The terrorists of today are innovators – they evolve tactics to adapt to the constant and increasing barriers to their activities placed upon them by security and intelligence forces across the world. One such example exists in the increasingly prevalent yet volatile world of cryptocurrencies. The use of cryptocurrencies to fund terror groups has gained traction recently.
In June 2016, the Ibn Tamiya Media Centre (ITMC), which serves as the online propaganda arm of the Salafi jihadist group Mujaheedin Shura Council (designated as a terrorist group by the US State Department), added the option of donating in bitcoin on its ‘Jahezona’ (‘equip us’) campaign. This was done in the form of QR codes posted onto Twitter. In early 2017, operatives from the Islamic State were found to have used bitcoin and PayPal in sending funds to local Islamists in Indonesia, according to the PPTAK, an independent anti-money laundering agency.
This has led to a series of nationwide crackdowns on bitcoin’s potential for abuse by a number of countries. In August 2017, Australia began regulating digital currency exchanges. Reforms aimed at strengthening the Anti-Money Laundering and Counter Terrorism Financing Act have resulted in cryptocurrency providers such as bitcoin being brought under the remit of the Australian Transactions and Reporting Analysis Centre (ATRAC). This follows similar regulatory attempts on cryptocurrencies in China, wherein the People’s Bank of China threatened several exchanges with closure in the event of violations of existing anti-laundering regulations.
On the surface, the anonymity attached to cryptocurrencies would implicate rampant use among terrorist organizations and their donors. Their use, however, has not been widespread thus far. In the aforementioned case, the inclusion of bitcoin has led to just over $500 worth of digital currency being channelled towards Jahezona.
The Scale of the Problem
This non-prevalence is due to several factors, including how bitcoin, in particular, is fast becoming mainstream. Sarah Meiklejohn, a computer scientist at University College London, describes how from the point of view of investigators, blockchain serves as a ready-made criminal history record, referring to the Silk Road bust of 2015. This limitation of anonymity is reflected further the limitation in the acceptance of cryptocurrencies in the areas where terrorist group largely operate. This puts a greater dent in their appeal as a source of finance.
Moreover, the current financing models neither accommodate nor necessitate, cryptocurrency funding. Radicalized ‘lone wolf’ attackers are largely self-financed, with foreign fighters raising capital to travel to their intended destinations via crowdfunding platforms such as Kickstarter. The majority of terrorist organizations in the Middle East, on the other hand, rely on the pre-existing (not to mention dominant) ‘hawala’ network of transfers, in which anonymous payments and donations to terrorist groups are made through brokers.
In stating this, however, room for evolution cannot be dismissed. Already improvements are being made towards preserving and enhancing anonymity for cryptocurrencies. ‘Dark Wallets’ have emerged in recent years. Made by companies such as the eponymous Dark Wallet and BitcoinFog, they allow not only greater anonymity but render transactions almost untraceable. In a 2014 article, Dark Wallet co-founder Cody Wilson speaks of how he, “wanted a private means for black market transactions, whether they were for non-prescribed medical inhalers, MDMA for drug enthusiasts, or weapons”. Additionally, cryptocurrencies such as Zcash allows for secure offline transaction and storage of assets, providing greater barriers for regulators.
The Islamic State, the once powerful aspirant caliphate that bulldozed through swathes of territory across Iraq and Syria, is now in retreat – but far from defeated. As many analysts have pointed out, their mode of operations would most likely switch from the head-on confrontation with forces back to the traditional guerrilla warfare mode. As they would change their mode of conflict, so would they seek ways to finance their operations. Anonymous and untraceable means to do so, of which cryptocurrencies are becoming better suited towards doing, provide more than attractive options for funding.
To conclude, while cryptocurrencies’ impact in terrorist funding is not significant as of now, the landscape, given current developments, promises to change. Hence, governments should adopt prudent measures tackling cryptocurrency abuse, whilst simultaneously ensuring that this technology is protected and not vilified. Thus, it is imperative for governments and providers to form or at the very least deliberate initiatives ensuring the most important protection of all-that of the lives of innocent citizens.