Increase in the Use of Crypto Currencies by Terrorists

The Covid-19 pandemic has shifted the focus of governments across the world on tackling the dire situation. Terrorist organizations have utilized the meantime to diversify their sources of financing. In the past decade, there was a revolution in the digital financial market due to the invention of cryptocurrencies. These organizations have explored the possibility of using cryptocurrencies in the past, but their usage has increased drastically in the last year.

Cryptocurrencies are not regulated by the government or banks, it is computer code which is generated by publically available software that allows people to store and send value online. The amount of cryptocurrency one hold and the transactions are stored on the blockchain. The distributed ledger is updated each time a transaction is made. There are thousands of cryptocurrencies available in the market and all don’t have the same value. Bitcoin was the first released cryptocurrency and recently Dogecoin which became famous due to the internet hype are few examples of cryptocurrencies.

The organisation will consider certain important characteristics like acceptance, usability, security, reliability, and anonymity before adopting a cryptocurrency. As the technology changes and evolves new currencies will emerge and these organizations will adopt those currencies that suit their needs.

These organizations might use cryptocurrencies to get donations since cryptocurrencies like Zcash offers a higher level of privacy which helps to keep the donors anonymous compared to other modes of donation. In July 2021 Hisham Chaudary of the United Kingdom was found guilty of using Bitcoin to fund Islamic State groups. Due to their increased usage, they are also used as a source for crowdfunding. The dark web enables these organizations to use cryptocurrencies for transactions, buy and sell drugs, and buy antiques illegally.  

In 2019, Al-Qassam was found to raise funds using Bitcoins and it promoted the safe and anonymous donations done using cryptocurrencies using its social media platforms and website. Al Qaeda was also found to be involved in similar activities where it used Telegram to network. The United States Justice Department found these networks, and the persons who contributed to these accounts were investigated. It seized 150 cryptocurrency accounts related to the Hamas fundraising campaign.

Though the cryptocurrencies offer a relatively higher degree of anonymity, once it comes out of blockchain and comes for trading the anonymity disappears. Hence these organizations promoting cryptocurrencies by claiming it offers full proof anonymity is a misnomer.

One of the major aspects that will limit these organizations from adopting cryptocurrencies is cyber-attacks. Further, though cryptocurrencies are used for sourcing funds and moving them, it has limitations in spending. Using cryptocurrencies these organizations can’t buy weapons since it is not widely accepted in the market currently and are unable to convert them readily into fiat. Hence their usability comes into question. In future, if the current trend of cryptocurrencies continues to grow then this might change.

The below graph shows the increased use of cryptocurrency in the year 2021

Source: https://www.statista.com/chart/24793/selected-cryptocurrency-price-growth/

Hence digital currencies are inevitable in future. Currently, countries have diverging views when it comes to cryptocurrencies. Take Bitcoin, for example, it is banned in China whereas in Canada it is viewed as a commodity and El Salvador in June 2021 adopted it as a legal tender. Hence countries should come together and adopt frameworks to regulate these cryptocurrencies.