Paedophiles are using the digital currency bitcoin to buy child sexual abuse images online, according to the Internet Watch Foundation.

In its annual report for 2014, the group, which is tasked with attacking the problem of child abuse images online, said a number of the “most prolific commercial” child sexual abuse websites started accepting the currency as a payment for images last year. It discovered 37 websites selling the images for bitcoins between January and April 2014.

The group said that illegal content was being sold in folders on legitimate websites which had been hacked, and that URLs for the websites were distributed via spam emails.

Bitcoin has a number of properties which make it well suited for trading illegal material such as child sex abuse images. The cryptocurrency is completely decentralised, which means that no single authority can prevent trades from being made, or blacklist buyers and sellers.

It is also largely pseudonymous, and there is nothing inherent to a bitcoin wallet that links it to any real-world individual. When the currency is used with care, it can be nearly impossible to discover the people behind online trades – a fact which was responsible for bitcoin’s first major real-world use, underpinning the online drugs marketplace the Silk Road.

But while the currency is often described as “anonymous and untraceable”, there are a number of elements to its design which law enforcement authorities have been able to use to track down people attempting to use bitcoin illegally. The decentralised nature of the currency means that every single transaction is made in public, and in order to convert bitcoins into a conventional currency, they must typically be bought and sold through a bitcoin exchange. Those exchanges are often legally required to keep detailed records on customers, in order to comply with money-laundering regulations.

The IWF said it was working with several of the world’s largest bitcoin exchanges to share intelligence and develop strategies for preventing the currency being used by distributors of child sexual abuse images.

Emma Hardy, the IWF’s director of external relations, said: “One area we look at in particular is the commerciality of child sexual abuse images and videos – people who want to buy and sell this type of content online.

“We noticed for the first time ever last year that cryptocurrency or bitcoin was being used.

“We need to ensure we engage with those who run bitcoin services but also other ordinary payment mechanisms, financial providers, to ensure we can help prevent them being abused by criminals.”

The IWF report also revealed that the number of web pages found with images of child sexual abuse soared by 137% last year.