It's not difficult to understand why terrorists and other nasty actors might be interested in buying up bitcoin.
The cryptocurrency isn't regulated by a government, so no need to worry about frozen bank accounts. It's digital, so there's no need for storage, making it easier to liquidate. And it's anonymous... well, kind of. More on that later.
As bitcoin's value skyrocketed last year, terrorist groups and their jihadist sympathizers took notice like anyone else, and they began to offer options to donate as a result. These efforts were rather limited in scope and not particularly successful, according to former CIA counter-terrorism analyst Yaya Fanusie. That said, they have continued to persist.
"There’s a group that we were just looking at a few weeks ago--operating in Telegram live," Fanusie told Circa on Tuesday during a presentation at the Foundation for Defense of Democracies in Washington. "I mean, I haven’t checked, but they may be operating to this day seeking bitcoin. They say they’re located in Syria. So we see this happening and perhaps there’s been an uptick because of the price rise and now everyone knows about Bitcoin. But this is clearly a way to raise funds."
The group Fanusie was referring to is called al-Sadaqah (Arabic for "voluntary giving"), a jihadist support group fundraising for fighters in Syria. The group used Telegram and other social media platforms to solicit $750 to build a camp and other facilities for the fighters suggesting potential patrons "donate anonymously and securely with bitcoin." Someone followed through on November 30, sending 0.075 Bitcoin, worth about $685 at the time, and currently approximately $829.
Even as bitcoin's value soars, 800 bucks is still small potatoes. But the concern isn't how it is being used by terrorist groups currently. Instead, it's what they could do with the technology in the future.
"Now the thing I would say though is there are lots of reasons why they have not been as successful as one might think," said Fanusie. "And just one of the difficulties of using Bitcoin--it’s very easy to put up a Bitcoin address but it’s more difficult to get people to widely adopt this as a fundraising method. And there are lots of alternative methods. But absolutely we should not--this is something that we’ve actually written a little bit about."
Bitcoin might not even be the ideal cryptocurrency for terrorist groups. Bitcoin's programming works off a block chain, where all transactions are put into a "block" of data which is constantly recorded. That means you can trace it. While the identities of the individuals exchanging bitcoins remain unknown, the fact that they made a transaction gives law enforcement agencies a trove of raw intelligence data that can be analyzed.
"It’s not actually true to say it is anonymous because Bitcoin is based on block chain and the block chain is a list of all transactions that take place in Bitcoin," Tom Robinson, chief data officer of Elliptic, a company that monitors illicit bitcoin transactions, told Circa. "What you don’t have though is any concept of identity. You don’t know who is making these transactions and that’s the problem."
That said, there are plenty of other cryptocurrencies out there. Some of which are even more anonymous than bitcoin. And there are likely to be plenty more invented in the near future, though Robinson expressed doubt that a terrorist group would invent their own.
"I don’t think they will need to. They can just use other cryptocurrencies," said Robinson. "And for the same reason it’s difficult for a state actor to generate the community and the acceptance around the cryptocurrency. It would be even harder for that kind of organization. I mean, what exchange would offer exchange services for that coin?"
Exchanges are the marketplaces in which bitcoin, or any other cryptocurrency, is traded in for traditional currencies. If you're looking to cash out bitcoins, you're likely going to need to go through an exchange. Exchanges currently looking to stay in business probably wouldn't risk doing business with jihadist groups... at least not yet.
Fanusie noted in a December piece for the Cipher Brief that bitcoin's infrastructure could expand in the future as it becomes more popular. As cryptocurrencies gain traction in places with limited financial regulation, like the countries jihadist groups are already based in, there's potential for illicit uses.
"I mean technology is just a tool. People are using it for various purposes," said Jaime Smith, global chief of communications for The Bitfury Group and a former special advisor to President Barack Obama. "It is up to us to be smart enough to find ways to curtail ... this is a secure immutable ledger transaction. Surely we can find a way. It's better than a bag of cash. We can actually figure out ways to trace this if we just wrap our minds around it and basically stop scratching our heads wondering what it is."
Smith compared the current rise of Bitcoin and cryptocurrencies to the rise of the internet in 1994, a time when no one really knew what would become of the new technology. Like the nascent internet, blockchain technology has enormous potential. And enormous potential to be misused. That's why the experts say regulators and law enforcement need to be looking to the future.
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