Cryptocurrencies and Criminal Activity- A Literature Review

Cryptocurrencies and Criminal Activity- A Literature Review

Introduction

The risks associated with cryptocurrency use continue to fuel debates among individuals globally; these risks may be economic, societal, or even political, especially with correlation to criminal activities. These debates limit and interfere with the ease of accelerated use of cryptocurrencies; the use of cryptocurrencies is debated to reduce criminal activities due to various characteristics of cryptocurrencies and other digital currencies, such as the online ledger. On the other hand, cryptocurrencies are debated to promote criminal activities due to some reasons, including some of their features, one of which is the anonymity of participants using the cryptocurrencies. Currencies are essential in funding criminal activities (Butler, 2019) and are used in illegal transactions; however, cash is more suitable for illegal transactions than cryptocurrencies because cryptocurrencies’ transactions are recorded. Subsequently, this indicates that both legal and illegal transactions are recorded on an online ledger, reducing criminal activities. In contrast, some cryptocurrencies’ features appear to favor criminal activities and illegal transactions. For instance, ease of access to the internet, digital currencies, and anonymity of participants of transactions favor criminal activity because they can transact without fear of being exposed, indicating that despite blockchain technology, criminals can still transact. Consistently, various features of cryptocurrencies, including blockchain technology, presence of regulations and regulators, and reduced cash use, limit criminal activities because transactions are recorded using a blockchain technology limiting illegal transactions; also, some cryptocurrency platforms have censorship, indicating that regulations and regulators are put in place to monitor transactions (Belomyttseva, 2015); furthermore, the use of cryptocurrencies reduce the use of cash which is fundamental in transactions; thereby reducing criminal activities. However, other cryptocurrency features, including anonymity of participants and lack of censorship, indicate that criminal activities might be favored because the participants of transactions cannot be identified, and the lack of censorship indicates that regulations and regulators cannot control the transactions, whether legal or otherwise, censorship will curb this shortcoming. The impacts of cryptocurrency use on criminal activity indicate reduced criminal activities because of the presence of the digital ledger, the presence of regulators on certain digital currency platforms, and the reduced use of cash with the use of cryptocurrencies.

Literature Review

Preface

A conversation on cryptocurrencies will lead to a debate. The debate stems from all the risks associated with cryptocurrencies, with some individuals supporting the idea that the risks are too high while others support the idea that the risks originate from misconceptions and fallacies. In some circumstances, the terms cryptocurrencies, dark web, and criminal activities are all used in relation to each other. This correlation points out that it is easy to associate cryptocurrencies with criminal activities, especially considering the dark web. However, in the absence of fallacies and misconceptions, how many individuals would opt for cryptocurrencies over cash when it presents an investment opportunity for all individuals globally (Kuo Chuen, Guo & Wang, 2017). With this in mind, it is essential to point out that criminal activities have not solely depended on cryptocurrencies since they were introduced in 2008, and illegal transactions have been occurring throughout history, begging the question of how cryptocurrencies influence criminal activity. Subsequently, it is important to point out that criminals have been using cash for their illegal transactions before cryptocurrencies (Hendrickson & Luther, 2021), thereby raising the question of which influences criminal activities over others. Consistently, the purpose of this literature review is to analyze the role of cryptocurrency in criminal activities by contrasting its cons and pros.

History

The first cryptocurrency, bitcoin, was introduced to the world in 2008 by Satoshi Nakamoto (Kuo Chuen, Guo & Wang, 2017). Initially, this cryptocurrency was created to cater to the shortcomings of cash, especially the transaction charges people incur while dealing with money, an objective that was achieved. Accordingly, altcoins were also created to cater to the shortcomings of bitcoins, including power consumption, the presence of regulations, and censorship on various platforms. However, according to Kuo Chuen, Guo & Wang (2017), similar algorithms were used on both Bitcoin and altcoins, favoring their use as digital currencies. Additionally, cryptocurrencies were employed to provide a cryptocurrency index (CRIX) that allowed all individuals anywhere in the world to obtain digital currencies without the limitations set upon them by society. Accordingly, cryptocurrencies were introduced to benefit society economically, socially, and politically.

Terminologies

Various currencies are used for trading, including digital currencies. Digital currencies are currencies that can be obtained online, such as cryptocurrencies and altcoins. Accordingly, cryptocurrencies are digital currencies that can be used for transactions; an excellent example is Bitcoin, which was the first cryptocurrency created. Cryptocurrencies have various distinct characteristics, such as blockchain technology. Blockchain technology is an online ledger in which all cryptocurrencies’ transactions are recorded. Another feature of cryptocurrencies is the provide cryptocurrency index (CRIX) that allows individuals to obtain cryptocurrencies despite their geographical location or social status (Kuo Chuen, Guo & Wang, 2017). Trading platforms have been created for successful transactions using digital currencies.

Pros

Cryptocurrencies pose various advantages regarding criminal activities.  These advantages are associated with blockchain technology, the presence of regulations and regulators, and reduced cash use. All criminal activities require funding to drive criminals to obtain the currencies they can use to transact (Butler, 2019). Initially, criminals heavily depended on cash to trade, a currency that could not be traced, implying that nobody would be aware of the transaction or the participants even when an illegal transaction occurred. Subsequently, cryptocurrency records transactions and criminal activities can be discovered. Additionally, the recording occurs because of blockchain technology, an online ledger that is attributed to cryptocurrencies, thus reducing criminal activity status (Kuo Chuen, Guo & Wang, 2017). Further, through regulators and regulations, the presence of censorship on certain digital currency platforms limits criminal activities due to the presence of a third party in any transaction. These factors indicate the advantages cryptocurrencies pose regarding criminal activities.

Cons

Just as the features of cryptocurrencies limit criminal activities, some also promote criminal activities, including CRIX, the anonymity of participants, and the lack of censorship (Weaver, 2018). CRIX works to dismantle societal confinements by giving individuals anywhere a chance to invest, implying that even criminals are provided with this opportunity; thus, they can obtain funding for their criminal activities. Secondly, participants of a transaction are anonymous, illustrating that their identities are hidden. With a hidden identity, criminals can conduct illegal transactions freely without fear of revealing their identities. Thirdly, blockchain technology promotes the lack of censorship, meaning transactions are neither regulated nor monitored by a third party. This shows that criminals can continue transacting freely despite the activities they are involved in. However, some of these shortcomings can be remedied to limit their contribution to criminal activities.

Conclusion

In conclusion, when it comes to the part cryptocurrencies play in promoting criminal activities, an analysis must be conducted to gather facts. Additionally, the greater evil between money and digital currencies must be determined so that individuals can understand which one promotes criminal activities more than the other. Based on this elaboration, it is evident that cryptocurrencies reduce criminal activities by reducing the use of money due to some of their features, such as blockchain technology and censorship on certain platforms.

References

Belomyttseva, O. (2015). Conceptual Framework for the Definition and Regulation of Virtual Currencies: International and Russian practices / Konceptualni okvir za definition in regulation virtualnih value: mednarodne in risk prakse. Naše Gospodarstvo/Our Economy, 61(5), 32-39. doi: 10.1515/ngoe-2015-0020

Butler, S. (2019). Criminal use of cryptocurrencies: a great new threat or is cash still king?. Journal Of Cyber Policy, 4(3), 326-345. doi: 10.1080/23738871.2019.1680720

Hendrickson, J., & Luther, W. (2021). Cash, crime, and cryptocurrencies. The Quarterly Review Of Economics And Finance. Doi: 10.1016/j.qref.2021.01.004

Kuo Chuen, D., Guo, L., & Wang, Y. (2017). Cryptocurrency: A New Investment Opportunity?. The Journal Of Alternative Investments, 20(3), 16-40. doi: 10.3905/jai.2018.20.3.016

Weaver, N. (2018). Risks of cryptocurrencies. Communications Of The ACM, 61(6), 20-24. doi: 10.1145/3208095

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Purpose: The purpose of this assignment is to revise the introduction and literature review of your academic argumentative research paper, which you created a draft of in Unit IV.
Description: In this assignment, you will revise the introduction and literature review that you wrote for the Unit IV assignment. Revisions must be substantive and should be made in accordance with the professor’s instructions.

Cryptocurrencies and Criminal Activity- A Literature Review

The following parts of the assignment must be revised:
▪ Introduction (9-12 well-developed sentences/approximately 350 words): For more details about what is expected for each of the following sentences, please see “Lesson 4: The Introduction.” You may also want to review the “Example Introduction and Literature Review (with comments).” The following components must be included in the introduction (in the following order).
▪ Sentence 1: Introduce the general topic
▪ Sentence 2: Pro side (general)
▪ Sentence 3: Con side (general)
▪ Sentence 4: Narrow the scope (1)
▪ Sentence 5: Examples of the narrowed topic
▪ Sentence 6: Narrow the scope (2)
▪ Sentence 7: Specific controversy
▪ Sentence 8: Pro side (specific)
▪ Sentence 9: Con side (specific)
▪ Sentence 10: The thesis
▪ Literature Review (800-900 words): For details about the structure of the literature review, you will want to review “Lesson 3: The Literature Review: The Process.” You may also want to review the “Example Introduction and Literature Review (with comments).” The link is below.
▪ Literature review preface: This paragraph acts as a guide to what the reader can expect in the literature review.
▪ Literature review body: This section includes three to four body paragraphs that discuss the history, terminology, and both sides of the controversy (pro and con).
▪ Literature review conclusion: The conclusion signals that the literature review is ending, but it also acts as a kind of preface for the body of the paper by restating the thesis statement and establishing your argument once again.
▪ Demonstrate the avoidance of plagiarism through proper use of APA citations and references for all paraphrased and quoted material.
▪ Implement techniques of editing and revising.
Introduction and Literature Review Example
Note: The conclusion is not presented in this example; however, the literature review conclusion is a requirement of the assignment.