Side Event: Drug Crypto Markets Beyond 2020: Policy, Enforcement, Harm, and Resilience

Organized by the Netherlands, and Asociacion Bienestar y Desarollo (Energy Control), Global Drug Policy Observatory and International Drug Policy Consortium.

Surprisingly little research on drug crypto markets. Crypto markets continue to function despite high profile law enforcement actions. Data suggests that production of drugs on crypto markets remain robust and in some contexts are increasing. Impact of law enforcement has been questionable. What should policymakers consider when dealing with crypto markets?

Dr. Martin Horton-Eddison, Global Drug Policy Observatory and Cardiff University: Advent of crypto markets represent a change in drug supply. Leverage internet technologies for direct yet anonymous supply. Secure against identification and thus reduce law enforcement and market violence. User confidence assured. Approaching a decade old and thus representing an established and maturing issue area. With respect to international response, historically the global drug control apparatus has been slow to comprehend. Thought to be a marketing issue. Although there is agreement that crypto markets are bad, no direct instrument or agreement on international response. Addition of Budapest convention have been coopted to produce an eclectic approach. Confused strategy at the international level. Silk Road takedown by FBI in October 2013 successfully removed the first major market, and generated significant offline and online media interest. Served to increase public awareness and traffic to crypto markets. Research shows that while seizure operations have short-term impacts, users simply migrate to the next largest crypto market. Closure of Silk Road returned to pre-bust levels in four months. Recovery time cut in half for future busts, and sale volumes exceed pre-bust levels. Research shows that overall, crypto markets and users recover faster from disturbances caused by law enforcement and crypto markets continue to grow more profitable. Takedowns of crypto markets spur innovation aimed at reducing vulnerability to law enforcement detection and arrest. FBI seizure of Silk Road accelerated adoption of innovation technologies. Entire ecosystem as a whole is highly resilient to law enforcement. Dutch approach includes global leadership role in countering crypto markets. High-tech crime unit. Instrumental to evolving increasingly nuanced and innovative approach. Rather than immediate takedown, undermining trust in these markets through infiltration. Smaller intelligence led unit. Embedding enforcement units. Live markets infiltrated in 2017 and marked a strategic shift in enforcement thinking and practice. Netherlands investigators covertly operating meant they were able to create a real time copy of the database in their jurisdiction and monitor users, as well as convince vendors to open a file that revealed their location. Lots of identifiable information revealed. Action follow up in 2018 was targeting customers. Information provided leads on vendor activities. Although ultimately took down the market after such approaches, undermined the trust and confidence of the market beforehand. More effective than illusionary impacts of takedowns alone. Crypto markets cannot be destabilized by takedowns alone. Dutch approach has other positive effects including contributing to self-regulation of the market, such as by removing fentanyl and analogues. May also have occurred as a result of negative views of these substances by users. Entire markets voluntarily going offline but quickly replaced by rivals. Analysis of the increasing research shows unintended consequences of takedowns include disrupting online markets and leading to less than optimal effects. Construction of a further nuanced approach grounded in evidence-base, rather than just law enforcement, could reduce undesirable consequences of takedowns. Such undesired consequences include unknown quality and purity of drugs sold and resolving disputes through violence. Drug sales on crypto markets dominated by those with low levels of harm. Data collected directly from markets shows cannabis and MDMA are most common. Substances with more problematic use, such as crack, heroin, and methamphetamine, are less common and generate small amounts of their revenue. Buying on crypto markets requires skill. Users are young and technically adept. Purchasing days in advance, so problematic substances may not be preferred for supply through crypto markets.

Dr. Fernando Caudevilla (Doctor X), Energy Control: Crypto markets are places where administrators interact with vendors and users. Increases in popularity but still a small fraction of the drug trade. Potential to grow significantly. Noticed that law enforcement activity has not had longer-term sustaining impact on activities. Harm reduction not the opposite or against law enforcement, but complementary. Crypto markets create a sense of community. Have their own rules and ethics. Do not allow child porn or mass weapons. Some only sell drugs, while some only sell other objects. Communication is very important. They have a forum and evaluation tools. Basing in trust and reputation is the brilliant idea of crypto markets. Trying to damage trust can have an effect, but can have a negative effect on health of users. Administrated by humans. Some markets are administrated by machines, but this is not the case for crypto markets. Is there a chance for harm reduction in crypto markets? Speaking from our experience over seven years. Crypto markets have severe criminal activity, but we will highlight other aspect that are less known. Energy Control is a Spanish NGO working in the recreational drug using community to provide online advice and drug checking. Objective of drug checking is to contact users and provide information to improve their knowledge. Drug checking can work in crypto markets. I started an “ask a drug expert about drug harms” thread, which became one of the top ten threads. Answered hundreds of questions. Replicated in different markets. Generated trust and reputation, and appreciated in the community. Opened the door for international grant on provision of drug checking to crypto market users. Act against bad vendors. Act directly with users, who send drug samples and we send back their results. Spread information in the community. Use social media. Send alerts to all users. High number of new psychoactive substances and other drugs. Most common recreational substances results are high purity, low adulteration rates, and low cost. There are also relevant exceptions. In a short period of time, ten samples from European vendors were found to be contaminated with fentanyl. Published in grey literature. Had clear evidence of the vendor so contacted administrator and vendor was banned. Fentanyl and analogues are no longer available. Potential role of administrator in harm reduction. Since we published alert, have never seen fentanyl in heroin from crypto markets. In last years, most relevant crypto markets have banned fentanyl and analogues. Crypto markets are sensitive to user perceptions. Adulterated alprazolam samples contaminated with amphetamines. Launched an alert. Role of vendor as they pulled supply when results came back as problematic. Vendors using drug checking. Some provide fake codes not related to us. Go after these people and have help of administrators. Opened a thread about how vendors can do harm reduction rather than using drug checking for proof of quality.

Questions and Answers:

  • What do you do when a site is taken down?
    • There is a forum on crypto markets. Used to be Reddit, but banned. Now on deep web, which forced them to mix with other criminal activities. Given all kinds of facilities to provide our messages.
  • When using the internet for harm reduction, how do you get the proper message to target populations?
    • Online advice has positives and limitations. Have to be prudent on what we say. In some cases, online advice is not indicated and can give more problems. Sometimes there are people who do not ask health professionals about drugs due to fear, or health insurance associated with work. Online advice reaches them. Sometimes there are ethical questions, such as is it ethical to help a person buy methadone to detoxify from heroin and give instructions? Maybe in EU this is not good practice, but what about in countries with no access? If I had this question, I would answer it.
  • Challenges with research methodologies for this area?
    • Number of different data collection strategies. Two main ones. First, data collected directly from crypto markets. Have information connected to purchases. Know date the drug was purchased, quantity, price, whether they were happy, where it was sent from, where it was sent to, and which vendor sold it. Much more detail than we have for offline buyers. Can document trends over time and in connection with millions of drug purchases. Gives us unprecedented information about how drug markets work. Second, self-reported data from people who answer questions in surveys. Biggest survey is the Global Drug Survey with 130,000 people on an annual basis. Number that used crypto markets has increased. Study with people reporting experience with threats or violence in crypto markets compared to typical alternatives. In all cases, such experiences are substantially less on crypto markets, even when compared to buying from friends. What are the unintended consequences of policy approaches that we take? Have to think about net effects on drug harms for people who use drugs and communities. Forcing people offline increases violence and disorder, the very things we are trying to reduce. Crypto markets can self-regulate, especially with access to drug checking.
    • Important to have time to professionally evaluate programs. Needs resources. My work is volunteer. We ask for a fee for drug checking that covers costs of analyzing the sample. Many people spend a lot of time for these projects to operate.
  • Advice for coming year on how to deal with crypto markets?
    • Listen to experts and those working in this field. Quickly evolving phenomenon. Have no prejudices. Not all vendors and administrators are evil. Interacting with them is not cooperating in drug trafficking. Same as harm reduction is not endorsing drug use.
    • Key to note that takedowns are strongly linked to innovations. Making the next time you need to infiltrate more difficult on yourself. Requires more resources, skills, and time. Imagine an ever increasing circle with the need to put in huge resources to find vendors of low scale. What if those same skills were deployed to combat guns or child porn? Should consider where best to deploy resources, against a system that has positive harm reduction capacity or against those that are clearly wrong?
    • Harm reduction often not thought of in connection to crypto markets. Implication of body of evidence accumulating in literature is that we advise law enforcement to target the harmful things that go on in crypto markets such as more harmful substances, behaviour by vendors, and less well-regulated markets, rather than try to take it all down and have net harm increase as a result.
    • What are we driving crypto markets towards? If we continue to crackdown, push people towards total lack of centralization with no oversight mechanism, and cause more people to be scammed. Think about what direction we are policing towards. People buying on Telegram and closed Facebook routes is increasing. Hard to get to those dealers. It is the wild west on Telegram. Unintended consequences of taking down crypto markets is they move to areas with no supervision by anyone.

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