EU Should Adopt New Approach To Curbing Misuse Of Cryptocurrencies By Extremists

(New York, N.Y.) – Cryptocurrencies are paving the way for extremists and terrorists to facilitate domestic and cross-border funding, while simultaneously working outside regulated channels. On November 3, Counter Extremism Project (CEP) Senior Director and former Coordinator of the U.N. Security Council’s ISIL (Da’esh), al-Qaida and Taliban Sanctions Monitoring Team Dr. Hans-Jakob Schindler authored an op-ed, “Cryptocurrencies: The New Age of Terror Financing” highlighting the challenges for regulators and law enforcement agencies to keep up with the rapidly evolving technology.“Anonymity enhancing technologies,” such as encrypted algorithms, mixers, tumblers, or so-called “piracy coins,” make it impossible to see the transaction paths, how much is held in a wallet, or gather information on the identities of the transaction partners—leaving law enforcement unable to effectively crack down on terrorist funding.

To combat potential abuse of cryptocurrencies in the EU, Dr. Schindler argues that there should be a centralized oversight system that utilizes all resources available.“Rather than continuing the competition between law enforcement authorities in EU countries for the best talent while also competing with the private sector for the same limited pool of specialists, it may be necessary to think about alternative models, such as private-public partnerships or the provision of technical investigation services at a central hub, such as for example within EUROPOL.”

In 2020, CEP and Berlin Risk published a joint study, Cryptocurrencies As Threats To Public Security And Counter Terrorism: Risk Analysis And Regulator Challenges, which highlighted the dangers and risks associated with terrorist groups utilizing cryptocurrency to finance extremist activities and warned that it is “essential to increase the level of existing expertise of government agencies and to reduce the coexistence of parallel regulatory responsibilities in the fight against money laundering and terrorism financing, especially in the crypto sector.”

Since then, however, CEP researchers have found that extremist groups and their supporters are increasingly turning to cryptocurrencies. The Base and supporters of the National Socialist Order have requested donations through the cryptocurrency platforms BitCoin and Monero, and pro-ISIS supporters have used chat channels on multiple occasions to encourage the use of cryptocurrencies.