Chainalysis: Crypto Use by Terrorist Groups is Small, Traditional Methods Still Preferred

Leading blockchain analysis firm Chainalysis has released a report dispelling some of the hype around cryptocurrency being used to finance terrorism. The report provides data showing these claims are largely inaccurate.

According to Chainalysis, transactions associated with terrorist groups account for just 0.05% of all cryptocurrency activity from 2021 to 2022. Furthermore, the total value of crypto transactions linked to terrorism declined substantially to around $376,000 in 2022.

Chainalysis notes that some high-profile cases like the bitcoin funding campaign for Hamas grab media attention. However, cryptocurrency still represents a very small share of terror financing compared to traditional methods.

Terrorist organizations strongly favor cash, banks, money services businesses, front companies, and charities to raise and move funds discreetly. These legacy options make it easier to conceal the sources and destinations of terror financing. Cryptocurrencies, in contrast, leave transparent and permanent transaction records in most cases.

Sophisticated blockchain analytics tools from firms like Chainalysis allow exchanges, banks, and law enforcement agencies to trace illicit transactions. This makes widespread terrorist use of cryptocurrencies more challenging.

However, Chainalysis cautions against complacency. As cryptocurrency adoption grows globally, its use by terrorist groups could increase and require vigilant monitoring. Robust compliance standards and intelligence sharing between the public and private sector can mitigate the risks.

But for now, cryptocurrency has yet to become a major avenue for terror financing according to Chainalysis data. Claims of widespread terrorist crypto use appear overblown given their ongoing heavy reliance on fiat currencies and traditional financial networks.

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