In January, the Indonesian financial transactions agency claimed Bitcoin had been used by Islamic militants to fund terrorist activity there; last year, Salafi-jihadist groups designated by the United States as foreign terrorists were able to raise some $600 in bitcoins. These incidents raise alarms about the potential for virtual currencies to become a part of the terrorist financing toolkit.
So far, however, evidence for terrorist use of virtual currencies is anecdotal and episodic. Unlike the situation in the cybercrime context, where bitcoin is used pervasively by criminals looking to mask their identities, it is not yet a strategic counterterrorism threat. It may yet become one, though. For now, terrorist groups face important challenges in using virtual currencies at scale to fund their attacks. In particular, virtual currencies lack the convertibility that terrorist groups require to fund themselves sustainably.
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