Crypto’s role in terrorist financing may be exaggerated by some reports According to Chainalysis
Crypto analytics firm Chainalysis said on Wednesday that it has received many questions about how terrorist groups use cryptocurrency, following the recent Hamas attack on Israel. However, it said that some reports may be inflating the metrics and using “flawed analyses” to measure the extent of crypto’s involvement in terrorist financing.
According to Chainalysis, most terrorist organizations still rely on traditional methods, such as financial institutions, hawalas, and shell companies, to raise, store, and transfer funds. Crypto-based crime is a very small portion of the overall illicit activity in the cryptocurrency ecosystem, it said.
Chainalysis also explained how to analyze the volume and flow of terrorism-related funds, by distinguishing between the funds directly controlled by a terrorist organization and the service providers that facilitate their movement. It said that some recent estimates may have included all the funds that went through certain service providers that had some links to terrorism financing, even if most of those funds were unrelated.
For example, Chainalysis said that out of $82 million worth of cryptocurrency transactions that some reports attributed to terrorism financing, only about $450,000 came from a “terror-affiliated wallet”. It said that it would be incorrect to assume that all the transactions involving the suspected service provider were related to terrorism.