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Financing through digital currencies: The nexus between extremists and cryptocurrencies


Bitcoin vs Altcoins. Photo by: André François McKenzie. Licensed under Unsplash

Cryptocurrencies, led by Bitcoin, have become increasingly mainstream in recent years, and so has their use by extremist individuals and groups. Rather than funding acts of terrorism in a systematic way, such modes of transaction offer an alternative to financing online campaigns, propaganda material, and resources. Against this, law enforcement has little choice but to continue to develop resources overseeing the use of cryptocurrencies by extremists. It can also rely on the intelligence community, as independent researchers actively track and expose crypto transactions by extremists.


All Bitcoin transactions are recorded on a publicly available blockchain. But the emergence of new currencies such as Monero - which provides a higher degree of privacy and the ability to transfer payments offline - is posing a challenge for authorities when tracking illegal transactions. Extremists across the ideological spectrum, from jihadists to the far-right, are seeking to take advantage of this, as they frequently call for Monero donations on their channels on encrypted platforms such as Telegram or RocketChat.


One the one hand, supporters of Islamic State regularly share tips and guides regarding the use of Monero. As extremists are seeking to adapt their funding resources to the new technologies available, they see Monero as more reliable than other currencies, and seem to think that their transactions would be untraceable. On the other hand, far-right users particularly have ramped up their use of less transparent alt-coins (alternative coins to Bitcoin) in recent years. Aligned with the development of new platforms on which they operate, tech-savvy users have understood that a sophisticated crypto wallet would allow them to raise and spend money to develop their movement.


This desire to make full use of emerging digital assets was paralleled by the necessity to do so. Particularly following the ‘Unite the Right’ Rally in Charlottesville in 2017, and following increased monitoring of far-right users’ online transactions, crowdsourcing platforms have continuously removed such members from their platforms. Julia Ebner, an extremism researcher, has linked this to a shift towards alternative platforms such as Hatreon, which is now defunct. Still, far-right and neo-Nazi users operate on encrypted platforms to discuss new crypto trends and call for donations.


For the far-right, the progressive shift towards cryptocurrencies and decentralisation represents more than funding opportunities. It fits with their identitarian and ideological vision, as some of these individuals are opposed to financial institutions and the ‘establishment’. It also aligns with broader tendencies to adopt conspiracist views; as cybersecurity expert John Bambenek points out, ‘If you believe the banks are part of the Jewish world conspiracy, then there are only two ways to make financial transactions: it’s either cash or it’s bitcoin’.


Conclusion and Recommendations

As of the time of writing, there is little indication that crypto transactions have been responsible for funding acts of terrorism, and it is all but a certainty that it will not replace traditional means of funding, such as fiat (government-issued) currencies or assets, in the coming years. As the emergence of these currencies is relatively recent, and their adoption by extremists even more, this is understandable. It also indicates that tech-aware extremists across the ideological spectrum are likely to accelerate their use of digital currencies in their quest of being untraceable.


The observed shift since 2017 from Bitcoin and its highly transparent blockchain technology to Monero, Zcash or BlackCoin represents a challenge both for law enforcement and policy-makers, and the intelligence community. Against this, researchers launched initiatives such as the Neonazi BTC Tracker, a tool monitoring transactions from ‘suspected neonazi or alt-right extremist wallets’.


With the ultimate aim of disrupting money flows and identifying extremists behind such transactions, financial authorities ought to use the transparency of blockchain technology to its full extent. This could be achieved through increased public-private collaboration when monitoring Bitcoin and alt-coin transactions by users that have been identified as having extremist views. Challenges will ultimately emerge when tackling these issues. This includes questions about privacy, about dealing with poor coordination when the investigation of these cases runs across different jurisdictions and investigation methods diverge, and questions about the lack of harmonization between national authorities on what is considered to be extremist content.


Beyond semantics, public and international actors also need to increase cooperation with platforms hosting such content in order to speed up its removal. This can include inviting these platforms to speak at different fora, and present the realities and challenges they face, which enables public actors to truly understand the matter. The INGE Committee of the European Parliament is a good example of this, although it needs to be organized at the national level as well. Finally, authorities can rely on the intelligence community (e.g. independent and open-source intelligence researchers) and initiatives that aim to shed light on extremists’ more obscure activities.

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