Chainalysis Reveals the True Extent of Cryptocurrency’s Impact on Terrorism Financing

The number of stories claiming that terrorist groups like Hamas, Hezbollah, and the Palestinian Islamic Jihad have been actively using cryptocurrencies for their financial activities has increased recently. These stories have sparked serious worries about the role that virtual currencies play in supporting terrorism, particularly in places like the Middle East.

Chainalysis, a company that specializes in blockchain forensics, has recently thrown light on this issue by pointing out errors in the measurements and analysis around the usage of cryptocurrencies in terrorism funding. The analytics firm has discovered some crucial insights as part of its continuous efforts to enable the freezing and seizure of digital assets connected to terrorist groups.

Terrorism Financing, A Fraction of an Already Small Illicit Crypto Market

Chainalysis underlines that the amount of bitcoin transactions classified as unlawful is a very small portion of the overall transaction volume. The business notes that when it comes to raising, storing, and moving money, these firms continue to prefer using conventional channels like banking institutions, hawalas, and shell corporations.

The use of faulty methodology to gauge the contribution of cryptocurrencies to the funding of terrorism is one of the main problems identified by Chainalysis. Actually, because of the inherent openness of the blockchain technology that powers cryptocurrencies, they are less suited for illegal operations. These organizations find it difficult to maintain their secrecy while carrying out their financial activities due to this openness.

Chainalysis delves further into the function of service providers in these exchanges, such the Gaza-based company Buy Cash. The U.S. Treasury Department recently sanctioned this business, which provides services for bitcoin trading and money transfers. By describing a wallet linked to terrorism funding and its counterparties, which include about 20 questionable service providers, Chainalysis further clarifies this point. Notably, eight of these suppliers also cooperated with Garantex, a Russian exchange suspected of transferring money to Gaza-based organizations.

A significant caution is provided by Chainalysis, though: not all monies received by service providers are necessarily connected to terrorist activity. It can be difficult to determine the precise source and use of the funds when people transfer bitcoin to an address that a service provider uses since these assets are frequently pooled and mingled with those of other users.