Crypto is a ‘Poor Form of Money’ for Terrorists, Congressional Hearing Concludes

The U.S. Congress Subcommittee on Terrorism and Illicit Finance has discussed various methods of terrorism financing with cryptocurrency, according to an official press release on the U.S. House of Representatives Financial Services Committee September 7.

In order to monitor threats and methods of terrorist financing, the hearing considered major means of transferring funds by terrorists, including traditional financial institutions and semi-formal methods, such as the hawala exchange system, as well as cryptocurrencies.

However, while al-Qaeda, the Islamic State, and other terrorist groups have all attempted to raise funds through crypto, they have not had great success, as Congress concluded in the meeting.

Yaya Fanusie, director of analysis for the Foundation for Defense of Democracies (FDD) Center on Sanctions and Illicit Finance, stressed that most terrorists, especially those that serve on “jihadist battlefields,” are currently living in environments where crypto is not operable, which means that fiat use is preferable for buying goods.

In his testimony, Fanusie pinpointed fiat money as the most anonymous method for funding, claiming that it is very popular among terrorists.

While Fanusie stated that crypto is a “poor form of money for jihadists” and “cold hard cash is still king,” according to a Forbes article, he still acknowledged that “there are multiple examples of terrorist cryptocurrency funding campaigns.”

The expert further stated that in order to combat the potential successful use of crypto fundraising campaigns by terrorists, the U.S. government bodies that are responsible for terrorist finance investigation should become more skilled in analyzing cryptocurrency transactions. Fanusie noted:

“By preparing now for terrorists’ increasing usage of cryptocurrencies, the U.S. can limit the ability to turn digital currency markets into a sanctuary for illicit finance.”

At this point, Fanusie appeared to recommend that the authorities should focus on minor crypto exchanges that trade alternative tokens or “privacy coins” instead of major exchanges that have significantly boosted their anti-money laundering (AML) and know-your-customer (KYC) policies over the past few years.

Earlier this year, risk management giant LexisNexis partnered with crypto exchange Blockbid in order to introduce security solution for exchanges dubbed “Trade with Confidence,” which intends to prevent terrorism financing, among other illicit activities.

In January 2018, Rep. Ted Budd (R-NC) of the House Financial Services Committee introduced a bill that aims to fight terrorism by offering rewards for information that leads to convictions of cryptocurrency-supported terrorism.