An Inquiry into Money Laundering Tools in the Bitcoin Ecosystem

Möser Malte, Böhme Rainer, Breuker Dominic


Abstract
We provide a first systematic account of opportunities and limitations of anti-money laundering (AML) in Bitcoin, a decentralized cryptographic currency proliferating on the Internet. Our starting point is the observation that Bitcoin attracts criminal activity as many say it is an anonymous transaction system. While this claim does not stand up to scrutiny, several services offering increased transaction anonymization have emerged in the Bitcoin ecosystem -- such as Bitcoin Fog, BitLaundry, and the Send Shared functionality of Blockchain.info. In a series of experiments, we use reverse-engineering methods to understand the mode of operation and try to trace anonymized transactions back to our probe accounts. While Bitcoin Fog and Blockchain.info successfully anonymize our test transactions, we can link the input and output transactions of BitLaundry. Against the backdrop of these findings, it appears unlikely that a Know-Your-Customer principle can be enforced in the Bitcoin system. Hence, we sketch alternative AML strategies accounting for imperfect knowledge of true identities but exploiting public information in the transaction graph, and discuss the implications for Bitcoin as a decentralized currency.



Publication type
Conference Paper

Peer reviewed
Yes

Publication status
Published

Year
2013

Conference
APWG eCrime Researchers Summit (ECRIME 2013)

Venue
San Francisco, USA

Language
English