A survey study from researchers at the University of Montreal found that the majority of illicit cannabis websites in Canada prefer e-transfers to using cryptocurrency.

Researchers say the reliance on e-transfers represents an increased legal risk for those running these websites while also calling for expansions of the legal cannabis market to more properly compete with these illegal online stores. 

Three researchers with the university’s School of Criminology posed as prospective customers of 201 illicit websites that sold cannabis in Canada. After two attempts, they received responses from 88 different website administrators. Of those 88, 69 (78%) did not accept any form of cryptocurrency. 

The survey was conducted from October 2021 to February 2022.

Interac and cryptocurrency

They found that the main reason is that some website owners and their customers don’t necessarily know how to use cryptocurrency.

“The main reason is the technical complexity,” David Décary-Hét, one of the three researchers, told the UdeM Nouvelles. “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’.”

“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.”

Refusing cryptocurrency transactions exposes vendors to significant legal risks, Décary-Hétu tells Nouvelles, adding that he believes this stems from a lack of enforcement and therefore perceived risk. 

“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.” 

The survey also found that most of these websites operate solely within Canada, not wanting to take on the added risk of selling across a federal border. 

Décary-Hétu believes that changes are needed to better allow legal cannabis companies to compete with these unregulated websites. He also calls for more oversight of e-transfers.

“First, expand the legal market to better meet the demand currently satisfied by the black market. Second, monitor electronic transactions more closely and introduce adaptive regulation, such as the pricing strategies used in the legal market for alcoholic beverages, which have significantly reduced illegal sales.”

The study was published in the journal Deviant Behavior in October 2024. 

Lack of enforcement

Despite almost six years of legal, regulated cannabis in Canada, illicit online retailers continue to prosper, with what seems like minimal interference from federal authorities. 

In 2024, StratCann spoke with Adrian Cheek, Lead Researcher for Coeus, a data company that examines all types of illicit online activity. 

Cheek has spoken to law enforcement agencies across the country and has heard an overwhelming sense of frustration. They understand what can be done but are not given the tools, finances, or proper support, he told StratCann. Jurisdictional challenges also likely factor in. 

StratCann reached out to the RCMP for comment on their practices in these areas. 

“In keeping with its mandate, the RCMP’s Federal Policing program investigates, and disrupts the most serious and complex criminal threats to the safety and security of Canadians and Canadian interests, including TSOC (transnational and serious organized crime) involvement in the illegal cannabis market,” said Robin Percival, a spokesperson for the organization.

Federal agencies

In 2023, StratCann reached out to several organizations, including the RCMP, Canada Post, Interac, and even Canada’s national financial intelligence agency—known as FINTRAC. All of these agencies responded with assurances that they were serious about enforcement but were light on details, often deferring to other organizations.

The RCMP was short on specifics at the time and mostly outlined its role as part of an integrated response to criminal involvement in the cannabis market. However, they confirmed that transnational and organized crime groups are active online participants and use Canada’s mail system.

“These groups are increasingly trafficking cannabis domestically and internationally by exploiting surface web platforms and mail and courier services,” said Corporal Kim Chamberland from the RCMP. “The surface web space allows criminal actors to sell illicit cannabis that is indistinguishable from legitimate online retailers to unsuspecting consumers, in addition to operating illegal sites on social media.”

FINTRAC could only reference its news release as part of the launch of Project Legion in September 2022, as well as the Operational Alert in which they said the agency had uncovered numerous instances of money laundering efforts related to illicit cannabis operators, especially from illicit online stores.

Related Articles

Illicit cannabis market continues to exploit Interac and Canada Post

April 14, 2023

FINTRAC releases report on money-laundering related to illicit cannabis sales, production

September 28, 2022

Why is it so hard to shut down illicit online cannabis sales?

October 7, 2024