From Coins to Cays: Using Crypto to Channel Funds Offshore

Dominika Langenmayr and David Streich

No 12740, CESifo Working Paper Series from CESifo

Abstract: We provide evidence that individuals use cryptocurrencies to channel funds into and out of tax havens. Exploiting the Panama Papers (2016) and Paradise Papers (2017) leaks as shocks to offshore detection risk, we compare prices of cryptocurrency–fiat pairs involving Singapore and Hong Kong dollars — the two haven currencies with sufficient trading data — to those involving non-haven currencies on the same exchanges. Prices denominated in haven currencies rise by approximately 10% relative to non-haven currencies following the leaks, consistent with increased demand for crypto originating in tax havens. Effects are concentrated on smaller, less liquid exchanges where arbitrage is constrained, and dissipate within two months, consistent with market efficiency and limits-to-arbitrage theory. These findings suggest cryptocurrencies serve as an alternative channel for capital flows that bypass conventional anti-money-laundering infrastructure.

Keywords: tax havens; illicit financial flows; cryptocurrencies (search for similar items in EconPapers)
JEL-codes: F31 G12 G14 H26 (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-iue and nep-pay
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