## Crypto as a Marketplace for Capital Flight

_IMF Working Papers, June 28, 2024_

## Source details

**Canonical URL:** [Crypto as a Marketplace for Capital Flight](https://www.imf.org/en/publications/wp/issues/2024/06/28/crypto-as-a-marketplace-for-capital-flight-550966)

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## Bibliographic details
- Authors: Clemens M. Graf von Luckner, Robin Koepke, Silvia Sgherri
- Published: June 28, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400279348.001

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### Summary and central argument
- The 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.
- Empirical analysis of relative crypto pricing data in several country case studies provides support that crypto markets serve as marketplaces for capital flight that already took place, rather than a novel channel for capital flight.
- The authors make available a novel dataset on crypto market premia, proposed as indicators of excess demand for foreign currency and capital control intensity; the dataset will be posted along with this paper and updated periodically.

### Key findings and empirical evidence
- Crypto markets can function as marketplaces that match agents without access to FX to agents with access to FX, enabling premium-priced conversion into foreign currency.
- Persistent crypto premia in local relative to global markets are linked to restricted foreign currency amid economic imbalances.
- Empirical support comes from relative crypto pricing data across several country case studies (case details are contained in the paper).

### Data and methodological contributions
- A novel dataset on crypto market premia is produced and will be posted along with the paper and updated periodically.
- The dataset is proposed as indicators of:
  - excess demand for foreign currency, and
  - capital control intensity.

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2024/06/28/crypto-as-a-marketplace-for-capital-flight-550966_