Cover IMF Working Papers
Crypto as a Marketplace for Capital Flight
Author: Clemens M. Graf von Luckner, Robin Koepkehttps://orcid.org/0000-0002-9308-9619, and Silvia Sgherri1
  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund
Series:
IMF Working Papers
Volume/Issue:
Volume 2024: Issue 133
Language:
English
Publication Date:
28 Jun 2024
DOI:
https://doi.org/10.5089/9798400279348.001
ISBN:
9798400279348
ISSN:
1018-5941
Pages:
42
Keywords:
Capital flows; digital money; capital controls; cryptocurrency market; cross-border capital flight; crypto market; trading illicit capital flight; IMF working paper 24/133; Capital outflows; Currencies; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Download PDF (3.7 MB) Download Epub
This paper shows how cryptocurrency markets can fuel cross-border capital flight by serving as marketplaces that match counterparts with and without (illicit) access to FX. In countries where international transactions are restricted, crypto exchanges effectively allow domestic agents to pay a premium to buy foreign currency. The counterparts to these transactions are agents with access to FX, who sell crypto holdings purchased abroad. A stylized model illustrates that restricted foreign currency amid economic imbalances incentivizes these transactions via persistent crypto premia in local relative to global markets. We analyze relative crypto pricing data in several country case studies, providing empirical support that crypto markets serve as marketplaces for capital flight that already took place, rather than a novel channel for capital flight. We make available a novel dataset on crypto market premia, which we propose as indicators of excess demand for foreign currency and capital control intensity. The dataset will be posted along with this paper and updated periodically.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund