Key Takeaways:
- Cryptocurrencies’ role in terror funding has been a key weapon in crypto detractors’ arsenal.
- However, terror funding networks have existed long before crypto’s advent.
- Studies show that crypto might be a medium for financing terrorism, but it is not the only one.
NEW DELHI (CoinChapter.com) — Nay-sayers have often pointed out that cryptocurrencies play a role in funding terrorist organizations worldwide.
There might be some truth in the accusations, given crypto transactions’ benefit of anonymity and the sector’s decentralization.
Svetlana Martynova, senior legal officer at the United Nations Counter-Terrorism Committee Executive Directorate, told Bloomberg in an Oct. 2022 interview that the use of crypto in terror financing had increased.
However, Martynova noted that several terrorist organizations, like Al-Qaeda or al-Qassam Brigades, tried to fund their operations using cryptos, but few have “gotten away with it.”
Yet, the UN official speculated that nearly 20% of terrorist attacks had links to crypto assets.
Relation Between Crypto And Terrorist Attacks
A Jan. 2023 research paper by the Institute of Defense Economics and Management, China, examined the relationship impact of terrorist attacks on Bitcoin prices.
The study concluded that “terrorist attacks and Bitcoin prices do not always have a consistent relationship throughout the sample period and show complex interactions in different periods.”
As such, the study could not conclude any definite relation between Bitcoin price action and terrorist attacks. However, a 2021 research paper published in the Baltic Journal of Economic Studies noted that terrorist organizations have started accepting cryptocurrencies for raising funds.
The paper stated that terrorist organizations had started using “an integrated approach, combining social media, messengers, and cryptocurrencies for international fundraising.”
Moreover, the study claimed that terrorists post detailed instructions for executing crypto transactions on social media platforms. Afterward, sympathizers use the information to send crypto tokens as donations to the organization.
Moreover, a July 2020 study published in a Centre for Security Studies journal highlighted how terrorist organizations use social media for crypto fundraising.
An Al Qa’ida-linked terror group called al-Sadaqah (which means voluntary giving in Arabic) was found to be operating through social media sites like Facebook and Telegram for Bitcoin funding. This initiative mainly targeted Western supporters and was an English-language fundraising campaign
An excerpt from the CSS research paper
Furthermore, the paper cited examples of terrorists collecting Bitcoin or crypto donations through social media platforms. The Izz ad-Din al-Qassam Brigades, Hamas’s military wing, solicited crypto donations through a website in 2019.
Moreover, crypto firm Chainalysis reported that Israel had disrupted a crypto-based terrorism funding network in June 2023. The report alleged that Iranian authorities used crypto to funnel funds to Hezbollah. Israeli authorities recovered nearly $1.7 million worth of crypto assets.
Is Crypto The Biggest Source Of Terror Funding?
In her interview with Bloomberg, Svetlana Martynova stated that cash remained the terrorist organizations’ best friend. The UN official noted that “cash is always king,” implying that terrorists remained dependent on the anonymity of cash transactions.
Furthermore, A Council Of Europe committee’s report on terrorism financing noted that such organizations often had multiple revenue streams. Terrorist organizations can obtain money for illegal activities like kidnap and ransom, drug trafficking, and human trafficking.
For example, between Sept. 2013 and Sept. 2014, ISIL raised approximately $45 million from kidnappings. Moreover, between 2010 and 2014, Al Qa’ida and its affiliates raised $145 million from the same source.
Another source of income for terrorist organizations comes from exploiting their area’s natural resources. For example, ISIS is known for selling crude oil from oil fields in its occupied areas.
As such, it would be illogical to blame crypto as a source of terrorist funding. It might be a medium, the same as fiat currencies, but cryptocurrencies should not get the full blame for financing terrorism.
Furthermore, growing regulatory oversight would significantly lessen the impact of cryptocurrencies on international terrorism. In addition, securing funds through crypto transactions involves complexities that make it difficult for terrorists to embrace crypto as a funding medium fully.
It is important to remember that the 9/11 terrorist attack happened in 2001, long before the birth of cryptos. Terror finance networks have existed since long before the advent of digital assets and e-finance.
Hence, attacking terrorism financing only from the scope of cryptocurrencies would likely make little impact in the long run. Though terrorist groups do use cryptos sporadically, it has yet to become a medium of choice for them.
