How do Australian Criminal Courts assess the use of Bitcoin and Darknet?
With the increasing popularity of virtual currency, Australian Courts are beginning to deal with sophisticated criminal activity involving bitcoins and the darknet which appears to be intended to disguise the supply of prohibited drugs and the proceeds of crime.
In a recent South Australian decision, R v Collopy  SASCFC 64 (hereafter ‘R v Collopy’), the Supreme Court was required to regard how these factors should be assessed in determining the application of sentencing principles such as general deterrence and an assessment of the objective seriousness of an offence. In that case, Mr Cooley and Mr Collopy purchased prohibited drugs from marketplaces called ‘BMR’ and ‘SHP’ that were hosted on the darknet.
The prohibited drugs were subsequently sent overseas to the US, the UK and Ireland, in order for them to be repackaged into smaller quantities.
Ultimately the prohibited drugs were sold to Australia based customers from their own virtual stall (AUVip) within the “BMR” and “SHP.” The prohibited drugs were then distributed to the end user by post.
All of the transactions were conducted using bitcoins. The estimated profit derived from the transactions (in a period of 6 weeks) was approximately $100,000.
Mr Collopy and Mr Cooley were charged with 30 counts of drug-related offences under South Australian drug laws, alleging trafficking, possession, supplying and attempting to supply prohibited drugs.
It was contended that the use of bitcoins and the darknet appeared to provide a layer of protection for the offenders as it prevented their detection by the authorities – they were ultimately detected however as a result of parcels being intercepted in the post which contained prohibited drugs.
How was the use of Bitcoin and the Darknet relevant in sentencing?
In sentencing the offenders Lovell J (with Peek and Blue JJ agreeing) determined that bitcoins and the darknet were an essential part of the offenders’ sophisticated and “untraditional” business model. The Court accepted the Crown’s submission that the use of these technologies was intended to disguise their criminal conduct in order to avoid detection by the authorities.
The Court determined however that the use of bitcoins and the darknet were only relevant to the question of general deterrence in sentencing. Lovell J stated the following;
“…the relative sophistication of the operation [such as the use of bitcoins and the darknet], particularly the difficulties it presents with detection, are matters to be given weight when considering the question of general deterrence.” 
The Court did not take into account the use of bitcoin and the darknet to disguise the offender conduct as having a direct bearing upon the assessment of the objective seriousness of the offence.
However, the Court commented that if such offending became more prevalent, the need for general deterrence could assume more relevance in sentencing offenders. Peek J (with whom Lovell and Blue JJ agreed) at  stated the following;
“I indicate that if this type of enterprise [of using bitcoins and the darknet] continues to be encountered in South Australia in the future, a heightened need for general deterrence may become apparent and lead to a significant increase in the length of prison sentences in cases of the present kind.”
Following this decision, it is likely that Courts will be asked to place more weight on general deterrence in cases where there may have been a similar use of bitcoins and the darknet.
Is this a universal approach?
The judgment of R v Collopy is limited in its binding effect within South Australia as the case only involved South Australian criminal law. Although courts in NSW do not have to follow the decision it may be persuasive in other jurisdictions where a case may have similar facts.
In NSW, the case of R (Cth) v Mead  NSWDC 1 concerned the use of bitcoin to disguise proceeds of crime. The Court determined that it was necessary to consider the use of bitcoin in the context of the objective seriousness of the offence in sentencing the offender for a Commonwealth offence. This was arguably a stricter approach to the use of bitcoins and the darknet than the approach taken in the case of R v Collopy.
As Courts become more familiar with offences involving the use of bitcoin and the darknet, it is likely that we will see an increased focus on how these factors are to be used in sentencing offenders for drug supply and dealing with the proceeds of crime offences. Presently, the number of cases which have considered these issues in the context of sentencing is small and there is no universal approach being adopted across Australian courts.