How crypto meltdown is bad news for global terrorism

New Delhi: At a time when terrorists had found an easy and untraceable funding network based on cryptocurrencies, the global crypto meltdown comes as bad news for terror organisations.

The success of strategies like counterterrorism finance (CTF) efforts that often focus on tracking money and preventing financial transactions that may be used to support terrorist activities, has raised alarms that terrorist organisations might increase their use of such digital currencies.

Terror funding via cryptocurrencies

A report by the Israeli Anti-Money Laundering (I-AML) website, in August 2020-August 2021 suggested that terror organisations received Ethereum (ETH), ERC20 tokens, and even XRP donations. The United Nations Counter-Terrorism in June 2021 also stated that the novel COVID-19 pandemic increased the potential for terror organisations to obtain money via digital sources. “In 2019, 2020, Al-Qaeda raised cryptocurrency through Telegram channels and Facebook groups,” the report stated.

In the 2021 global crypto adoption index, blockchain analysis company Chainalysis ranked Afghanistan 20th among 154 countries in the ‘2021 Global Crypto Adoption Index’.

According to the findings by Rand.org, cryptocurrencies are “not well matched with the totality of features that would be needed and desirable to terrorist groups but might be employed for selected financial activities.” Even though, the terror organisations were slow with these digital currencies, in the recent years, they have been experimenting with it because of its ‘widespread adoption, better anonymity, improved security, and that is subject to lax or inconsistent regulation’.

Crypto meltdown=drying up of terror funding

The recent crypto meltdown globally may be an effective way to combat terror funding. Cryptocurrency markets globally have been battered, with billions of dollars being wiped out. The crypto meltdown has taken the total market value of cryptocurrencies below USD 1 trillion in just one year from USD 3 trillion in 2021, sending Bahamas-based crypto exchange FTX into bankruptcy after numerous customer withdrawals.

The collapse of FTX empire, which lost entire USD 16 billion fortune of co-founder Sam Bankman-Fried, shook confidence in the troubled industry that was struggling to gain credibility. The prices of the original cryptocurrencies, Bitcoin and Ether, have also plummeted.

India has been opposing the cryptocurrencies by noting that global consensus is required in respect of virtual currencies as these are borderless and involves very high risks. Finance Minister Nirmala Sitharaman said, “Cryptocurrencies are by definition borderless and require international collaboration to prevent regulatory arbitrage.”

How the world is fighting crypto terror funding?

Since 2018, the international body has been trying to define virtual assets and service providers to apply guidelines for anti-money laundering (AML) and to combat the terror funding (CFT) to the already troubled industry. Coindesk.com quoted it earlier as saying that nearly half of the world’s jurisdictions still do not require crypto service providers to identify their customers properly.

India is all set to host the third edition of the ‘No Money For Terror (NMFT)’ conference in New Delhi later this week. The government will be discussing key issues including the use of virtual assets, and crowdfunding platforms by terrorist entities, their use of the dark web, the links between terror financing and legitimate economic activities, and payment intermediaries. The conference, to be held on November 18–19 in New Delhi, is expected to be attended by representatives of about 75 countries.

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