Over the past few years, several experts have voiced concerns that the Islamic State (also known as ISIS) and other terrorist groups could use cryptocurrencies such as Bitcoin as a new funding stream to further their operations. But in spite of these fears, the use of digital currencies among terrorists is not widespread—yet. Neither terrorist financing methods nor cryptocurrency technology is static, however, and the world could soon see the worst-case scenario unfolding. Greater pressure on existing terrorist finance methodscoupled with easier-to-use cryptocurrencies that give users greater anonymity may well lead to a large-scale adoption of the technology by extremists.
At present, cryptocurrencies are hardly a go-to solution for terrorist financiers. Most types afford only limited anonymity, and it is difficult to quickly transfer large amounts of money through these systems. Moreover, there is limited acceptance of digital cash in regions such as the Middle East and North Africa, where many terrorist groups are most active.
Yet as the U.S. Treasury Department and its partners have increasingly denied terrorists access to other parts of the international financial system, new cryptocurrency technologies could provide an attractive alternative. To be sure, gauging whether these new technologies will be adopted, and if so, how quickly, is difficult. The answer depends on a host of unknowns, such as what other technologies are around the corner, how the public uses the new cryptocurrencies, and how useful or safe they prove to be. Digital currencies could be used for general funding; for money laundering; or to pay the personnel, associates, and vendors that keep the terrorist machine running. But there can be barriers to use as well, depending on the type of group and how its operations are financed.