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Growing evidence suggests that terrorism is being increasing funded using crypto, according to a United Nations official.
The prevalence of crypto-funding of terrorist activities may have quadrupled in recent years, said Svetlana Martynova at a recent conference.
The senior legal officer at the U.N.’s Counter-Terrorism Committee Executive Directorate estimates that 20% of terrorist attacks have been crypto-financed. She reported these numbers seemed to have increased as scrutiny of the illicit use of cryptocurrencies has intensified.
Criminal activities associated with cryptocurrencies rose to a record high last year, according to the most recent report from Chainalysis. The figure has nearly doubled, from $7.8 billion in 2021, with illicitly-associated addresses receiving $14 billion in 2021.
Chainalysis highlighted a number of militant organizations that had made efforts to finance their operations with cryptocurrencies.
Terrorists Abuse Crypto
However, Martynova pointed out that cash payments still facilitate the vast majority of terrorism around the world. She also highlighted the use of an informal value transfer system known as hawala. The practice, which involves the use of brokers, adheres to Islamic principles and is commonly used in the Middle East.
The United Nations official explained that terrorists often adapt their fundraising methods to suit the restrictions posed by their environment. For instance, “if they want to collect money from a territory that uses mobile payments as a common way to pay for things, they will abuse that mechanism,” she said.
But if terrorists find themselves effectively excluded from the formal financial system, then they are more likely to abuse cryptocurrencies.
Member States to Step Up Game
Greater scrutiny of crypto transactions have followed in the wake of international efforts to combat their use for illicit purposes. Martynova referred to a U.N. Security Council resolution, which calls on member states to step up their cryptocurrency regulation.
She also referenced global standards recommended by the Financial Action Task Force, which focus on tracking blockchain transactions across jurisdictions.
Unfortunately, Martynova lamented that enforcement of these regulations still woefully underwhelming. A mere 27 out of 98 jurisdictions in a recent survey reported they had started creating a regulatory framework for cryptocurrencies. Consequently, even fewer have been in a position to enforce them.
One criminal activity associated with cryptocurrencies that has been growing in prominence is ransomware attacks. This week, the Biden administration is hosting a global summit, featuring officials from around the world, to address the problem.
A White House official said a goal of the meeting would be to establish a globally coordinated approach to the issue.