Cryptocurrencies and Corruption

Abstract

The paper focuses on the links between cryptocurrencies and corruption. After providing an overview of the literature dealing with the topic, it presents an outline of possible scenarios for how cryptocurrencies can be used in corruption-tainted contracts. The scenarios imply that cryptocurrencies can reduce the costs and risks related to a corruption-tainted contract and make it easier to transfer the corruption-based benefits on an anonymous basis. Their existence also allows corruption-tainted contracts to expand to areas where this did not bring any economic advantages in the past. The paper then explores whether there are any empirical correlations between cryptocurrencies and corruption in different countries. The numbers of Bitcoin automated teller machines (ATM) and cryptocurrency users were used as a proxy for cryptocurrencies and the Corruption Perception Index (CPI) as a proxy for corruption. Although we did not find any clear relationships, we discovered that the largest number of owners or users of cryptocurrencies is in countries with a high prevalence of corruption, but the level of corruption in them did not exceed the critical limit (around the value of 30 points of the CPI index).