A recently released report has claimed terrorists are more likely to use cash to finance their crimes than cryptocurrency.
The report was released by Rand – a firm which provides objective research services – and investigates the likelihood of terrorists using crypto to finance their crime and whether they are more likely to opt for cash.
It focuses on three main areas of terrorist financing: receipt, management, and spending.
‘Terrorists need a robust financial system’
The report claims that terrorist organisations which are under attack rely heavily on a robust financial system to prevent losses of personnel, sites, or records.
“Cryptocurrencies may not be well suited to this type of robustness, because loss of technical expertise or loss of access to cryptographic keys could lead to a complete loss of funds,” writes Rand.
“Thus, it seems unlikely that these groups would want to maintain balances or manage their money via cryptocurrency in the near term.”
On the issue of spending, Rand notes that most terrorist organisations are constrained in their ability to use crypto because of the limited acceptability and usability of cryptocurrencies in regions where terrorism is most prominent.
This is because they cannot easily spend it where vendors expect cash. For example, there are very few Bitcoin ATMs in the Middle East, making it difficult to exchange crypto for fiat.
Many Bitcoin ATMs exist in Western countries where local banking and currency laws provide “something of a deterrent to illicit use”.
However, Rand notes that direct operational funding for overseas attacks by affiliates of the al Qaeda network or independent cells like those inspired by ISIS are hard to disrupt via CTF (Counter-Terrorist Financing).
Terrorists adopting crypto depends on the technology available
Ultimately, the question of whether and how terrorist groups will use a crypto system will depend on the available technology and its properties alongside the needs and capabilities of the group.
The report states: “Newer cryptocurrencies may emerge with properties that terrorist organisations find more attractive than those currently available.
“For instance, if a future cryptocurrency provides better anonymity than Bitcoin for large-sum transactions and is more widely adopted than Zcash, then terrorist organisations might be willing to employ that currency for specific activities.”
Rand’s report concludes that terrorist organisations are more likely to use cash because crypto is not the ideal currency for them to employ, and current concerns relating to the use of crypto in crime “are almost certainly overblown, but coming improvements in cryptocurrency technology will likely have a significant long-term effect on CTF”.
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