Crypto use for terrorism financing is not effective, says the report from the US Foundation for Defense of Democracies’ (FDD) Center on Sanctions and Illicit Finance (CSIF). The decentralized nature of cryptocurrencies leaves a track that is difficult for terrorists to wipe out.
11 September, AtoZ Markets – One of the recent reports published by the US Foundation for Defense of Democracies’ (FDD) Center on Sanctions and Illicit Finance (CSIF) indicates that digital currencies are poorly-suited for the purpose of terrorism financing.
Crypto Use for Terrorism Financing is not Effective
The report has been presented by the director of analysis with CSIF, Yaya Fanusie, during a hearing before the US House of Representatives Subcommittee on Terrorism and Illicit Finance. Mr. Fanusie outlined a number of cases, in which terrorist groups used cryptocurrencies to raise funds.
The report includes the first case of terrorism funding campaign, namely “Jahezona.” It has been conducted back in 2016 in the Gaza Strip. According to the study, the campaign was publicly visible on a Blockchain. The fundraising campaign has been managed by a group of jihadists and aimed to raise $2,500 per person, offering contributors an option to pay in Bitcoin. The group has reportedly raised “a little over $500 in Bitcoin.”
In addition, the decentralized nature of cryptocurrencies leaves a track that is difficult for terrorists to wipe out. This characteristic of cryptocurrencies makes users’ pseudonymous transactions available for public viewing.
Mr. Fanusie has stated that by analyzing Jahezona’s transactions on Blockchain, the CSIF was able to identify the exchange that has allowed these transactions to be conducted. The report notes that the now-defunct BTC-e exchange has been the intermediary in this case, while it is also known that this crypto exchange has been allegedly facilitating money laundering.
Crypto Requires Skills
The report has mentioned another example that involved one of the militant groups in Syria, which aimed to raise funds on Twitter. The group has been found by an Uzbek that has served in the Russian military before leaving to Syria in 2013. The campaign has reportedly received a number of transactions. Yet, the group has been able to only raise less than $100 worth of BItcoin.
Mr. Fanusie has highlighted that managing a large amount of cryptocurrencies requires specific skills, which terrorists might currently lack. He added that one would need to be “extremely savvy in cybersecurity ” in order to successfully manage big sums in cryptocurrency.
Mr. Fanusie had added that price volatility and vulnerability to hackers make the use of cryptocurrencies a “fringe activity both among the general public and within the population of global jihadists.”
He has also pointed out that regulators regard cryptocurrencies as a payment method for illegal activities. However, the terrorists normally inhabit locations that are not currently suitable for cryptocurrency use, which implies that they need to buy goods with cash, “which is the most anonymous funding method.”
Mr. Fanusie concluded by stating that terrorists’ use of cryptocurrencies mirrors that of the general public:
“But cryptocurrencies and blockchain technology are not innately illicit and should not be feared. Like most technological innovations, they can be utilized for good or ill, depending on the user. Our adversaries, both state and non-state actors, are building blockchain-based tools to advance their interests. The U.S. must keep up with this technology and address new risks emerging from an evolving financial ecosystem.”
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