Cryptocurrencies and Criminal Activity- A Literature Review

Cryptocurrencies and Criminal Activity- A Literature Review

Introduction

Uncertainties surrounding cryptocurrencies’ application in society, especially economically, contribute to the ongoing debates on the use of cryptocurrencies. On the one hand, the use of cryptocurrency will reduce the frequency of cryptocurrency due to the presence of an online ledger that records all transactions, legal or otherwise; an aspect that is greatly debated. On the other hand, cryptocurrency use will promote the frequency of criminal activities due to the hidden identities of participants of a transaction, implying criminals can conduct their businesses comfortably without the fear of exposure. First, from these two perspectives, it is essential to elaborate that the challenges facing the application and implementation of cryptocurrencies originate from the presence of the Internet and digital currencies, which are easily and readily available to all individuals. Consistently, this points out the fact that anyone, despite their location and occupation, has easy access to the internet for transactions using digital currencies (Weaver, 2018). Secondly, the properties of digital currencies contribute to these setbacks; the hidden identity of the participants and the lack of a third party in transactions may provide an environment in which all individuals, including criminals, may transact (Kuo Chuen, Guo & Wang, 2017). Consequently, the question creating the debate is, “Do cryptocurrencies promote or reduce criminal activity? Subsequently, cryptocurrencies might reduce criminal activities due to the blockchain technology that records all transactions, including illegal transactions. In contrast, the anonymity of participants and the absence of third parties in transactions involved in cryptocurrency transactions might contribute to criminal activities. However, certain aspects can be put in place to monitor these transactions to control criminal activities, including the use of regulators, who act as third parties in the transactions involving digital currencies. Consequently, the setbacks involving cryptocurrencies can be reduced through regulators and regulations. The impacts of cryptocurrency use on criminal activity indicate reduced criminal activities because of the presence of the digital ledger, presence of regulators on certain digital currencies platforms and reduced use of cash with the use of cryptocurrencies.

Literature Review

Preface

Fallacies and misconceptions about digital currencies, such as cryptocurrencies, continue to limit the number of people willing to transact using digital currencies. One example of a widely used cryptocurrency is Bitcoin. One misconception of cryptocurrencies is their likelihood of promoting criminal activities. This ideology is promoted by the properties of digital currencies that allow anyone to transact without revealing their identities. Additionally, the absence of a third party in transactions illustrates that illegal transactions can occur without regulators. However, illegal transactions by criminals have been occurring way before digital currencies were introduced using money. What this indicates is that criminals need any type if currency to transact, however, some currencies are preferred over others (Hendrickson & Luther, 2021). One such currency is money, which cannot be traced, and transactions do not have regulators hence it is the preferred method of transacting (Butler, 2019). Accordingly, the goal of this literature review is to compare the pros and cons of digital currency use in relation to criminal activity.

History

In 2008, Satoshi Nakamoto introduced Bitcoin, the first cryptocurrency. From this digital currency, many others were invented and generally referred to as altcoins (Kuo Chuen, Guo & Wang, 2017). Their inventions were aimed at addressing the setbacks of bitcoins to provide alternative options for people using digital currencies. As the use of digital currencies continues to increase, their costs also increase, creating an investment opportunity for all individuals interested in digital currency. Consequently, financial institutions must monitor these transactions, such as the change from cryptocurrencies to cash and vice versa. This is essential to ensure these transactions are not based on criminal activities or money laundering (Sprenger & Balsiger, 2018).

Terminologies

Digital currencies are online currencies. One type of digital currency is cryptocurrencies, which have various properties. One property of cryptocurrencies is blockchain technology, which is an online ledger that records all transactions involving cryptocurrencies (Kuo Chuen, Guo & Wang, 2017). The efficiency of blockchain technology illustrates the nonessentialism of a third party to oversee transactions. Additionally, the cryptocurrency index (CRIX) allows every individual to trade online despite their social status and class (Kuo Chuen, Guo & Wang, 2017). The CRIX contributes to the investment opportunity in cryptocurrencies. Additionally, there are various trading platforms where digital currencies are used, such as Rakuten.

Pros

There are various pros associated with cryptocurrency use. They include “increased capacity, better security, and faster settlement” (Kuo Chuen, Guo & Wang, 2017). These pros promote cryptocurrency use amongst all individuals; however, when it comes to the pros over criminal activities, there are varying pros, including blockchain technology, regulators and regulations, and reduced use for cash. The first pro is the blockchain technology in which all transactions are recorded; illustrating that illegal transactions are also recorded on this ledger, thereby reducing criminal activities using cryptocurrencies. Secondly, the presence of regulators and regulations on certain digital currency platforms also reduces illegal transactions because a third party oversees transactions. Thirdly, opting for cryptocurrencies reduces the use of cash, which is often used for illegal transactions since it is untraceable (Butler, 2019).

Cons

On the other hand, there are various cons associated with cryptocurrency use. These cons are all based on some properties of cryptocurrencies. One of the properties includes the anonymity of participants in transactions. All transactions have participants whose identities are hidden, allowing criminals to conduct their transactions easily (Weaver, 2018). Secondly, CRIX indicates that anyone anywhere can transact using cryptocurrencies, including criminals. Thirdly, the lack of censorship allows criminals to transact on digital currency platforms easily, but the presence of regulators and regulations curtails this setback (Hendrickson & Luther, 2021). Accordingly, some of the pros of cryptocurrencies curb the cons associated with cryptocurrency use, especially in criminal activities.

Conclusion

In conclusion, controversies surrounding cryptocurrency use in criminal activity continue to fuel the debate on cryptocurrency use. Since its introduction in 2008, cryptocurrencies have created investment opportunities for individuals globally. This opportunity is open even for criminals who can invest and conduct their illegal transactions. Further, various arguments are made to illustrate the role cryptocurrencies play in criminal activities, including some favoring their role and some opposing their role. Some arguments that shed light on this controversy include blockchain technology, regulators and regulations, reduced use for cash, the anonymity of participants in transactions, CRIX, and lack of censorship. Therefore, it suffices to say that despite fallacies and misconceptions about cryptocurrencies’ role in criminal activities, various elaborations clarify their role in reducing rather than promoting criminal activities.

References

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

Sprenger, P., & Balsiger, F. (2018). Anti-money-laundering in times of cryptocurrency. Retrieved from https://assets.kpmg/content/dam/kpmg/ch/pdf/anti-money-laundering-in-times-of-cryptocurrency.pdf

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

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So, what exactly is an LR? A literature review assesses a body of materials written about a particular topic (in our case, a controversy). In this situation, however, you are not critiquing the arguments, ideas, or positions of others. Instead, you are using the space of the literature review to explain the controversy based on the materials that you have

Cryptocurrencies and Criminal Activity- A Literature Review

Description: In this assignment, you will first write your literature review and then write your introduction. Please see “Lesson 4: The Introduction” for details on why it is suggested that you begin the drafting process with the literature review instead of the introduction. An introduction is the first paragraph of a research paper. We know that an introduction should preface the material that comes afterward by familiarizing the reader with the general concepts. The thesis statement should be placed at the end of this paragraph. An introduction sets the stage for the rest of your paper. If you do not include an introduction or your introduction is weak, the reader may have difficulty understanding your topic or your argument. Whatever you include in the introduction becomes the foundation for the entire paper, so you want to give the reader a strong understanding of what you will be doing for the rest of the paper

The following details are the requirements of the assignment:
▪ 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
Thesis statement: 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 reduced use of cash with the use of cryptocurrencies.
▪ 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 how to summarize and paraphrase source materials.
▪ Demonstrate the avoidance of plagiarism through proper use of APA citations and references for all paraphrased and quoted material.
Introduction and literature review example