Canada's Black Market Pot Sites Reject Crypto Payments

Cryptocurrencies such as bitcoin are often used in illicit transactions for goods and services but there is one notable exception in Canada: illegal online sales of cannabis.

Between October 2021 and February 2022, David Décary-Hétu of UdeM's School of Criminology and his colleagues Patricia Saldaña-Taboada and Mélina Girard surveyed Canada's black market cannabis websites.

In a study, published in the journal Deviant Behavior, they report that 78 per cent of the illegal websites don't accept cryptocurrencies, opting instead for Interac e-transfers.

Quebec's legal cannabis retailer, the Société québécoise du cannabis, estimated in its 2024 annual report that the black market accounts for approximately 37 per cent of total sales in the province. According to Décary-Hétu, the illicit merchants cater to specific needs not met by the legal market, such as vaping devices, more attractive edibles, sales to people under 21 in Quebec, and home delivery.

"These sites are here to stay because they complement the legal market: when regulations are too restrictive, the black market steps in to meet the demand," Décary-Hétu said.

Information from the horse's mouth

David Décary-Hétu

Credit: Amélie Philibert, Université de Montréal

To carry out their survey, the research team posed as potential customers of the illicit websites, after clearing it with their ethics committee. They contacted the administrators of 201 black market sites and, after two attempts, received full responses from 88, of which 69 did not accept cryptocurrency.

Why do most illicit online cannabis merchants refuse to accept cryptocurrency?

"The main reason is the technical complexity," Décary-Hétu replied. "Setting up and maintaining a cryptocurrency payment system requires expertise that many lack. Some said 'the boss is too old and doesn't understand it'."

Another key factor is lack of customer demand. The dynamic is two-sided: sellers don't accept cryptocurrency because customers don't demand it, and vice versa. "The learning curve for customers is considered too steep," Décary-Hétu added. "You have to know where to get cryptocurrency and how to transfer it."

The study used a Technology Acceptance Model (TAM) to understand merchants' decisions. This model analyzes technology adoption through two lenses: perceived usefulness and perceived ease of use. For black-market merchants, cryptocurrency offers neither.

A calculated risk

Refusing cryptocurrency transactions exposes vendors to significant legal risks, Décary-Hétu noted. "Interac transactions leave a trail that authorities can easily follow, and the penalties for illegal cannabis sales are severe: up to 14 years in prison." He believes the merchants' apparent disregard for safety reflects a sense of impunity.

The surveyed sites generally say they operate "from Canada to Canada." While some U.S. sites also ship to Canada, the research team found that the market is predominantly domestic, as cross-border shipments are deemed too risky.

The researchers proposed two strategies to curtail the black market. "First, expand the legal market to better meet the demand currently satisfied by the black market," Décary-Hétu suggested. "Second, monitor electronic transactions more closely and introduce adaptive regulation, such as the pricing strategies use in the legal market for alcoholic beverages, which have significantly reduced illegal sales."

About the study

"Why don't you want my money: a study of the acceptance of cryptocurrencies in online cannabis markets," by Patricia Saldaña-Taboada, Mélina Girard and David Décary-Hétu, was published Oct. 25, 2024 in Deviant Behavior.