Blockchain Technology as a Tool to Combat the Shadow Market: A Literature Review

Abstract

The purpose of this article is to analyze the potential of blockchain technology in combating the shadow economy, which poses significant threats to the economic stability of states and reduces their tax revenues. The shadow economy, encompassing illegal economic activities, deprives governments of substantial financial resources, undermines trust in public institutions, and fosters corruption. Blockchain, as a decentralized technology, can provide transparency and security in financial transactions, which are crucial factors in reducing corruption risks, preventing tax evasion, and combating money laundering. The article employs comparative analysis methods of scholarly publications on implementing blockchain technologies across various economic sectors, alongside a review of practical cases where this technology has been utilized to enhance the transparency of financial transactions. This approach allows for a comprehensive assessment of blockchain's potential in counteracting the shadow economy and identifying opportunities for its integration to improve financial transparency, minimize corruption risks, and optimize financial flow management.

The research results indicate that blockchain holds significant potential for enhancing the efficiency of financial flow management, particularly in the public sector, where its adoption can lower corruption levels and bolster trust in public institutions. Additionally, blockchain shows promising prospects for implementation in sectors such as logistics and healthcare, where data transparency, security, and reliability play a critical role.

Despite specific regulatory and technical barriers to its implementation, blockchain offers considerable opportunities for reforming financial and economic systems on a global scale. The conclusions underscore that the continued development of this technology can substantially reduce the scale of the shadow economy and improve transparency in economic operations. It is emphasized that integrating blockchain into public finance management systems enables tracking all stages of financial flows, thus minimizing the risks of corruption. Furthermore, the technology prevents the alteration or falsification of data, making it an indispensable tool in the fight against the shadow economy. Despite the technical challenges and regulatory hurdles, blockchain can potentially transform the economy's public and private sectors. The conclusions highlight that the further advancement and refinement of blockchain technology can significantly enhance the efficiency of economic transactions, increase trust in public institutions, and reduce the scale of the shadow economy. This demonstrates the potential of blockchain as a technology that could bring substantial changes to the global financial system and serve as an effective instrument in combating illegal economic activities.