In recent years, illegal activities such as money laundering using cryptocurrency represented by bitcoin have been emerging. The anonymity, two-way convertibility and transnational of bitcoin are used to "launder" illegal income. Some bitcoin theft incidents are also associated with money laundering. Hackers "launder" the stolen bitcoins and eventually convert them into legal property. In this paper, we explore whether these illegal activities can be detected. First, we mine the user characteristics from the original transaction data of bitcoin. Second, the user characteristics are classified to distinguish normal users from abnormal users. Third, Gaussian Mixture Model is used to cluster users to find suspicious users. Finally, we detect the abnormal transactions among the suspicious users.
Carol Alexander, Jaehyuk Choi, Heungju Park, Sungbin Sohn
Abstract BitMEX is the largest unregulated bitcoin derivatives exchange, listing contracts suitable for leverage trading and hedging. Using minute‐by‐minute data, we examine its price discovery and hedging effectiveness. We find that BitMEX derivatives lead prices on major bitcoin spot exchanges. Bid–ask spreads, interexchange spreads, and relative trading volumes are important determinants of price discovery. Further analysis shows that BitMEX derivatives have positive net spillover effects, are informationally more efficient than bitcoin spot prices, and serve as effective hedges against spot price volatility. Our evidence suggests that regulators prioritize the investigation of the legitimacy of BitMEX and its contracts.
This study unravels histories and locates meanings of specific Native and colonially imposed currencies from the 1850s to present day. Existing literature tends to reproduce colonial stereotypes of Native American peoples as technologically primitive, and has not addressed the shifts/integrations from land-based to emerging forms of digital currency. To intervene, this dissertation focuses on two case studies in which currencies–as communication technologies–are dynamic parts of much larger stories. The first case study focuses on land-based currencies–gold, coins, and beads–in the period of Oregon’s Gold Rush, specifically during the Rogue River War (1853-1856) between Native peoples and invaders/settlers. Additional chapters provide supplementary histories of related currencies and detail the political, social, and cultural shifts to digital currencies. The second case study centers on a limitedly used Indigenous cryptocurrency, or digital peer-to-peer currency, with a contested history and an explicit resistance to the U.S. dollar. Grounded in three theoretical areas, currency as communication and media, currency as entwined with nations, and de/post/settler colonialism, this dissertation works to answer a number of questions, mainly: What might the meanings embedded in land-based currency from the colonial past communicate about the present, and how does Indigenous digital currency of the present address the colonial past? Building on existing work, one finding of the first case study suggests that America’s democratic identity crisis was codified on currencies that were then used to dominate and shut out the various types of Native currencies in circulation. However, forms like shell and glass beads did not “vanish” after the Colonial Era, and remain as meaningful communicative forms that signify tribal identity present day. Findings of the second case study reveal how cryptocurrencies can be encoded with visions of tribal sovereignty, and can potentially serve tribal nations. However, they have proven problematic to implement. Further, this case study explicates the roles that racist discourses, circulated by journalistic media, play in contouring the meanings of Indigenous cryptocurrency. Native peoples have always found ways to challenge capitalism and settler colonialism. One way is through choices, re-articulation, and technological innovation around currencies.
In this article, the author outlines the existing interactions between cryptocurrencies, money laundering and organized VAT fraud, evaluating whether a growing use of virtual currencies may result in the development of more sophisticated fraud patterns. The adoption of blockchains, split-payment mechanisms and the definitive VAT regime are discussed as possible long-term measures to address the issue.
In July 2018, the Federal Reserve Chairman told the US Congress that cryptocurrencies are ‘great’ for money laundering. Many media headlines follow comments such as this, suggesting that cryptocurrencies are a significant criminal tool that should be feared. This article examines academic research, particularly those that analysed the Bitcoin blockchain, to see if the results matched the headlines. This was then compared to wider government and think-tank reporting. Contrary to popular opinion, this article shows that cryptocurrencies are currently used in a very small percentage of crime and they are not the great future threat that many assert. Cash is the real enemy for crime fighting and remains ‘king’. It is anonymous and far more useful to criminals than cryptocurrencies. However, the future of money is uncertain and policymakers need to understand that there is more to the debate about cryptocurrencies than the headlines suggest.
Although blockchain is often posed as a revolutionary and disruptive technology, its politics and socio-technical configurations often align with aims to maintain the status quo, and/or aims to concentrate wealth and to make existing powers more efficient. I empirically describe how colonial-contingent, neoliberal economic policies in Puerto Rico have incentivized the techno-capitalist industries of cryptocurrency and blockchain. Portions of the archipelago are being re-made into a so-called “crypto-utopia” to satisfy the desires of new settlers in a new form of crypto-colonialism. Puerto Rican government organizations, institutions, and businesses are also engaging blockchain technology with differing intents, all using rhetoric as a covert design tool. In this paper I will focus on blockchain and cryptocurrency as neoliberal and libertarian technologies adopted by governmental agencies, businesses, organizations, and individuals, as well as efforts of resistance through alternative, decolonial design.
Corruption or frauds has become common terms which are associated with government bodies working across the globe. It often leads to several social and economic problems, if remain unchecked. Increase in the rate of corruption adversely affects the development of any country. The government funds or money which is intended for the welfare of the public goes in the pocket of greedy officers. This research work is aimed to reduce corruption or frauds using blockchain technology. To establish our framework, we have worked on a generic scenario in which a government has various schemes running for the welfare of common people and the funds are disbursed through a layered architecture of government passing through various organisations. Non-transparency, poor management of government records, delay in verification process can lead to corruption in various schemes at various levels. Blockchain being a transparent, immutable and decentralized mechanism is found to be a mightier technology which can help fighting corruption in the experimental generic scenario.
Bitcoin is a well-known cryptocurrency in which records of transactions are maintained by a P2P network to create a distributed ledger. Due to the complex nature of maintaining highly efficient, transparent and speed transactions between nodes, security is one of the primary concerns of this system. The most prominent modern-day attacks to this system are the selfish mining and double spending attacks. This survey is organized around the aspects pertaining to countermeasures of selfish mining and double spending attacks. We selected a total of 20 primary studies from recent years as a result of a systematic analysis approach. In this study we will aim to classify, analyze, and evaluate these proposed methods in order to create a secure blockchain system. These countermeasures are being developed and are being experimented with in order to mitigate and/or even eliminate these attacks from occurring. These proposed frameworks and research papers will outline the keys to improving the blockchain architecture with code scripts and design parameters to increase the functionality of the blockchain. We aim to identify implications of these countermeasures to address vulnerabilities in the blockchain network for future research on this topic.
Purpose The purpose of this paper is to explore, from the view of buyers and sellers, the relationship between the blockchain technology and various important aspects of real estate transactions such as transparency, security and cost reduction. Design/methodology/approach The present study uses a quantitative research method. For the purpose of this study, a questionnaire with close-ended questions is used. The questionnaire was distributed to both buyers and sellers alike. The study included 1,000 people using the stratified probability sampling. The study uses factor analysis to analyze the relationship between the blockchain technology and other research variables such as such as transparency, security and cost reduction. Findings The findings of this study indicate that the buyers and sellers perceive that the transparency and cost reduction have the highest influence on the intention to adopt blockchain technology in a real estate transactions system, followed by the security of transactions. Practical implications The study has great implications for the real estate transactions system in Kosovo and society in general. The study shows that the blockchain technology can provide for a transparent and errorless interaction between buyers and sellers of real estate. Since smart contracts eliminate the need for third parties in real estate transactions, the cost of transactions shall be considerably reduced due to elimination of intermediaries and due to process speed and efficiency. Finally, the blockchain technology can increase the trust between parties and shall serve as a means to fight corruption and money laundering in real estate investments. Originality/value The study is the first quantitative study that studies the causal link between the blockchain technology and important aspects of real estate transactions system such as transparency, security and transaction costs.
One of the most striking financial developments of the last five years involves the emergence and rapid adoption of digital currencies, with Bitcoin being the most prominent. This paper seeks to determine whether there is evidence of collusion between mining pools (coalitions of individuals that verify transactions for monetary returns). We first constructed a theoretical framework which modeled the mining activity as an infinitely repeated game between two competing pools. By devising payoffs in the form of value functions and applying the one shot deviation principle, we found that a collusive strategy was indeed an equilibrium–if certain conditions held. However, our empirical analysis offered more ambiguous results. Ultimately, our attempt to capture peer effects suggests the relationship between a mining pool and its competitors is negative and non-linear. While this could serve as evidence against collusive behavior, we also postulate alternate explanations that could account for the finding.
This chapter seeks to gather accounts on criminal activities using cryptocurrencies and present how criminals use this technology as a tool for committing crimes in a wide range of wicked and unlawful exercises. It offers some recommendations as to how such crimes can be tackled and how cryptocurrencies can become mainstream without limiting the benefits of blockchain technology. Criminals promptly liked the concept and adapted Bitcoin when it first arrived, even before the learned society started releasing the true merit of this new technology. Darknet-based crimes are all connected to darknet markets, which are also referred to as crypto-markets. Criminals and underworld sellers use these markets to trade illicit goods such as drugs, cyber-arms, weapons, counterfeit currency, stolen credit card details, forged documents, unlicensed pharmaceuticals and steroids. Darknet is considered a sanctuary for hackers who commit various cybercrimes.
Cryptocurrency investigations have centered almost entirely around the transfer of value “money” or a cryptocurrency asset. The use of cryptocurrency for illicit purposes, especially Bitcoin, is well documented both in academic writing, media reporting and even film documentaries. The infamous SilkRoad market place in addition to the millions of dollars spent within dark markets on drugs, guns and assassinations have grabbed the headlines. This paper looks at how blockchain is creating new areas of investigation that are yet to be explored in detail. This scenario-based research examines the hosting of stolen data (P.I.I) personal identifiable information on a distributed blockchain host where the data is also accessible. The platform used is based on Ethereum infrastructure but demonstrates just one available platform that poses the paradigm. The paper examines the considerations through the lens of an incident responder /cyber investigator, forensics examiner and data controller. The scenario highlights distinct differences in considerations from a traditional response compared to dealing with the immutable and unstoppable distributed technology. The paper concludes that more is needed to be done to understand digital forensics in the blockchain era and the need to develop beyond track and trace in the cryptocurrency investigative tool box. The discussion also brings forth how data retention and GDPR requires consideration when applying it blockchain systems.
Over the past three years, the dams of Chelan County, Washington, its watershed and fish, the electrical grid and the laborers who maintain it, and cleared land with warehouses filled with computers, have all been enrolled as part of the decentralized digital infrastructure of Bitcoin. While popular accounts of the Bitcoin network correctly report the massive scale of energy it consumes and its potential environmental ramifications, in practice, the material geographies of Bitcoin are highly uneven and intertwined with specific infrastructural, ecological, and economic systems. In this article, we examine Bitcoin's impacts on Chelan County, untangling the processes that occur as the distributed, digital infrastructure consumes the very real material resources of one place to produce digital goods used in another. In so doing, we examine not only the material costs of networks like Bitcoin, but also their historical ties to older processes of accumulation.
Abstract This chapter attempts to clarify and describe the legal and regulatory framework for cryptocurrency with special focus on Malaysia and the threats that it poses from the anti-money laundering perspective. Currently, very few countries have legislations that regulate cryptocurrency. Nonetheless, the crazy surge in prices (to more than 20-folds at some point) has sent both legitimate investors and criminals flocking to cryptocurrencies. This chapter analyses and compares the official reports from various governments, writings of government officials, experts and scholars in journals and newspapers, interviews and draws conclusions on the legal framework of cryptocurrency, and money laundering challenges. The study notes that the decision of the US regulators in allowing Bitcoin futures to trade on major exchanges to be one of the reasons behind the sudden surge. The study also finds that the South Korean regulators’ approach in banning its financial institutions from dealing with virtual currency is a positive one. The chapter stresses that it is not adequate for regulators to warn the public to act with extreme caution and increase their understanding on the risks they take on if they choose to invest in cryptocurrencies. Instead, it is necessary to have comprehensive international and national laws and regulations for the control and management of cryptocurrencies. In addition, the anti-money laundering legal framework must be improved to cater to the new threats posed by cryptocurrency.
Using Bitcoin trading data in Venezuelan bolivars from the LocalBitcoins peer-to-peer market place and using the theory of Purchasing Power Parity (PPP), Bitcoin, as a single universal asset, is substituted for the ‘basket of goods’ normally used in the PPP, allowing the estimation of the relationship between the Venezuelan bolivar and the United States dollar. In this analysis Bitcoin is used as a tool to enable the calculation of the bolivars to dollars unofficial exchange rate and consequently the implied inflation rate. Using Bitcoin’s publicly available prices in this way enables a government’s economic mismanagement to be identified more quickly than the typical approach of measuring changes in the Consumer Price Index. Venezuela is currently in crisis, which this approach identifies as a problem as far back as 2014, as official and unofficial exchange rates diverge and inflation rates increase yearly reaching an unbelievable 70,000% in 2018 alone.
ABSTRACT: In the last decade, a new kind of financial technology or “fintech” has emerged, bringing with it a host of legal issues. The most commonly known cryptocurrency, Bitcoin, is touted as the alternative to traditional money systems. Dozens of exchanges have emerged that can be used to store and transfer Bitcoins between virtual wallets. These exchanges are prone to being hacked, however, and without the infrastructure to back the “currency,” users have frequently lost Bitcoins to virtual thieves and been unable to recover their losses. This paper argues that class actions are an effective avenue for remedy against an exchange that has negligently lost Bitcoins. It provides a brief overview of Bitcoin’s underlying technology, the blockchain on which transactions are recorded, and the exchanges out of which they operate. Canadian class actions law is examined in the context of Bitcoin hacks to demonstrate how large-scale litigation can play an increasing role in fintech. There are many examples of cyber attack theft where class actions are the only viable remedy, given the commonality of harm, enormous aggregate losses, and lack of other recourse in an unregulated and uninsured industry. There are also inherent enforcement challenges that need to be addressed by regulators, such as jurisdiction conflict and party anonymity. New technology is constantly emerging and difficult to legally classify. Nevertheless, the paper concludes that class actions law is the best means of protecting consumer interests against fintech risks and supporting the objectives of access to justice, judicial economy, and behaviour modification.
Mark Weber, Giacomo Domeniconi, Jie Chen, Daniel Karl I. Weidele · 7 authors
Anti-money laundering (AML) regulations play a critical role in safeguarding\nfinancial systems, but bear high costs for institutions and drive financial\nexclusion for those on the socioeconomic and international margins. The advent\nof cryptocurrency has introduced an intriguing paradox: pseudonymity allows\ncriminals to hide in plain sight, but open data gives more power to\ninvestigators and enables the crowdsourcing of forensic analysis. Meanwhile\nadvances in learning algorithms show great promise for the AML toolkit. In this\nworkshop tutorial, we motivate the opportunity to reconcile the cause of safety\nwith that of financial inclusion. We contribute the Elliptic Data Set, a time\nseries graph of over 200K Bitcoin transactions (nodes), 234K directed payment\nflows (edges), and 166 node features, including ones based on non-public data;\nto our knowledge, this is the largest labelled transaction data set publicly\navailable in any cryptocurrency. We share results from a binary classification\ntask predicting illicit transactions using variations of Logistic Regression\n(LR), Random Forest (RF), Multilayer Perceptrons (MLP), and Graph Convolutional\nNetworks (GCN), with GCN being of special interest as an emergent new method\nfor capturing relational information. The results show the superiority of\nRandom Forest (RF), but also invite algorithmic work to combine the respective\npowers of RF and graph methods. Lastly, we consider visualization for analysis\nand explainability, which is difficult given the size and dynamism of\nreal-world transaction graphs, and we offer a simple prototype capable of\nnavigating the graph and observing model performance on illicit activity over\ntime. With this tutorial and data set, we hope to a) invite feedback in support\nof our ongoing inquiry, and b) inspire others to work on this societally\nimportant challenge.\n
This paper examines the impact of South Korea’s ban on Bitcoin futures on intraday spot volatility, liquidity and volatility–volume relationship. The results show that while reducing the permanent component of intraday spot volatility, the imposition of a ban on Bitcoin futures trading increases the transitory component. For intraday spot liquidity, different liquidity proxies indicate heterogeneous results. Moreover, we identify a positive and unidirectional effect of intraday spot volume on volatility. This effect appears to be stronger in the post-ban period. Overall, over the past few months, South Korea’s Bitcoin futures ban generally has had a significant impact on the intraday dynamics of the Bitcoin spot market.
Sushil Kumar Singh, Mikail Mohammed Salim, Minjeong Cho, Jeonghun Cha · 6 authors
Pool hopping attack is the result of miners leaving the pool when it offers fewer financial rewards and joining back when the rewards of mining yield higher rewards in blockchain networks. This act of leaving and rejoining the pool only during the good times results in the miner receiving more rewards than the computational power they contribute. Miners exiting the pool deprive it of its collective hash power, which leaves the pool unable to mine the block successfully. This results in its competitors mining the block before they can finish mining. Existing research shows pool hopping resistant measures and detection strategies; however, they do not offer any robust preventive solution to discourage miners from leaving the mining pool. To prevent pool hopping attacks, a smart contract-based pool hopping attack prevention model is proposed. The main objective of our research is maintaining the symmetrical relationship between the miners by requiring them all to continually contribute their computational power to successfully mine a block. We implement a ledger containing records of all miners, in the form of a miner certificate, which tracks the history of the miner’s earlier behavior. The certificate enables a pool manager to better initiate terms of the smart contract, which safeguards the interests of existing mining pool members. The model prevents frequent mine hoppers from pool hopping as they submit coins in the form of an escrow and risk losing them if they abandon the pool before completing mining of the block. The key critical factors that every pool hopping attack prevention solution must address and a study of comparative analysis with existing solutions are presented in the paper.
After the oil price collapsed in 2014, debates in oil-producing nations emerged around the importance of doing away with commodity dependence. Modernization plans and developmental projects sprung up among large and small producers alike. Nevertheless, some countries remain dramatically committed to rentier practices, and many in Latin America and Africa have engaged in new forms of resource dependence by expanding their mining frontiers. Further, in the aftermath of the global financial crisis, new forms of online payments entered the global political economy and generated discussion among policymakers about the legality and implications of these payment mechanisms. In this article, I explain the linkages of two apparently disconnected forms of mining. Drawing on the case of Venezuela, I argue that the spread of small-scale, irregular and artisanal gold extraction and cryptocurrency mining is the result of the decaying rentier state in crisis. These originally decentralized and irregular activities were later endorsed and transformed by the state with the Orinoco Mining Arc project and the launching of the commodity-backed cryptocurrency, the ‘petro’. The state’s endorsement of these forms of mining translate into the collateralization of primary commodities and the emergence of new forms of authority in a radicalized form of rentierism connected with global financial circuits.
The rise of cryptocurrencies in Argentina and Venezuela in recent years shows how a highly distressed economy could become fertile ground for decentralized digital currency. This article analyzes similar traits between these two nations and examines why a collateral result of high inflation, tangled monetary regulation, and political instability could be the rapid growth of cryptocurrencies that are not linked to a central bank. Mistrust in central government authorities and national currency volatility that surpasses that of traded cryptocurrencies open a window for intangible ways of storing the falling value of local fiat currency. This article sets a general framework in order to have a better understanding of the growth of decentralized digital currencies in developing economies and continues to explain the rise of such technology in recent times in Argentina and Venezuela.