Cryptocurrencies In Terrorist Financing: The Role Of Cryptocurrencies In Terrorist Financing

We empower Anti-Financial Crime and Corporate Risk Management Professionals

  • Home
  • /
  • Blog
  • /
  • Cryptocurrencies In Terrorist Financing: The Role Of Cryptocurrencies In Terrorist Financing
Cryptocurrencies In Terrorist Financing

Cryptocurrencies in terrorist financing. Terrorism experts say that cryptocurrencies currently only play a minor role in terrorist financing. On the other hand, there is evidence that terrorist organizations have developed cryptocurrency financing schemes growing in sophistication.

Cryptocurrencies In Terrorist Financing

Cryptocurrencies In Terrorist Financing: The Role Of Cryptocurrencies In Terrorist Financing

Since Bitcoin arrived in 2009, there has been growing economic and ideological interest in perfecting money native to the internet, and its popularity has sparked thousands of iterations. Blockchain-based digital money was supposed to make our financial systems more free, fair, and transparent. But where visionaries saw improvements over traditional finance, terrorists saw opportunities.

In particular, the use of cryptocurrencies by terrorists has been a key concern for regulators and politicians worldwide when considering their regulatory regimes. Alike as they seek to tighten their oversight of cryptocurrencies, the vast majority of which are not issued by or controlled by a government.

Many terrorist organizations started already quite some time ago to adopt cryptocurrency solutions. In one instance, terrorists collected crypto donations worth tens of thousands of dollars in just one campaign, which is a much quicker way to raise funds than prior efforts. In another instance, and not too long ago, the United States accused two Iranians of using Bitcoin in a digital extortion campaign. 

According to the Middle East Media Research Institute, a research and analysis organization, there is a significant uptick in jihadi organizations soliciting donations in cryptocurrency through social media, particularly on the messaging app Telegram.

In 2019, the AQB, the military wing of Hamas and a designated terrorist organization, collected money through a website that generated a new Bitcoin address for every donor to send funds to, the first verified example of such technology deployed by a terrorist organization. A previous effort that started in 2016 used a single Bitcoin address for donations.

The AQB campaign also published a video on its website, teaching people how to donate anonymously; in the past, terrorism contributors have had to figure that out on their own. For example, AQB advised people to donate while using public Wi-Fi, so their computer’s IP address couldn’t be traced by law enforcement. The result was that this campaign raised as much money in nine months and attracted more donors than a 2016 campaign by another organization that ran for two years.

Fighters around the region use cryptocurrency to fund attacks, purchase weapons, obtain equipment and support their families. Elliptic, a company that develops tools to track how cryptocurrencies are used in criminal activity, has found that Hamas, the Palestinian fundamentalist militant organization, has deployed a method to make some of their donations nearly untraceable by providing each visitor a different Bitcoin address to send payments to.

Cryptocurrencies In Terrorist Financing

Some experts say that the current concerns about cryptocurrency as a significant enabler of terrorist groups are almost certainly overblown. According to these experts, there is little indication that terrorist organizations are using cryptocurrency extensively or systematically. However, lone-wolf actors and loosely associated groups are likely to attempt or are already attempting to use these systems.

Starting a terrorist attack can cost as little as a few thousand dollars. With cryptocurrencies, that money can be raised almost instantly by scamming users, attacking businesses, or manipulating financial markets. The potential earnings can be far greater for a state-sponsored hacker with nearly unlimited resources.

In addition, even the terrorism experts that say cryptocurrencies do not play a major role in terrorist financing acknowledge that neither the technology nor the groups are static, which might change the dynamics in the future. It could also make successful use of these technologies easier or harder. The question of whether terrorist organizations will use these systems is dependent on the available technology, as well as on these groups’ needs and abilities.

Regardless, the coming improvements in cryptocurrency technologies will likely have a significant long-term effect on terrorist financing. It does not necessarily require intentional use by terrorist organizations but can be a byproduct of banks changing their practices. For example, the U.S. Treasury has access to unique financial data about funds flows within the international financial and commercial system, which is invaluable for tracking illicit flows of money. These sources are potentially imperiled by the trend toward debunking finance via cryptocurrencies because adopting cryptocurrencies might enable secure international fund transfers without needing the current centralized system. Perhaps, this can be achieved by using cryptocurrency systems such as Ripple, which exists outside the traditional financial system. 

Final Thoughts

Current cryptocurrencies are not well matched with the totality of characteristics that terrorist groups would require and desire, but they may be used for specific financial activities. If a single cryptocurrency emerges that provides widespread adoption, improved anonymity, and improved security while being subject to lax or inconsistent regulation, the potential utility of this cryptocurrency, as well as its use by terrorist organizations, would increase. Cryptocurrency regulation and oversight, as well as international cooperation between law enforcement and the intelligence community, would be critical steps in preventing terrorist organizations from using cryptocurrencies to fund their operations.

Leave a Comment

Your email address will not be published. Required fields are marked

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}