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Government Research - No Significant Terrorism/Cryptocurrency Relationship

September 11, 2018

 

The Subcommittee on Terrorism and Illicit Finance in the U.S. met last week to examine the methods used by major terror groups to source and move funds. Back in May, the EU parliament released an in-depth research “Virtual currencies and terrorist financing: assessing the risks and evaluating responses. Both governing bodies came to similar conclusions, that caution must be maintained, however it’s apparent that cryptocurrencies are not currently involved in terrorist economics in any significant volume.

 

U.S. Key Takeaways

  • The threat of terrorism is always changing as the number of groups around the world threatening the United States increases.

  • Financing of terrorism is a central pillar to combate all forms of terrorist activity before major damage can occur.

  • Terrorism threats and their financing processes require constant vigilance and adaptation by law enforcement, financial institutions, and regulators.

 

 

Cryptocurrencies and the blockchain industry are “not innately illicit and should not be feared,” according to the director of analysis for the Foundation for Defense of Democracies (FDD) Center in America. FDD CSIF director of analysis Yaya Fanusie found that crypto is a “poor form of money for jihadists” and that “cold hard cash is still king.” Terrorist groups such as al-Qaeda, the Islamic State, and others have not had great success in raising funds through cryptocurrency.

 

The study notes a terrorism funding campaign, “Jahezona” in 2016 in the Gaza Strip, which was publicly visible on a blockchain. They attempted to raise $2,500 per fighter with an option to pay in Bitcoin (BTC). The group gained “a little over $500 in Bitcoin.” Another example is from a militant group in Syria called Malhama Tactical. They tried to raise funds on Twitter, but received a only few transactions and contained less than $100 worth of BTC.

 

 

 

EU Key Findings

  • Only a small number of cases suggest some jihadist and right-wing extremists are using cryptocurrencies - likely attracted by cryptocurrencies’ perceived anonymity and P2P, decentralised nature.

  • Cryptocurrencies currently do not provide substantial benefits for a wide range of terrorist and extremist actors over other established methods, such as cash.

  • Bitcoin is not truly anonymous, and cryptocurrency networks essentially have ‘chokepoints’ in the form of exchanges.

  • The most significant near-term risks relate to purchasing illicit items on the Dark Web, raising funds through online crowdfunding and moving funds internationally.

  • Long-term risks include the convergence of terrorism with cybercrime, or terrorist actors exploiting advanced decentralized applications.

 

Overall, cryptocurrencies are complex technology that require the development of new law enforcement techniques, knowledge and resources. Illicit actions can adapt to these technologies faster than law enforcement can adjust. The EU research presses the importance that the public sector cannot develop effective regulation, enhance knowledge and improve

intelligence acting alone. Cooperation and interaction with private businesses in the cryptocurrency and blockchain industry is essential.

 

 

By: BGN Editorial Staff

 

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