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A startling revelation from Yaya Fanusie of the Center on Sanctions and Illicit Finance, a Washington D.C.-based economic group, believes cryptocurrency adoption is gaining traction among terrorist organizations like Al Qaeda and the Islamic State, according to a report on September 7.
Privacy Features an Asset?
The note contradicts recent reports of terrorists turning away from cryptocurrencies due to their lack of easy liquidity and requirement of basic technical knowledge. Terrorist groups have reportedly enjoyed limited success in their fundraising pursuits using native or popular tokens.
But, Fanusie believes terrorists quickly adapt to new technologies and financial opportunities to hide their trails. In this regard, the privacy features of cryptocurrencies make it a terrorist’s favorite, in addition to providing a new financial market to exploit for economic gains.
The speaker pointed out global authorities have banned the usage of cryptocurrencies for the reasons as mentioned earlier, in addition to finding use in darknet markets to create sustainable crime economies and helping to facilitate illicit transactions.
However, Fanusie is aware of terrorist groups potentially facing limiting factors that subdue their ability to use cryptocurrencies. For one, a terrorist’s living conditions are atypical to an advanced cyber-economy – one connected to the internet and facing no electricity outrages – which form a foundational environment for conducive cryptocurrency use.
The Unfamiliarity of Cryptocurrencies
Terrorist organizations have historically transacted with cash – or hawala methods – and avoid financial tools that require a third-party interference from banks to provide liquidity. Such “unreliable” infrastructure, for terrorists, negates the potential benefits of using cryptocurrencies.
For terrorists, another drawback of using cryptocurrencies is their underlying blockchain network – a distributed ledger system that updates participants in real time about all transactions on the network. Suspicious transactions can be easily flagged by participants, including tracking all transactions and behaviourally identifying the person/s involved. Hence, “unsophisticated users” may leave an easy trail of transactions for authorities to trace.
The ease-of-use for cryptocurrencies is a widely-documented fallacy – with crypto-applications baffling even experienced computer users at times.
The skill gap forms another limitation for terrorists to use cryptocurrencies effectively. Apart from learning how to input correct addresses each time, users must securely store private keys in hard wallets.
Besides, handling millions of dollars worth of cryptocurrencies would require a tech-savvy terrorist to process transactions at all times, and with the inherent volatility of cryptocurrencies, terrorism budgets are bound to be affected.
Failed Terrorist Attempts
Fanusie pointed out several examples of terrorist organizations using cryptocurrencies like Bitcoin to find their nefarious activities.
Mujahideen Shura Council (MSC) – a Saudi Arabia-based outfit designated by U.S. authorities as a “foreign terrorist organization in 2016 – reportedly used Bitcoin to fund solicitations for necessary ammunition, guns, rockets, and grenades for use in terrorist demonstrations. The group also fueled the creation of propaganda videos and pro-terrorism statements to attract new demographics towards their ideologies.
However, the campaign failed drastically for MSC, which managed to raise only $500 instead of their target of $2,500 per fighter.
Fanusie also cited the case of pro-Islamic State website Akhbar al-Muslimeen’s 2017 campaign, a movement which called for propaganda against western civilization and placed a QR code for bitcoin donations on their website.
Meanwhile, Fanusie believes terrorists may find cryptocurrencies both appalling and appealing to use, but until steps to mitigate terrorist financing via cryptocurrencies are wholly enforced, the U.S. government must “be prepared” for exploitation of the world’s fastest rising asset class.