launch Flash Loan(s), and those Flash Loan transactions are further classified into 7 categories. Lastly, the measurement of financial behaviors based on Flash Loans is present to help further understand and explore the speculative usage of Flash Loan. The evaluation results demonstrate the capability of the proposed system.
This chapter investigates how corruption and market effectiveness impacted bitcoin trading from 2010 to 2018 in different geoeconomic, i.e., institutional, settings. The bitcoin trading market is characterized not only by strong variation in trading volume across countries but also by stark differences in degrees of regulation. These contrasting institutional environments have different effects on the growth and development paths of bitcoins and on cryptocurrencies. In contrast to fiat money, the value of bitcoins is not connected to a government or state but is derived only from a critical mass of users that accept bitcoins in exchange for commodities or services. In such a regulation-free market with a largely anonymous trading mechanism, corruption may be an issue since such situations are attractive to those laundering money from drugs and other illegal sources. Changing economic and regulatory conditions have impacted the attractiveness of bitcoin trading in various countries.
Cryptocurrencies are decentralised virtual currencies, using blockchain technology to process peer-to-peer electronic payments. In 2009, the first successful cryptocurrency, Bitcoin, was established. This article discusses concepts of cryptocurrency, its relevance in the financial sector, its associated risks and establishes whether regulatory interference is necessary in order to combat money laundering using cryptocurrency. Currently, cryptocurrencies remain unregulated in South Africa. The article concludes that regulatory intervention is necessary and that cryptocurrencies should be integrated into relevant existing legislation.