The use of cryptos as a means of financing terrorism has raised concerns among the international community and financial regulatory bodies. The subject is at the heart of the debates. Especially since the United States publicly declared that assets like XRP or bitcoin (BTC) were used to finance the Hamas attack against Israel. The Hebrew state subsequently froze crypto assets suspected of having links with this terrorist group. Obviously, the aim of these lines is not to take a position on the legitimacy or otherwise of the actions of one side or the other in the context of this deadly conflict. What is interesting to see here is the extent to which cryptos would be used to finance acts of terrorism. The question is all the more relevant as it is regularly perceived in public opinion as the ultimate means of financing terrorism. Which, as we will see, is simplistic.
Crypto and terrorist financing: what are the links?
Recently, the crypto industry reacted strongly to accusations that Ripple’s bitcoin (BTC) and XRP were used to finance the Hamas offensive against Israel. These allegations by the American government actually arise from a criminal investigation that has been open for three years and which is still continuing today.
The investigation reveals that the Palestinian organization has mobilized nearly $10 million in crypto donations. Of course, donors are anonymous. Even if, as investigations show, Hamas made calls for donations on social networks, notably Facebook and Twitter (X). This, by mentioning crypto wallet addresses intended to receive the requested funds.
Seen this way, we are automatically led to believe that cryptos are holy bread for financing terrorist activities. How could it be otherwise, one might think, since blockchain, the technology on which they are based, offers the anonymity necessary for carrying out this type of clandestine operation? Especially since there was a history.
We remember the cases of Al-Qaeda and the Islamic State of Iraq and ash-Sham (ISIS). According to some sources, these two terrorist organizations took advantage of the anonymity offered by cryptos to raise the funds necessary for their activities. Can we, on the basis of these elements, conclude that these assets are the panacea for financing terrorist groups?
Crypto in the financing of terrorism: a not so simple question
Concluding, on the basis of the elements mentioned above, that cryptos are used to finance terrorism would be a challenge. The truth is that the issue of using crypto to finance terrorism is complex. This complexity is linked to the amalgamation between these two activities while a nuance exists between them.
There is thus a distinction between the use of cryptos and other uses of terrorist financing. We tend to forget that this is what part of the income from drug trafficking is used for. Counterfeiting, extortion and money laundering are also other means used for ages by terrorist organizations to mobilize the funds they need. From this point of view, it appears that cryptos are only one tool among others in the range of methods of financing these operations.
This is also the idea expressed by Yaya Fanusie, a former CIA analyst, now an associate researcher at the Center for a New American Security. “There is no single method of financing Hamas or other terrorist organizations. They are opportunistic and adaptable”said the expert.
It is also necessary to qualify the notion of the anonymity of cryptos. One of their characteristics so often sold as the asset that puts them at the top of the list of means of financing terrorism. It is true that cryptos offer a certain degree of anonymity which makes them attractive for secret or even clandestine operations. But this anonymity is not absolute. Basically, crypto transactions are traceable, especially since they are recorded on a blockchain which is itself public.
It is useless to recall that the regulatory authorities of crypto activities are increasingly arming themselves technologically to trace transactions and identify the authors. Especially when suspicions of financing terrorism weigh against them. This is without taking into account that the anonymity of cryptos itself is considerably reduced, especially as cryptographic exchanges are increasingly subject to regulations. Standards requiring user identification. Therefore, carrying out terrorist activities with impunity is today much more difficult due to restrictions on anonymity.
Terrorism would be dead if crypto was its only mode of financing
As Yaya Fanusie noted, “efforts to stop them [les terroristes, Ndlr] are a constant game of cat and mouse”. In fact, it would have been much easier to get your hands on them if they were only banking on crypto for funding. For the different reasons that we mentioned above.
If terrorist activities are present, it is because cryptos are not their only financing options. Today, it is mainly fiat money, mobilized via various trafficking and then laundered, which is their main source of financing.
However, there is a real challenge to the use of cryptos in financing terrorism. Some believe that technological advances would provide terrorists with new opportunities to evade detection. As a result, the monitoring of illicit operations could be complicated. Particularly because of crowdfunding platforms and decentralized exchanges (DEX) allowing anonymous fundraising.
The regulation of cryptos will have to play a crucial role in preventing the financing of terrorism. Hence the obligation for governments to collaborate internationally to develop consistent standards and regulations for this purpose.
The assertion that cryptocurrencies are used to finance terrorism is a complex subject that must be qualified. It is true that allegations of the use of cryptos to support the operations of terrorist groups are being made. However, it seems essential not to generalize and to recognize that other traditional methods of financing terrorism remain predominant. Furthermore, the apparent anonymity of cryptos, often put forward to tarnish their image, does not exclude the traceability of transactions. In addition, efforts are constantly made to strengthen the latter, thus reducing anonymity. However, coherent international regulation is necessary to support this dynamic.
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