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From Coins to Cays: Using Crypto to Channel Funds Offshore

Author

Listed:
  • Dominika Langenmayr
  • David Streich

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.

Suggested Citation

  • Dominika Langenmayr & David Streich, 2026. "From Coins to Cays: Using Crypto to Channel Funds Offshore," CESifo Working Paper Series 12740, CESifo.
    • Handle: RePEc:ces:ceswps:_12740
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    JEL classification:

    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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