Bitcoin and modern alchemy:
in code we trust
Government of Ontario, Toronto, Canada
Purpose – This paper aims to explore the challenge posed by Bitcoin to regulators, particularly
anti-money laundering regulators. Bitcoin is a crypto-currency based on open-source software and
protocols that operates in peer-to-peer networks as a private irreversible payment mechanism. The
protocol allows cross-border payments, for large and small items, with little or no transactional costs.
Design/methodology/approach – Case studies and case law are examined as are relevant reports
Findings – Bitcoin is based on complex computer code supported by a robust community in a
peer-to-peer network. Unlike other virtual currencies, Bitcoin appears to have obtained purchase and as
such poses unique challenges to regulators.
Research limitations/implications – Bitcoin is at a nascent stage and the evolution of the virtual
currency is difcult to predict.
Practical implications – Those who study nancial systems, anti-money laundering regimes and
asset forfeiture laws will have an interest in this topic.
Originality/value – This is a new and emerging currency; there is limited literature on the
implications of this currency to anti-money laundering systems.
Keywords Bitcoin, Money laundering, Virtual currency, Asset forfeiture
Paper type Research paper
Unlike credit card transactions, which leave a digital trail, Bitcoin transactions are designed to
be anonymous and untraceable. When you transfer Bitcoins to someone else, it is as if you
handed over a paper bag lled with $100 bills in a dark alley. Sure enough, as best as anyone
can tell, the main use of Bitcoin so far, other than as a target for speculation (on the markets),
has been online versions of those dark alley exchanges, with Bitcoins traded for narcotics and
other illegal items (Krugman, 2013).
The Library of Alexandria, by the third century BC, was believed to hold the sum of
human knowledge; today there is enough information oating around the world, big
data, to give every single person alive 320 times as much information as that great
library held, 1,200 exabytes worth (Cukier and Mayer-Schoenberger, 2013). Big data
offers unique opportunities to solve problems, potentially threatens our privacy and
The views expressed in this paper are the personal views of the author and do not represent the
views of the Government of Ontario. The author (email@example.com) is a co-author of Civil
Asset Forfeiture in Canada (Toronto: Canada Law Book, 2012). The author is grateful for the
thoughtful suggestions of his friend and colleague Michael Ryan, BBA, LLB, retired police
Inspector and currently a senior associate with Toddington International Inc., although any errors
in the paper are the author’s.
The current issue and full text archive of this journal is available on Emerald Insight at:
Journalof Financial Crime
Vol.22 No. 2, 2015
©Emerald Group Publishing Limited