Digital Сurrencies Became Unsuitable for Politicians As Well As Terrorists

What do the cryptocurrency and gold have in common? The value based on trust, the possibility of using as a means of payment, a rarity, the difficulty of mining. You got that right. And gold is the cause and the consequence of wars. Probably, therefore, politicians, financiers, and just curious citizens believe that illegal armed groups receive various donations through anonymous channels in crypto. But is it really so? And in general, how serious and deep is the problem of financing terrorist organizations with virtual tokens?

Last year, a photo was spread over the social networks where smiling militants of one of the terrorist organizations acting in Syria are holding a cardboard with the link of the digital wallet for donations. The cryptocurrency preferable was also stated there. Surely, it was bitcoin.

We do not publish this image, for obvious reasons. At about the same time, FBI agents arrested an American of Pakistani origin who transferred the cryptocurrency to the wallet of a member of one Islamist group. According to the investigation, she obtained $85 thousand from the bank by a trick and converted them into bitcoins, conducted a transaction and tried to escape to her homeland. The police has detained the accomplice of terrorists at the airport and now she faces dozens of years in prison.

No wonder if the Internet riddled would be filled with such announcements. Surprisingly, there are very few of them.

But how, then, should one treat the words of the Central Bank representatives and other regulatory authorities that cryptocurrencies can be a source and means of terrorism financing? Apparently, as one "can", but not as "it is." It seems that virtual tokens are not the most appropriate way to finance illegal armed formations.

For that matter, another case is indicative. Amir TAAKI is one of the pioneers of the crypto-economy, began as the creator of client programs for bitcoin, the founder of Bitcoinica crypto-exchange. Then he started developing trading platforms and created DarckMarket, the platform where objects and assets were traded on the Darknet principle,  absolutely anonymously and uncontrollably. In 2016, this cyber-anarchist decided that he belonged not at the computer desk but in the forefront of the fight against terrorism. For 4 months, TAAKI became a member of the Kurdish self-defence group Peshmerga.

But not just out of pure curiosity and adrenaline, which is so lacking in the boring English life, he got to the front.

"At first I was scared terribly and I was sure I would die," he said in an interview. "And then I was sent to the front. Without any training, I was handed the Kalashnikov assault rifle. I learned to use the weapon already halfway. At some point, I had to fight. But I wanted to get to where my skills would be useful. Rodzhava (the place where Amir TAAKI fought - ed. note) is under an embargo, so there is no way to take money in or out. We need to really create our own crypto-economy. And now we do have a technical tool that will help people to freely organize their lives outside the state system".

In other words, he went to the Middle East to create a Kurdish national currency - the money of a nation that does not have a state. But has anyone heard anything about Kurdish virtual coins? No one ever. The activist’s idea failed, because virtual values, oddly enough, require a lot of energy and a developed technical base.

For example, the minimum amount of electricity required for a single bitcoin transaction, according to Leonard WIZ's calculations, is 91.6 kWh. Where can one get so much energy in the conflict zone? Another example. The optimal bitcoin transaction time is 80 minutes; bitcoin cache is 60 minutes; lightcoin - 30 minutes. The transaction of the fastest popular Ethereum cryptocurrency requires on average 6 minutes.

Imagine a terrorist sitting next to a working smartphone for an hour, while all signals coming from the combat zone are tapped by special services and the army, recorded, and tracked. What follows does not need to be discussed. It is unlikely that any of the participants in illegal armed groups will take such a deadly risk.

But still, can one buy weapons for the crypto?

Undoubtedly, yes. Darknet gives the answer to this question. The technology of purchasing is simple - on one of the specialized forums, we will not name on which one exactly, we find an offer. We get in touch with the seller through a special encoder. He names the phone number and e-wallet of the intermediary. We pay the crypto to the intermediary. At this time, the seller is making a "dead drop" (hides the gun in the place known to him only). After transferring the virtual coins, we send a message with the single word "Ok" to the intermediary and seller's numbers. In the end, we get the "dead drop’s" address.

Sellers receive fiat money in a similar way. This is a well-known scheme.

The crypto arms market exist. However, the supply is very specific there. In general, these are the products of the "grave robbers" labour: the restored arms of the Second World War. There are makeshift guns and single exemplars, taken out of the combat zones. And most importantly, these supplies are very few. This is clearly not enough for the war.

So where does the opinion come from that cryptocurrency can become an instrument for terrorism financing?

Here is another indicative example. The British police arrested a dentist, 23-year-old Abdurrahman KAABAR because he had paid the cryptocurrency to a terrorist organization. During the investigation, it was found out that the money had been aimed at his brother, who had been fighting in Syria on the side of one anti-government group. But the whole point is that at that time the brother was not even in the combat zone, but was on treatment in one of the Middle Eastern countries.

The young doctor is facing a serious prison term now. And politicians will say once again that the anonymity of virtual assets plays into the hands of various kinds of criminals. But the truth is that it is difficult to invent an instrument more inappropriate for financing terrorist organizations than cryptocurrency. It's an illusion that transactions are anonymous because people who want to help someone on the wrong side of the law get caught on a regular basis. Even a greater illusion is that the crypto is easy to use. Transactions require time and money. But these illusions are beneficial for many officials because behind them it is easy to hide both ignorance and fear of everything new.

And the picture, most likely, is only a fake of scammers, who decided to cash in on the sympathizers. Real terrorists need genuine gold.