Cryptocurrency is a disruptive force in the modern world. It challenges traditional financial systems and revolutionises the way we perceive money and transactions.
Its importance in today’s world cannot be overstated, as it has the potential to reshape economies, empower individuals, and foster financial innovation.
So much for the good news. The bad news is that Crypto can also empower terror-minded individuals, and foster financial innovation for their extremist activities.
The Islamic State group (IS) is reported to have turned to cryptocurrencies to move money from places such as Somalia and South Africa to fighters elsewhere on the continent.
Cryptocurrencies such as Bitcoin use blockchain technology to verify their value and track their movement. Users are anonymous, but once a cryptocurrency wallet address can be tied to an individual, it is easy to search the ledger for every transaction linked to that address.
According to Beatrice Berton, an analyst with the European Union Institute for Security Studies, private donations, known as “sadaqah” in Arabic, makeup one of IS’s largest sources of revenue. Although much of this money moves through the informal system known as hawala, some IS supporters are said to use digital currencies such as Bitcoin or Tether to transfer money quickly while avoiding detection by international agencies seeking to disrupt terror financing.
Observers say that IS has seen its finances drop from more than $300 million when it controlled parts of Iraq and Syria to about $20 million today. The organization has encouraged its African affiliates, such as IS-Somalia and Islamic State Central African Province (ISCAP) in the eastern Democratic Republic of the Congo (DRC), to finance their operations.
They have done so through a variety of means, including ransoms from kidnappings, extortion and “taxes” on residents. IS-Somalia raises about $6 million a year through those methods, according to observers. IS supporters in South Africa engage in a growing number of kidnappings and then funnel ransom payments to IS affiliates through al-Shabaab.
The Counter ISIS Finance Group (CIFG) says that West Africa, home to Islamic State West Africa Province (ISWAP), has become a focal point for cryptocurrency transfers. The CIFG represents about 80 countries and international organizations targeting IS.
Nigeria, where ISWAP operates, is second to India among the world’s largest adopters of cryptocurrency as legal tender. Nigerians use cryptocurrencies as a hedge against economic instability. Financial experts put the volume of transactions at nearly $60 million in 2023. This means that IS and other terrorist groups can have a lot of space to play in.
GhostSec is another group that tracks IS finances. The group, which includes private hackers formerly affiliated with the group Anonymous, also has targeted IS finances and discovered thousands of dollars in Bitcoin going to an account believed to be affiliated with IS since 2012.
Hackers found that that account transferred money to another Bitcoin account containing more than $3 million but were unable to identify the owner, according to Deutsche Welle.
Since Bitcoin was developed more than 15 years ago, cryptocurrencies have become notorious as a way to conduct illicit transactions, from drug deals to weapons trafficking. Crypto defenders say international pressure to prevent money laundering has lifted much of the secrecy that previously surrounded them.
According to Tether CEO Paolo Ardoino, Tether has frozen more than $300 million in digital assets as part of its campaign to keep criminals from using its cryptocurrency. It has developed security measures to protect its community.
“It is easier to track crypto than it is to track cash,” Ahmed Buckley, an expert on terrorism financing, recently told the security publication Janes. “But that hasn’t prevented these terrorist groups and individuals from experimenting, from trying to adapt and learn, and see ways where they can exploit gaps in regulations pertaining to crypto, to bolster their finances.”