Cryptocurrency, Terrorists and the Best Coins for Criminals
Expecting criminal operators not to make use of cryptocurrency is like expecting a burglar not to make use of a ski-mask.
Cryptocurrency offers a decentralized, accessible path to illegal fund generation, money laundering and liquidity pools, to be used by anyone in any corner of the world, without the oversight of a centralized authority, such as a bank manager.
If the tools are there, then criminals will ultimately make the most of them. This has proved to be the case ever since bitcoin’s inception, where it could mainly be used on the dark web, long before established, reputable real-world vendors ever decided to take notice.
The trend hasn’t slowed – in fact it has flourished, and now a whole host of new coins join bitcoin on the list of coins that dark web vendors will accept for their illicit goods.
At the same time, the rise of cryptocurrency has coincided with the rise of decentralized terrorist networks, and the two look to be inextricably linked from here on out.
Adoption by ISIS
According to a 2016 research paper by Angela S.M Irwin and George Milad, titled ‘The use of crypto-currencies in funding violent jihad’, it has already been shown that terrorists, specifically ISIS, are relying on cryptocurrency to fund their operations, although finding the data isn’t easy. The paper states:
“Although it is difficult to find concrete evidence of large-scale use of Bitcoins and other crypto-currencies by terrorist groups and their supporters, there is strong evidence to suggest that they have been linked to a number of terror attacks in Europe and Indonesia.”
Given the extreme scrutiny which typical financial accounts come under, especially during criminal investigations, it’s no surprise that terrorists are turning to cryptocurrency as a way to outmanoeuvre authorities. The paper continued:
“Supporters of Islamic State of Iraq and Syria (ISIS), jihadists and terrorist organisations are actively looking to and promoting the use of new and emerging technologies, such as Bitcoin, to mitigate some of the risks associated with traditional fund transfer methods.”
It’s not hard to understand the attraction, and using cryptocurrency appears to be a growing trend in terrorist hotspots. The paper summarizes the situation as so:
“Some websites associated with terrorist organisations have started to collect donations in Bitcoins. Many Bitcoin ATMs and Bitcoin exchanges are located in countries that have seen significant numbers of foreign fighters join ISIS in the Middle East and are also positioned in countries that have seen increased risk of terror attack. These present a significant risk because they allow for the seamless, anonymous transfer of funds to and from terrorist groups and their supporters.”
The paper focuses specifically on bitcoin, presumably since it makes up the greater bulk of overall market transactions; however there are other coins which are actually favoured by those engaging in illicit activities to a much higher degree than bitcoin.
Privacy Coins and the Dark Web
Internet research group, Recorded Future, recently published this report on the most common cryptocurrencies used for illicit or unregulated activity on the dark web.
One of the report’s findings was that while bitcoin was still the most common accepted payment method among vendors, it is not the cryptocurrency that dark web users actually favour the most.
The report polled members of a prominent dark web hacking forum, and found that the currency most favoured was, unsurprisingly, Monero.
Monero has gained a reputation as the most private of the privacy coins since its launch in 2014, and has proved the most resistant to the prying fingers of legal authorities.
Following closely in second place is Dash – a crypto payment platform which undoubtedly gains popularity for its ease of use and low fees.
Besides the privacy concerns of individuals buying illegal goods on the dark web, the biggest reason for bitcoin’s decline in popularity is its transaction-to-fee ratio which makes it completely unsuited for smaller, micro-payments.
However, as you can see from the following image, there is a gap between the currencies favoured by criminals and the currencies actually accepted by vendors. As the image illustrates, 100% of vendors on the dark web accept bitcoin.
Following closely in second place is Litecoin, which appears on 30% of vendors’ accepted currency list. Dash comes in at a close third with 20%, while the criminal’s favourite, Monero, only finds use on around 6% of dark web services.
Interestingly, a split appears between Eastern-European and English-speaking regions, with Litecoin and Monero being favoured by those two groups respectively.
The paper quotes a prominent Russian hacker on one of the forums they surveyed as describing how it was the black market which propelled Bitcoin to prominence in the first place, and that the trend will continue with some of the newer coins. He said (translated):
“Do not reinvent the wheel – just look where Bitcoin came from. It came from the darknet, and now U.S members are gradually migrating to Dash, while those in Europe have moved to Monero.”
This sentiment was echoed by another forum user, whose comments bring to mind the oft-quoted rule about how the porn industry is the ultimate arbiter of successful video formats:
“As a rule, whatever [currency] is used by the drug dealers will become a mainstream currency, and they have been actively switching to Dash. There are not so many carders are there are junkies.”
The question at this point isn’t whether such activity is taking place, but what the crypto community plans to do to resolve it.
That’s assuming they decide that it needs to be resolved. We’ve already seen instances of crypto platforms in the past refuse to meddle with their code in any way, even in the event of a major hack.
Such dedication to the ideals of cryptocurrency is one of the strengths of the community, but is also the very things which open up the playing field for criminal utilization.
Regulators may move in eventually, but by that time there will likely be another dozen privacy coins which can step in to carry on the process.
Featured image courtesy of Shutterstock.