Terrorist Networks Eye Bitcoin as Cryptocurrency’s Price Rises

Photo: Dan Kitwood/Getty

Signs are increasing that jihadist groups are looking to capitalize on the rising value of bitcoin, as massive price increases for the cryptocurrency in recent months garner growing public attention. Cold, hard, untraceable cash remains their preferred medium for transmitting funds, but new online activity shows that some jihadist groups are soliciting bitcoins, which can be acquired and spent without any government or banking intermediary.

Terrorist networks cannot easily transact in the formal banking system, so they often employ innovative methods to gain resources. Multiple media outlets that promote al-Qaida or Islamic State (IS) propaganda have asked supporters in recent weeks to send funds to specific bitcoin addresses. In some cases, these have been Salafi Jihadist news websites purportedly seeking donations for site maintenance. But one campaign–still live as of Dec.20–asks for funds to support fighters in Syria.

These groups likely are opting for bitcoin because of the perceived anonymity of bitcoin transactions. But the bitcoin blockchain’s online ledger of identity-masked transactions is public, providing an auditable trail of activity that anyone–including law enforcement–can view and analyze.

So most of these fundraising efforts, thus far, appear unsuccessful, with one exception.

The campaign that has raised the most funds is one targeting Muslims in the West. An organization calling itself al-Sadaqah (Arabic for “the voluntary giving”) by early November had started an English-language social media fundraising campaign to supply fighters with weapons and other resources. A jihadist-website-monitoring group reported that the al-Sadaqah campaign was circulating amongst al-Qaida-linked social media channels like Facebook, but those social media accounts now appear to be shut down. However, on the Telegram messaging app, al-Sadaqah continues to solicit funds through an open channel. Its campaign began by seeking $750 or what it said was a project to build camp facilities and reinforcements at a location in Latakia province in Syria.  One posting states, “Donate anonymously and securely with bitcoin.”

On Nov. 30, someone sent 0.075 bitcoin, which was worth about $685 then, to al-Sadaqah’s bitcoin address. The next day, al-Sadaqah’s address sent all the funds (which, due to bitcoin’s price increase, was worth $803 by then) to another address. By early December, the campaign’s Telegram account was suspended. But it soon moved to a new Telegram account, where it regularly posts slickly-designed graphics, accompanied by jihadist rhetoric and religious references framed to justify funding jihadist activities. One graphic quotes deceased American jihadist cleric Anwar al-Aulaki.

Other jihadist bitcoin fundraising campaigns the past few weeks have gained even less traction. On Nov. 6, the Dawaal-Haqq Islamic News Agency, a pro-jihadist Arabic website, posted a bitcoin address on its Facebook page seeking donations. Dawaal-Haqq (Arabic for “Invitation to the Truth”) has been publishing pro-Salafi Jihadist articles for several years, including statements supporting IS. The bitcoin post did not specify the purpose of the fundraising. The post was soon taken down and Dawaal-Haqq no longer has a profile page on Facebook, although its main news website is active. The only funds the bitcoin address has received are less than $100 that came during the two months before the Facebook posting.

In late November, another pro-IS Arabic website Akhbar al-Muslimeen (Arabic for “News of the Muslims”) posted a link for bitcoin donations, according to an Israeli research institute. The link reportedly went to a page at a mainstream bitcoin payment-processor site, although this link no longer exists. But , as of Dec. 20, the Akhbar al-Muslimeen website still had hyperlinks that read, “Donate to site, servers are costly” above various articles. Instead of pointing to an external bitcoin payment site, these links open to a page within the website that generates bitcoin addresses. Supporters could copy these addresses and donate to them directly, away from the page.

This shows some technical sophistication on the part of that site’s administrators, because they apparently have eliminated their dependence on digital currency exchange services. Also, because the site’s donation page generates a variety of bitcoin addresses where funds can be sent, instead of just one,  it may be harder for outsiders to monitor donations. Still, I identified a few dozen addresses created by the site, and none had any deposits.

In early December, a jihadist-website-monitoring group reported that a separate IS-affiliated website called Isdarat was soliciting bitcoin donations. The Isdarat website can only be viewed on the dark web, via a Tor browser. The site also uses various Telegram channels to further disseminate IS videos and other propaganda. Because media sources did not publish the bitcoin address, it is unclear how much, if any, bitcoin Isdarat has raised or whether the campaign is connected to the other IS media outlets also seeking bitcoin donations.

All of these efforts indicate that Salafi jihadist networks are well aware of bitcoin and are continuing to experiment with ways to finance themselves through this cryptocurrency. I wrote about the first publicly verifiable instance of such activity more than a year ago, when one bitcoin was worth only $581. Today, it’s approaching $20,000.

With cryptocurrencies getting more mainstream media coverage, it is unlikely that terrorist groups will be oblivious to the potential for fundraising through these new digital assets. However, because tracking bitcoin is relatively easy, it is more likely that terrorists, like other criminals, eventually will begin to experiment more with newer cryptocurrencies that provide more anonymity and less traceability. And since using online exchange services makes cryptocurrency users dependent on third-party businesses that could suspend their accounts and report them to law enforcement, it is likely that terrorist groups will adapt by minimizing their use of such platforms. Still, online exchanges probably will remain the location where less tech-savvy, less security-conscious donors purchase bitcoins they want to send to terror networks.

So the good news is that bitcoin, for now, is still not a reliable source of funding for jihadists. The factors currently limiting widespread use of cryptocurrencies probably also discourage terrorist use. While there is greater public awareness of how to buy bitcoins, there is little infrastructure for most people to spend bitcoins on actual goods and services. However, this may change in the future.

Counterterrorism and law enforcement officials should be thinking now about which factors could shift to make terrorist funding through cryptocurrencies a more significant threat, so that agencies can head off a potential threat. One trend to look out for would be groups targeting recruits with computer science skills. Also, officials should be aware of developments within the cryptocurrency industry, such as the widespread adoption of “coins” more anonymous than bitcoin or the growth of online digital currency exchanges that do not adhere to anti-money laundering and “know your customer” practices.

Unfortunately, the places that already have weak financial regulatory environments would be more likely to produce noncompliant exchanges. This certainly would be the case in parts of Africa and the Middle East where jihadist networks are most active. Financial regulators should pay close attention to the development of cryptocurrency exchanges in these regions. Europol’s cybercrime division earlier this year hosted its fourth virtual currency conference, attended mostly by financial authorities and cryptocurrency firms from Europe and North America. Financial regulatory officials from emerging markets should participate more in such meetings in the future.

Bitcoin is not even a decade old. Yet, its technology is breaking new ground and has the potential to usher in new markets, generate more financial transparency, and give underbanked populations greater access to capital.

But the cryptocurrency industry is still at an experimental stage. If this technology is going to develop, its growth must be accompanied by awareness of how terrorists will try to exploit it. They have not been successful so far. We need to keep it that way.

Yaya J. Fanusie is a former CIA counterterrorism analyst. He is the director of analysis at the Foundation for Defense of Democracies’ Center on Sanctions and Illicit Finance. He tweets at @signcurve.

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