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The role of crypto in terror financing is miniscule: Chainanalysis
Cryptocurrencies have experienced significant growth in popularity since they were first introduced in 2009. They are somewhat obscure in nature and difficult to understand; this confusion brings about myths and rumors regarding these digital currencies.
One of the oldest and most pervasive myths about digital currencies is that they are most commonly used for illicit activity. While it’s true that digital currencies have been used by individuals with nefarious goals in mind, as well as by criminal organizations, the same could be said of any form of money used throughout history.
On October 18 2023, blockchain analytics firm Chainalysis released a report detailing the role of cryptocurrency in terrorism financing—and data shows that it is miniscule.
The report titled “Correcting the Record” aims to address inaccurate methodologies for estimating cryptocurrency’s role in terrorism financing.
Chainalysts stated it had “seen overstated metrics and flawed analyses of these terrorist groups’ use of cryptocurrency.”
Moreover, it noted that crypto plays a small role in terrorism financing. However, some groups like Hamas, Hezbollah, and Palestinian Islamic Jihad do raise and transfer some funds using crypto.
It added that terrorist organizations have historically used and will likely continue to use traditional, fiat-based methods. These include financial institutions, hawala, and shell companies as their primary financing vehicles.
Furthermore, cryptocurrency is actually less suitable for terrorism financing due to its transparency on blockchains. This allows government agencies and blockchain analysis firms to collaborate to identify and disrupt terror funding flows.
The analysts said this was not easily achievable with traditional transfer methods such as cash.
The report also identified flaws in the analysis of terrorist flows. Estimates of crypto terror financing are often inflated by including all funds received by intermediary service providers, not just the portions explicitly tied to terrorists. Tracing funds through these service providers can also lead to inaccurate conclusions, it noted.
Moreover, mainstream media have also used terrorism financing as a weapon in their anti-crypto crusades. Notor ious industry antagonists such as the WSJ have demonized crypto by running inaccurate headlines regarding its role in funding terrorism.
The bottom line is that cash is king when it comes to terrorism financing, but it doesn’t make for such salacious headlines.
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