Blockchain and the Tracing of Illicit Financial Flows: On-Chain Analysis, Off-Chain Attribution, and Asset Recovery

Felipe Telles Veloso de Araujo

No k5n7a_v1, LawArchive from Center for Open Science

Abstract: This paper argues that blockchain has not eliminated the traditional problem of asset concealment, but has profoundly changed its form. Unlike cash, transactions on public blockchains leave durable, auditable, and chronologically ordered traces. That does not amount to absolute transparency. It means, rather, that the investigation of illicit financial flows now depends on a double movement: technical reading of the on-chain trail and production of off-chain evidence capable of attributing that trail to concrete persons, companies, or criminal organizations. The paper explains why pseudonymity is not anonymity, examines the main forensic heuristics used in blockchain analysis and their evidentiary limits, and shows how mixers, privacy-enhancing technologies, cross-chain bridges, and DeFi increase investigative complexity without making attribution impossible. It then discusses major international cases, recent Brazilian regulation and case law, and the institutional importance of cooperation among courts, regulators, exchanges, and investigators. The central claim is that blockchain’s principal contribution to the repression of illicit financial flows is not total transparency, but a change in the evidentiary regime: the challenge is less to locate value in the abstract than to reconstruct trajectories, test control hypotheses, and transform technical traces into valid proof and effective asset recovery.

Date: 2026-04-21
New Economics Papers: this item is included in nep-law
References: Add references at CitEc
Citations:

Downloads: (external link)
https://osf.io/download/69dfb241c8aa616bc6e4724e/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:osf:lawarc:k5n7a_v1

DOI: 10.31219/osf.io/k5n7a_v1

Access Statistics for this paper

More papers in LawArchive from Center for Open Science
Bibliographic data for series maintained by OSF ().