The Dark Side of Cryptocurrency

By - Tushar Shahani

Introduction

The rate of criminal activity in the crypto industry has hit an all-time high at $14 billion

in 2021, according to Chainalysis. This is ironic since the percentage of illicit

transactions did take a dip compared to previous years; at the same time, the dollar

value also surged. The overall transaction volume in the crypto industry grew 567%

from 2020 to a total of $15.8 trillion. Chainalysis reports that unlawful use and illicit

activity account for 0.62% of the total transaction volume from 0.34% in 2020.

Cryptocurrency1 represents a significant technological advancement in the field of

financial services, offering the potential to disrupt traditional intermediaries such as

banks through the facilitation of peer-to-peer transactions with a high degree of

anonymity and speed. However, the lack of regulation and oversight surrounding

cryptocurrency has also made it a tool for criminal activity. As such, the adoption and

integration of cryptocurrency into mainstream economic systems may necessitate

the development of regulatory frameworks to mitigate potential negative

externalities. Cryptocurrency has been utilized in various illicit activities, which

started with cybersecurity breaches, are now associated with money laundering,

dark web trade, fraud, and NFT-related crimes. This trend has potentially hindered the

mainstream adoption and growth of cryptocurrency, as seen in the recent hack of the

central exchange FTX, in which $477 million worth of cryptocurrency was stolen and

laundered through various digital coins, including Ethereum and Bitcoin. Currently,

$74 million has been converted into Bitcoin using the RenBridge. This type of activity
1
Cryptocurrency is a digital asset that circulates on the internet as a medium of exchange. It employs
blockchain technology — a distributed ledger of transactions that is publicly available — and is secured
by advanced cryptography. Crypto Glossary - Cryptopedia | Gemini. (n.d.). Gemini. Retrieved December
24, 2022, from https://www.gemini.com/learn/glossary,
is common in the cryptocurrency industry, as conversion into various digital coins is a

commonly employed tactic in laundering stolen crypto assets. The total value of

cryptocurrency involved in illicit activities raises concerns about the future

development of this technology.

This study aims to provide an overview of the cryptocurrency market, including its

potential use in criminal activities. Through a review of existing literature and an

analysis of regression models, this paper investigates the relationship between

cryptocurrency, specifically Bitcoin, and crime rates in the United States. By

examining this relationship, we hope to shed light on the motivations and

consequences of using cryptocurrency for illegal purposes.

The Cryptocurrency Landscape

What is a Blockchain?
Blockchain is a decentralized2 and distributed digital ledger technology that allows
for the secure and transparent recording of transactions on a network. It uses

cryptography to ensure the integrity and security of the data, making it virtually

tamper-proof.

The blockchain concept was first introduced in 2008 with the creation of the Bitcoin

blockchain, which was designed to be a decentralized and secure digital currency.

Since then, blockchain technology has evolved and been adapted for various use

cases, such as supply chain management, voting systems, and identity verification.

2
Decentralization is in many ways the central and defining characteristic of blockchain technology.
Applying decentralized processes and tech can reduce or even eliminate the role of intermediaries across
industries and use cases. For example, by removing banking institutions from financial instruments,
decentralized finance (DeFi) platforms can distribute profits and governance to users and the wider
community. On an even more foundational level, a decentralized network crowdsources consensus,
making it much harder for any one entity to control or censor the data that transacts through the network.
However, many experts believe that achieving optimal decentralization can tend to decrease network
throughput. Crypto Glossary - Cryptopedia | Gemini. (n.d.). Gemini. Retrieved December 26, 2022, from
https://www.gemini.com/learn/glossary
One of the many key features of blockchain is its decentralized nature, which means

that a single authority or entity does not control it. Instead, it operates on a

peer-to-peer network, where participants can access the same data and verify

transactions. This eliminates the need for intermediaries and financial systems like

banks and allows for a more efficient and transparent process.

Another critical aspect of blockchain is its immutable nature, which means that once

a transaction is recorded on the network, it cannot be altered or deleted. This

ensures the integrity and security of the data, making it a reliable and trustworthy

source of information.

The importance of blockchain lies in its ability to provide a secure and transparent

platform for recording and verifying transactions. It has the potential to disrupt global

industries and change the way we conduct business by providing a more efficient

and secure way of conducting transactions and managing data.

Since the inception of the blockchain, it has undergone numerous developments,

leading to the emergence of new protocols and technologies, such as smart

contracts and decentralized applications. These advancements have facilitated the

expansion of the blockchain beyond its original use case in finance and banking and

into a range of industries, including supply chain management and voting systems.

Bitcoin & Other Cryptocurrencies

Cryptocurrency is a digital or virtual currency that uses cryptography to function.

According to CityAM: “Cryptography is a data security measure that converts any

type of data into a new format that can only be read by users who are permitted

access. Therefore the data cannot be accessed by users without no authorization.”

It also uses cryptography to store cryptocurrencies in digital wallets. These wallets

contain a private and public key. The private key is only known to the individual and
the wallet; it has to match the public key to transact with others. If the individual

forgets or loses their private key, which contains a ‘seed phrase,’ then they will never

be able to access their digital wallet. There are also hardware wallets, which are a way

to store cryptocurrencies on a USB or a hard drive. Most people in the cryptocurrency

community keep their digital assets in cold storage, which is when crypto is stored on

a hardware wallet but disconnected from devices like a laptop or desktop.

Alternatively, they even write down the seed phrase3 on a small piece of paper and

store it in a safe place or even memorize it so that it can be used to unlock the digital

wallet whenever they like (Groysman, 2018).

Bitcoin was the first decentralized digital currency created. It operates on a

peer-to-peer network. It was created in 2008 by an individual or group using the

pseudonym Satoshi Nakamoto, and the creator remains anonymous even today

(Groysman, 2018). One of the key features of Bitcoin is its limited supply. There will

only ever be 21 million Bitcoins in circulation, with a fixed rate of new bitcoins released

into the market through mining4. This makes Bitcoin resistant to inflation, as central

authorities cannot increase the supply arbitrarily. Bitcoins' decentralized nature

means that any central authority or government does not control it, allowing users to

transact without interference from third parties. This also makes it resistant to

censorship and ensures that it remains accessible to all users, regardless of location

or political situation. Today, according to Exploding Topics, there are over 20,000
3
A seed phrase, also referred to as a “recovery phrase' is a 12, 18, or 24-word code that is used as a
backup access mechanism when a user loses access to a cryptocurrency wallet or associated private
key. The seed phrase matches information stored inside the corresponding wallet that can unlock the
private key needed to regain access. Crypto Glossary - Cryptopedia | Gemini. (n.d.). Gemini. Retrieved
December 24, 2022, from https://www.gemini.com/learn/glossary
4
Mining is the process of using computing power to verify and record blockchain transactions. Mining also
results in the creation of new coins, which miners earn as a reward for their efforts. Mining is utilized in
Proof-of-Work (PoW) blockchains. Crypto Glossary - Cryptopedia | Gemini. (n.d.). Gemini. Retrieved
December 24, 2022, from https://www.gemini.com/learn/glossary
cryptocurrencies, with new coins being created daily. Only a couple have been

dominating the market for a while. Bitcoin is still the market leader with 39.3%

dominance, down from its high of over 60%. Many other private cryptocurrencies,

such as Ethereum, Ripple, and Litecoin, have emerged in recent years. These

cryptocurrencies have unique features and use cases, but they all operate on similar

principles to Bitcoin. Ethereum allows developers to build and run applications5 on

top of its blockchain. It uses a different programming language and has its own virtual

machine6, allowing for more flexibility and innovation in the types of applications that

can be built on its platform. Ripple, meanwhile, is a payment network and

cryptocurrency that focuses on facilitating global payments and reducing the cost

and time associated with cross-border transactions. It uses a different consensus7

mechanism and has partnerships with banks and financial institutions, making it

more appealing to mainstream users and businesses. Litecoin is a cryptocurrency

that was created to improve Bitcoin's scalability and transaction speed. It uses a

different algorithm for mining and has a larger supply of coins, making it faster and

cheaper to transact with. Specific cryptocurrencies specialize in privacy. Bitcoin has

5
A decentralized application — or dApp — makes use of blockchain technology to address use cases
ranging from investment to lending to gaming and governance. Although dApps may appear similar to
web applications in terms of user experience (UX), dApp back-end processes eschew centralized servers
to transact in a distributed and peer-to-peer fashion. Rather than using the central Hypertext Transfer
Protocol (HTTP) to communicate, dApps rely on wallet software to interact with automated smart
contracts on supported blockchain networks. Crypto Glossary - Cryptopedia | Gemini. (n.d.). Gemini.
Retrieved December 26, 2022, from https://www.gemini.com/learn/glossary
6
A Virtual Machine (VM) is a cloud-based emulation of a computer system that provides the functionality
of a physical computer system. VMs may be made to emulate types of specialized hardware, software, or
a combination of the two, and provide the framework for data transactions and transactional execution on
blockchain networks. The most well-known VM in the blockchain industry is the Ethereum Virtual Machine
(EVM). Crypto Glossary - Cryptopedia | Gemini. (n.d.). Gemini. Retrieved December 26, 2022, from
https://www.gemini.com/learn/glossary
7
A consensus mechanism is an algorithm that some participants in a blockchain network use to reach an
agreement on the state of the blockchain ledger, including the order of transactions. Popular consensus
algorithms include Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS).
Crypto Glossary - Cryptopedia | Gemini. (n.d.). Gemini. Retrieved December 26, 2022, from
https://www.gemini.com/learn/glossary
historically been used for criminal purposes and still dominates ransomware

demands. However, it is essential to note that Bitcoin is not the only cryptocurrency

that has been used for illicit activities. Monero, a privacy-focused cryptocurrency,

has also been used by some individuals for criminal purposes due to its enhanced

privacy features (Sigalos, 2021). While it is difficult to accurately quantify the extent

to which different cryptocurrencies are used for criminal purposes, it is clear that

Monero and other privacy-focused cryptocurrencies have attracted attention from

those seeking to engage in illicit activities and is "helping make dirty money

disappear without a trace," according to the Financial Times.

Exchanges & Methods of Trading

Centralized cryptocurrency exchanges allow users to convert fiat currency8 into

cryptocurrency and the option to convert that crypto into other coins or back to fiat

currency, which, if withdrawn, is charged a certain fee.

Peer-to-Peer (P2P) trading allows individuals to trade cryptocurrencies with one

another directly without the need for a central authority. P2P trading offers lower

fees, but it comes with a risk of fraud since this method does not require the buyer

and seller to complete any identification process.

Decentralized finance (DeFi) aims to use blockchain technology and smart contracts

to create a more open, transparent, and inclusive financial system. Decentralized

Exchanges, or DEXs, allow individuals to swap one token for another one they have in

their wallet. These transactions might be difficult to trace since DEXs do not have any

8
A fiat currency is any type of government-issued currency that is used as legal tender by a specific
nation, government, or region’s citizens. Fiat currencies are not backed by a physical commodity (like
gold or silver) but instead by the government that issued it. As a government-regulated instrument, it
functions as a medium of exchange, store of value, and unit of account. Crypto Glossary - Cryptopedia |
Gemini. (n.d.). Gemini. Retrieved December 24, 2022, from https://www.gemini.com/learn/glossary
KYC procedures and following transactions of swaps to lesser-known tokens or

privacy tokens enhances anonymity (Europol, 2022).

Criminal Activities in the Crypto Industry

1) Money Laundering - According to Chainlysis Crime Report 2022,

cybercriminals laundered $8.6 billion of digital currency in 2021, 30% more than

the laundering activity in 2020. The main difference between fiat and crypto

money laundering is that each transaction, amount, time, and the wallet

address is registered on the blockchain, which makes it transparent and easily

traceable. Still, privacy coins like Monero and Zcash hide those details. With

money laundering, cybercriminals use multiple strategies as to which service

they send their illicit activity funds. A fascinating insight in the Chainlysis

Report was the difference in the strategy employed by the crime forms Theft

and Scamming, which are the two highest-grossing forms of crypto crimes in

2021. The graph shows that almost 50% of stolen funds were sent to DeFi

platforms or DEX’s9. In contrast, Scammers sent most of their stolen funds to

Centralized Exchanges, a much harder hurdle due to technical challenges. In

2016, two individuals laundered $4.5 billion worth of Bitcoin cryptocurrency

stolen during the hack of a centralized exchange called Bitfinex. According to

the Department of Justice, 2000 unauthorized transactions were initiated

when a hack breached Bitfinex’s systems, and approximately 120,000 Bitcoin

were stolen. Over the past five years, 1/4th of the total amount of stolen

9
A decentralized exchange (DEX) is a financial services platform for buying, trading, and selling digital
assets. On a DEX, users transact directly on the blockchain in a peer-to-peer (P2P) fashion without the
need for a centralized intermediary. DEXs do not serve as custodians of users' funds, and are often
democratically managed with a decentralized governance structure. Without a central authority charging
transaction fees for services, DEXs may be cheaper than their centralized crypto exchange counterparts.
Crypto Glossary - Cryptopedia | Gemini. (n.d.). Gemini. Retrieved December 24, 2022, from
https://www.gemini.com/learn/glossary
 Bitcoin was transferred out of the two individuals’ wallets using money

laundering processes and somehow ended up in accounts connecting it all

back to the true identity of the individuals. On February 8th, 2022, the two

individuals were arrested, and law enforcement seized $3.6 billion linked to

that hack.

10

2) Darknet Markets - The internet we use today is known as the ‘surface net’ or
‘clear net.’ Deepweb is part of the internet that is not accessible without

permission. It comprises sites requiring special software or configuration to

access and is often used to host illegal or illicit activities. Because the content

of the deep web is not easily accessible, it can be challenging to determine

precisely what is on it. However, it is known to be a hub of illegal activity,

10
The Chainalysis 2022 Crypto Crime Report. (n.d.). The Chainalysis 2022 Crypto Crime Report. Retrieved
December 19, 2022, from https://go.chainalysis.com/2022-Crypto-Crime-Report.html
including drug sales, human trafficking, and the sale of stolen personal

information(TRM Labs, 2022). However, Deepweb is not the same as the

‘Darkweb’ or the ‘Darknet.’ The Darknet is a specific part of the Deepweb which

is decentralized, unindexed, unregulated, and can only be accessed using

specialized software such as the ‘Onion Router’ or the ‘Tor Browser’ (MSN,

2022). Darknet market revenues hit an all-time high of $2.1 billion in 2021, out of

which $1.8 billion came from drug markets(Chainlysis Crime Report, 2022).

Darknet markets have preferences regarding which cryptocurrency they

accept, just like companies. Bitcoin is on top of the list for most marketplaces,

while Monero, Zcash, and Ethereum are also accepted in several marketplaces.

The Russian-based darknet market 'Hydra' is still dominating the space,

accounting for 80% of the darknet market revenue worldwide, according to the

Chainlysis Crime Report (2022). Since its inception in 2015, it has been

growing among criminals and offers purchases of large quantities of drugs and

fraud-related goods and services through a massive network of sellers

worldwide through its website. Out of the five largest markets aside from

Hydra, 2 of them: UniCC and DarkMarket, were taken down by law

enforcement.
 11

3) Ransomware - A ransomware attack is a cyber attack in which the attacker

encrypts the victim's data and demands a ransom payment in exchange for the

decryption key (Computer Emergency, 2022). The attacker typically demands

payment in a cryptocurrency, such as Bitcoin, to make it more difficult to trace

the transaction. Ransomware attacks can be incredibly disruptive and costly,

as they can prevent organizations and individuals from accessing critical data

and systems until the ransom is paid. People and businesses need to take

steps to protect themselves against ransomware attacks, such as regularly

backing up their data and keeping their computer software up to date.

According to the Innovation's Cybersecurity guide, “Malware is short for

malicious software and refers to any software that is designed to harm or

exploit a computer or its user.” There are four different types of cryptocurrency

malware: Info Stealers, Clippers, Cryptojackers, and Trojans. Cryptojacking is

when a hacker uses someone else's computer to mine cryptocurrency without

11
The Chainalysis 2022 Crypto Crime Report. (n.d.). The Chainalysis 2022 Crypto Crime Report. Retrieved
December 19, 2022, from https://go.chainalysis.com/2022-Crypto-Crime-Report.html
the user's knowledge or permission. This is done by embedding a piece of code

on a website or in an email that will execute the mining software when the user

visits the website or opens the email. The user's computer will then mine the

cryptocurrency, which the hacker can sell for a profit. Cryptojacking can be

challenging to detect, and it can slow down a computer's performance. It is

important to use reputable antivirus software and be cautious when visiting

unknown websites or opening suspicious emails to protect against this attack.

According to the Chainlysis Crime Report (2022), 73% of the total value

received by Malware type comes from Cryptojacking, followed by 19% from

Trojan malware. With ransomware attacks, only a small portion of companies

end up paying the ransom; hence Cryptojacking is gaining popularity among

criminals as more accessible and profitable (Biasini et al., 2018). An average

“cryptojacked” computer can produce around $0.25 of Monero(XMR) a day. If

there are around 2,000 computers, that is about $500 a day or over $180,000 a

year (Biasini et al., 2018). According to a 2018 report by Palo Alto Networks, it is

estimated that cryptojackers mined 5% of all Monero in circulation, which is

valued at over $100 million in revenue.

 12

Literature Review
Gary Becker's Crime: An Economic Approach paper suggests that individuals will

weigh the costs and benefits of committing a crime and only engage in criminal

activity if the expected benefits outweigh the costs. To illustrate this concept using

mathematical formulas, we can represent the cost of committing a crime as C and

the expected benefit as B. If the expected benefit exceeds the cost (B > C), the

individual will choose to commit the crime. In the context of cryptocurrencies, the

cost of committing a crime may include the risk of being caught and punished. The

potential costs of getting caught include the loss of funds and damage to reputation.

The legal consequences of such activities, including fines and imprisonment, can

negatively impact an individual's future prospects. The expected benefit may include

12
The Chainalysis 2022 Crypto Crime Report. (n.d.). The Chainalysis 2022 Crypto Crime Report. Retrieved
December 19, 2022, from https://go.chainalysis.com/2022-Crypto-Crime-Report.html
the monetary gain or other rewards the criminal expects from the crime (Becker,

1968).

Cryptocurrency, specifically Bitcoin, has been widely used in illegal activities such as

money laundering, trading in illegal goods and services, financing terrorism, fraud,

and tax evasion (Levin et al., 2014). This is partly due to the anonymity and

decentralized nature of cryptocurrencies, which make it difficult for law enforcement

to trace and identify users. The anonymity of cryptocurrencies also reduces the risk

for drug dealers, leading to lower prices for drugs purchased through crypto market

vendors than street prices (Martin et al., 2018).

According to Mabunda (2018), money laundering using Bitcoin is not inherently

different from other traditional currencies. However, Bitcoin's anonymity, security,

and decentralized nature make it particularly challenging for authorities to monitor

and prevent its use in illicit activities. Even if Bitcoin's value declined significantly, it

might still be utilized for money laundering due to these attributes. Despite the

difficulties faced by law enforcement in addressing the unique problems posed by

Bitcoin, Brown (2016) notes that cryptocurrency continues to offer opportunities for

criminal activity. In addition, less popular cryptocurrencies may also provide

opportunities for illegal activity, further complicating efforts by authorities to curb

the illicit use of digital assets. These challenges have been extensively discussed by

Brown (2016), highlighting the ongoing difficulties faced by law enforcement in

effectively addressing the use of Bitcoin and other cryptocurrencies in illegal

activities.
According to a study by Schoenberg and Robinson (2018), Bitcoin ATMs are

disproportionately situated in areas characterized by high levels of crime and

poverty. The observation further supports this finding that Bitcoin ATM revenue

positively correlates with the crime rate. Despite the requirement for users to provide

identification at Bitcoin ATMs, it is common for individuals to utilize false or fabricated

identification documents in order to evade detection. This highlights the continued

challenges faced by law enforcement in effectively tracking and preventing the use

of Bitcoin ATMs for money laundering purposes. Using fake or altered identification

documents further complicates efforts to identify and prosecute individuals engaged

in illicit activity using Bitcoin ATMs.

The use of cryptocurrency, particularly Bitcoin, has been the subject of extensive

research and analysis, focusing on its technological innovations and potential

involvement in illicit activities. The present study seeks to build upon the work of

previous scholars in examining the relationship between Bitcoin and criminal activity.

This paper aims to contribute to the existing body of knowledge on the topic by

exploring the potential impact of Bitcoin on crime rates in the USA.

Analysis: Cryptocurrency’s Impact On Crime Rates in the USA

Theory - Bitcoin and other cryptocurrencies have been utilized in various criminal
activities, such as money laundering, darknet marketplace trading, and ransomware.

The anonymity of these digital assets decreases the risk of detection for individuals

engaging in illegal activities and allows for higher profit potential. As

utility-maximizing individuals, criminals are motivated to commit crimes when the

marginal benefits exceed the marginal costs (Becker, 1968). The use of Bitcoin and

other cryptocurrencies reduces the marginal cost of crime, potentially leading to an

increase in criminal activity. Bitcoin ATMs have been observed to be positively

correlated with crime (Schoenberg & Robinson, 2018).

However, the anonymity of Bitcoin and other cryptocurrencies also makes it more

difficult for law enforcement to detect crimes involving these digital assets. As a

result, the number of crimes reported may decrease, even if the overall number of

crimes committed remains unchanged. This is because the use of Bitcoin does not

increase the punishment for criminal activity, but it does reduce the risk of being

caught. The "risk premium" associated with illegal transactions is negatively

correlated with the currency's anonymity, leading to a decrease in transaction costs

for illegal activities (Keane,2020). This suggests that criminals view

cryptocurrencies, particularly Bitcoin, as having a lower risk of detection compared to

other forms of currency.

In this study, we will utilize the work of Kevin Keane (2020) to examine the

relationship between Bitcoin ATMs as a proxy for Bitcoin usage and criminal activities

in the United States. To conduct this analysis, we will employ a regression model.

This approach will allow us to determine the impact of Bitcoin ATMs on criminal

activities in the USA, providing insight into Bitcoin's role in facilitating illegal activity.

By examining the relationship between Bitcoin ATMs and crime, we aim to contribute

to the ongoing conversation surrounding the intersection of cryptocurrency and

criminal activity.

Model & Data - Regression equation used to analyze the impact of Bitcoin on crime
rates in the USA.
TOTAL.CRIME.RATE = B0 + B1 BITCOIN.ATM + B2 POST.2013 + B3 POVERTY.RATE +
Ui
In this study, we will utilize ordinary least squares (OLS) regression to investigate the

relationship between Bitcoin ATMs, total reported crime rate, and poverty in the

United States. The dependent variable, TOTAL.CRIME.RATE represents the total

reported crime rate per 100,000 individuals from 2000 to 2022: the first independent

variable, BITCOIN.ATM represents the number of Bitcoin ATMs installed in the United

States from 2013 to 2020. The second independent variable, POST.2013, is a dummy

variable that takes on a value of 1 if the year is 2013 or later and 0 otherwise. This

variable is included in the model to control for the fact that Bitcoin ATMs were not

installed prior to 2013. The third independent variable POVERTY.RATE represents the

poverty rate in the United States from 2000 to 2020.

This study builds upon the work of Kevin Keane (2020), who used Bitcoin ATM data

from 2017 to examine the relationship between Bitcoin ATMs and crime. However, in

this analysis, we will utilize data on overall Bitcoin ATM installations in the United

States over eight years to provide a more comprehensive understanding of the

impact of Bitcoin ATMs on reported crime in the country. As noted by Schoenberg and

Robinson (2018), Bitcoin ATMs tend to be disproportionately located in areas with

high levels of crime and poverty. Brown (2016) similarly found that population density

and socioeconomic welfare, including the poverty rate, are strong crime indicators.

Thus, the inclusion of the POVERTY.RATE variable in our model allows us to control for

the potential confounding effect of poverty on the relationship between Bitcoin

ATMs and crime.

Results - The linear regression model results indicate that all three predictors,
Bitcoin.ATM, Post.2013, and Poverty.Rate, are significantly associated with the

dependent variable, Total.Crime.Rate.

The regression coefficients for each predictor can be found in the "Coefficients"

table under "Estimate" in the chart below. The coefficient for Bitcoin.ATM is

-0.002287, the coefficient for Post.2013 is -18.65, and the coefficient for Poverty.Rate

is -2.13. These coefficients indicate the average effect on the dependent variable

(i.e., Total.Crime.Rate) for a one-unit increase in the predictor variable, holding all

other predictor variables constant. A one-unit increase in Bitcoin.ATM is associated

with an average decrease of 0.002287 units in Total.Crime.Rate, while a one-unit

increase in Post.2013 is associated with an average decrease of 18.65 units in

Total.Crime.Rate. Additionally, a one-unit increase in Poverty.Rate is associated with

an average decrease of 2.13 units in Total.Crime.Rate. These findings suggest that

the presence of Bitcoin ATMs, the passage of time after 2013, and higher poverty

rates are all associated with a decrease in the total reported crime rate in the United

States.

The statistical significance of the predictors is further supported by the F-statistic

and its corresponding p-value. With an F-statistic of 43.39 and a p-value of

3.504e-08, the model demonstrates an excellent fit for the data and indicates that

the predictors are significantly associated with the dependent variable. The p-values

for each predictor, "Pr(>|t|)," is less than the 0.05 threshold for statistical

significance., which indicates the relationship between the predictors and

Total.Crime.Rate reported is statistically significant. The adjusted R-squared value of

0.8641 further supports the strong explanatory power of the model, as it indicates

that the predictors explain 86.41% of the variation in Total.Crime.Rate. These results

support the hypothesis that an increase in Bitcoin ATM installation correlates with a

decrease in the total reported crime rate in the United States. The findings of this

study contribute to the existing body of literature on the relationship between

Bitcoin and crime and suggest that the decentralization and anonymity offered by

Bitcoin may have unintended consequences on criminal activity.

Conclusions & Limitations - While this model has provided valuable insights into the
relationship between Bitcoin ATM installations and reported crime rates in the United

States, it is essential to acknowledge the study's limitations. One major limitation is

the use of Bitcoin ATM installations as a proxy for Bitcoin usage. While Bitcoin ATMs

may provide a convenient way for individuals to buy and sell Bitcoin, there are other

means of obtaining or using the cryptocurrency. Therefore, the findings of this study

should be interpreted with caution, as they may not accurately reflect the true

relationship between Bitcoin usage and crime rates.

A potential limitation of this study is the possibility of omitted variable bias, as the

model did not consider variables such as unemployment rates, income inequality,

police presence, or DeFi adoption, which may also impact crime rates. If these

variables are correlated with both Bitcoin ATM installations and crime rates, the

model may produce biased estimates of the relationship between these variables.

Additionally, data on other potential predictors of crime rates, such as DeFi adoption,

is often difficult to obtain and is typically only reported globally rather than at the

country or state level, making it challenging to analyze the impact of these factors on

crime rates accurately.

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