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Terrorist Financiers in Southeast Asia Switch to Crypto Transactions

Cryptocurrency transaction tracking has grown significantly over the past few years. In the Philippines, a new research group is employing it to root out terrorist funders.

This week, the Philippine Institute for Peace, Violence and Terrorism Research (PIPVTR) published a report in which it confirmed that terrorist financiers and groups across Southeast Asia have begun making cryptocurrency transactions. 

Jumping Between Exchanges to Evade Tracking

As the report explained, the institute has successfully found cryptocurrency transactions conducted by several parties affiliated with the Islamic State. These financers are also reportedly using the funds to bankroll the activities of groups such as Jamaah Ansharut Daulah and the Mujahideen Eastern Timur in Mindanao.

Going deeper, the institute explained that the terrorists have been laundering money using crypto assets. The operation reportedly consists of two stages. In the first, cryptocurrencies with “suspicious origins” move across several crypto exchanges. This way, the terrorists can confuse trackers and funnel money from place to place. 

Phase two is where the cycle ends. As the institute explained:

 “The second phase refers to an exchange of these crypto-assets into fiat money which, then, returns the funds to the legal money cycle. In crypto-only exchanges, cryptocurrencies can be exchanged with one another.”

The institute goes on to warn of extra-regulatory crypto use from terrorist groups. Given that the country doesn’t have robust crypto guidelines, these criminals could use the digital assets freely.

It further called on government authorities to implement robust Anti-Money Laundering and Countering-Terrorist Financing procedures for cryptocurrencies. Barring this, the governments risk allowing a terrorism spree to grow out of control quickly.

Bitcoin is Losing the Privacy Battle 

Notably, the institute pointed to the use of Monero, one of the most prominent privacy coins in the space. While it didn’t give insights on how significant a role Monero has been playing in the terrorists’ operations, the fact that they’re employing it means that they know Bitcoin isn’t as anonymous as it used to be.

The same sentiment appears to be prominent among Dark Web members – the same people who first started to adopt Bitcoin. Earlier this week, Crystal Blockchain Analytics, a blockchain intelligence and data firm, published a report confirming that Bitcoin transactions on the Dark Web had reduced. 

As the firm explained, the total value of Bitcoin transferred across the Dark Web grew by 65 percent in the first quarter of 2020 over the same period in 2019. While that is good, it also pointed out that transaction volumes themselves had reduced.

Per the report, the total amount received by Dark Web sites dropped from 64,000 BTC in Q1 2019 to 47,000 BTC in Q1 2020. At the same time, the amount of Bitcoin they sent fell from 64,000 BTC in Q1 2019 to 50,000 BTC in Q1 2020.

With more people ditching Bitcoin for, assets like Monero and ZCash – which offer greater privacy – have taken charge.

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