Chainalysis Debunks Myths on Crypto in Terrorism Financing
Chainalysis’ report highlights the limited role of cryptocurrency in terrorism financing.
The report emphasizes how blockchain is actually a deterrent for illicit activities.
Service providers are often misunderstood, Chainalysis says. In the wake of recent conflicts between Hamas and Israel, questions have arisen about the role of crypto in financing illegal and terror activities. In response to growing attacks on crypto amid the conflict, Chainalysis has released a report to address concerns and debunk common myths.Chainalysis’ In-Depth Examination of Cryptocurrency in Terrorism FinancingOn Wednesday, October 18, Chainalysis, a leading authority in blockchain analytics, released a report on the role of crypto in terrorism. The report addresses the concerns raised about how terrorist organizations like Hamas, Hezbollah, and the Palestinian Islamic Jihad are leveraging digital currencies.Contrary to popular belief, the report emphasizes that crypto transactions comprise a tiny portion of terrorism financing. The report stresses that most terrorist organizations still rely heavily on traditional, fiat-based methods for their financing.
Another key takeaway from the Chainalysis report is the inherent transparency of blockchain technology. Unlike traditional financial systems, blockchain ledgers are open and traceable. This makes cryptocurrencies less suitable for illicit activities, including the financing of terrorism. The report also suggests that government agencies can effectively identify and disrupt the flow of illicit funds if they use the right tools. The Bigger Picture in Cryptocurrency and TerrorismChainalysis also delves into the role of service providers in the movement of funds tied to terrorism. These include money services businesses and virtual currency exchange services. The report cautions against making sweeping generalizations that all funds processed by these service providers are related to terrorism.
For instance, it mentions a Gaza-based business, Buy Cash, that was recently sanctioned. However, the report also points out that not all its transactions were terror-related.Chainalysis also points out that Hamas has been moving away from crypto donations. On April 27, 2023, Al-Qassam Brigades, the military wing of Hamas, announced the shutdown of their longstanding cryptocurrency donation program. The group cited concerns for the safety of their donors due to the transparent nature of crypto. On the Flipside As technology evolves, so do the methods employed by terrorist organizations to secure funding. While cryptocurrencies may not be the go-to option now, there’s no guarantee that this won’t change.
Rogue actors, including North Korea, have been known for using crypto to finance their military activities. These actors use mixers like Tornado Cash to launder their crypto. Why This MattersThe narrative around using digital currencies in terrorism financing influences the regulatory narrative around crypto and crypto exchanges. This is key as regulations can make or break crypto markets, significantly influencing investor confidence.