By: Antonia Ward, Columnist
Photo by: money.cnn.com
Since it first came into existence in 2009, Bitcoin has been causing controversy, confusion, and consternation in equal measure. The cryptocurrency is valued at 1 bitcoin to $14,122 USD (£10,189.53) at the time of writing (15 January 2017), and is the first decentralized digital currency of its kind, requiring neither a central repository nor single administrator.[i] While hedge funds and banks have viewed it as a powerful asset and have made considerable investment, it has also been recognized as a vehicle for fraud and organized crime.
However, more concerning is the slow realization by governments, banks, and the public that the cryptocurrency could be used for the purposes of terrorism. Indeed, the links between terrorism and organized crime have been well-documented.[ii]
Bitcoin has become the prominent currency of the ‘dark web’, which is often used to purchase illegal goods online, such as weapons and drugs. However, the intersection of Bitcoin and the dark web for terrorist activities has been less well-documented. Anecdotal evidence suggests that terrorists are using both already, but more work is needed to ascertain whether groups are using a combination of Bitcoin and the dark web to finance, plan, and perpetrate terrorist attacks. This has raised questions about the cryptocurrency enabling illegal behavior.
In the last two months alone Bitcoin has received vocal criticism. Chief Executive of Goldman Sachs Lloyd Blankfein has accused Bitcoin of being a ‘vehicle for fraud’, claiming its wildly varying market price is not reflective of a true currency.[iii] His comments come after CEO of JPMorgan Chase Jamie Dimon labelled the currency a ‘fraud that is waiting to blow up’. [iv]
In addition, the UK and EU have announced their intention to introduce regulations and crackdown on the cryptocurrency over fears it is being used for money laundering.[v] The UK Treasury is already planning to bring Bitcoin under current anti-money laundering and counterterrorism financial legislation.[vi]
The connection between terrorism and Bitcoin is contested and remains a relatively unknown area of both awareness and research. Some, such as David Carlisle of Royal United Services Institute, have argued that the threat has been blown out of proportion, warning that overreaction from governments could stifle the new technology.[vii] However, there is evidence that terrorist groups have already been exploiting Bitcoin. Cryptocurrency is perfect for decentralized activity and anonymity, affording terrorists protection and making the tracking of transactions incredibly difficult.
In some cases, terrorists have used the cryptocurrency to replace the traditional method of ‘hawala’[viii], in which terrorist organizations have used a physical and local broker to transfer money between locations. Moreover, in January 2017, Islamist militants allegedly used Bitcoin to finance operations.[ix] The Mujahideen Shura Council, a US-designated terrorist organization in the Gaza Strip, launched a Bitcoin funding campaign last year.[x] ISIS has also used Bitcoin, posting an advertisement on the dark web with its Bitcoin address.[xi]
The intersection of the dark web and Bitcoin, popularized by organized crime, perhaps poses the most significant threat. Much like organized criminals, terrorist organizations could use Bitcoin to purchase a range of weaponry including firearms or bomb making materials or even false passports on the dark web.
A study by RAND Europe, “Behind The Curtain: The Illicit Trade Of Firearms, Explosives and Ammunition on The Dark Web”, identified 24 French and British cryptomarkets on the dark web during a week-long data collection period in September 2016, of which 75 per cent were found to have evidence of arms dealing.[xii]
This illustrates the pervasiveness of arms dealing on the dark web. Various media outlets have reported a connection between the Paris and Munich terrorist attacks in 2015, with the weapons used by the perpetrators of the latter attack allegedly linked to vendors on the dark web.[xiii] This is particularly concerning given that ISIS propaganda has called for increasingly simplistic attacks using vehicles, firearms, and knives.
It can be argued, however, that the evidence at present largely remains anecdotal. There is insufficient information on the extent Bitcoin is used on the dark web and for what purpose, despite respected companies including Microsoft, Expedia, and Subway accepting the cryptocurrency as a form of payment. [xiv]
The fast paced, dynamic and evolving nature of terrorism in the 21st century warrants a detailed and concerted investigation into how terrorists use Bitcoin and the dark web, and how the intersection of the two can aid terrorist groups in financing, planning, and perpetrating attacks. If nation states are going to be able to respond to terrorism effectively then this warrants further investigation in order to both prevent terrorist financing and the increasingly simplistic style of attacks encouraged by terrorist groups.
[i] Hern, Alex (2017) “Everything you wanted to know about bitcoin but were afraid to ask”, The Guardian 11th November 2017 https://www.theguardian.com/technology/2017/nov/11/everything-you-ever-wanted-to-know-about-bitcoin-but-were-to-afraid-to-ask-cryptocurrencies
[ii] Europol (2018) “Links between serious and organised crime and terrorism” https://www.europol.europa.eu/socta/2017/links-between.html
[iii] Monaghan, Angela (2017), “Bitcoin is a vehicle for fraudsters, warns Goldman Sachs boss”, The Guardian, 30th November 2017 https://www.theguardian.com/business/2017/nov/30/bitcoin-is-a-vehicle-for-fraudsters-warns-goldman-sachs-boss
[iv] Mourdoukotas, Panos (2017) “Why big banks attacked bitcoin”, Forbes, 14th September 2017 https://www.forbes.com/sites/panosmourdoukoutas/2017/09/14/why-big-banks-attacked-bitcoin/#1ee11f936c53
[v] Kollowe, Julia (2017) “Bitcoin: UK and EU plan crackdown amid crime and tax evasion fears”, The Guardian, 4th December 2017 https://www.theguardian.com/technology/2017/dec/04/bitcoin-uk-eu-plan-cryptocurrency-price-traders-anonymity
[vi] Mendick, Robert and Rayner, Gordon (2017) “Treasury crackdown on Bitcoin over concerns it is used to launder money and dodge tax”, The Daily Telegraph, 3rd December 2017, http://www.telegraph.co.uk/news/2017/12/03/bitcoin-crackdown-amid-fears-money-laundering-tax-dodging/
[vii] Carlisle,David(2017) “Cryptocurrencies and Terrorist Financing: A Risk, But Hold the Panic”, RUSI, https://rusi.org/commentary/cryptocurrencies-and-terrorist-financing-risk-hold-panic
[viii] Looney, Robert (2003) “Hawala: The Terrorist’s Informal Financial Mechanism”, Middle East Policy Council, http://www.mepc.org/journal/hawala-terrorists-informal-financial-mechanism
[ix] Yuniar, Resty Woro (2017), “Bitcoin, PayPal Used to Finance Terrorism, Indonesian Agency Says”, https://www.wsj.com/articles/bitcoin-paypal-used-to-finance-terrorism-indonesian-agency-says-1483964198
[xii] Persi Paoli, Giacomo et al (2017), “Behind the curtain:The illicit trade of firearms, explosives and ammunition on the dark web”, RAND Corporation, https://www.rand.org/pubs/research_reports/RR2091.html
[xiii] Bender, Ruth and Alessi, Christopher (2016) “Munich Shooter Likely Bought Reactivated Pistol on Dark Net”, The Wall Street Journal, https://www.wsj.com/articles/munich-shooter-bought-recommissioned-pistol-on-dark-net-1469366686
[xiv] Nishanian, Mariam, (2017) “8 surprising places you can pay with bitcoin”, Business Insider, http://www.businessinsider.com/bitcoin-price-8-surprising-places-where-you-can-use-2017-10?r=UK&IR=T