Debunking Overblown Claims on Crypto and Terrorism Financing

blockchain.news:

In light of the recent terrorist attack in Israel orchestrated by Hamas, Chainalysis, a blockchain analysis company, addresses the misconceptions surrounding cryptocurrency's role in terrorism financing in a blog post dated October 18, 2023. The analysis reveals that terrorism financing represents a minuscule portion of the already marginal illicit cryptocurrency transaction volume. While terrorist groups do utilize cryptocurrencies, they predominantly rely on traditional fiat-based financing channels like financial institutions, hawalas, and shell companies.

Blockchain technology, known for its inherent transparency, renders cryptocurrency less suitable for illicit activities, including terrorism financing. This transparency enables government and private sector entities equipped with blockchain analysis tools to collaboratively identify and impede fund flows, a feat challenging to achieve with traditional value transfer methods. Chainalysis particularly discusses the common pitfalls when analyzing terrorist fund flows on the blockchain, especially concerning service provider identification and tracing.

Two essential aspects form the crux of analyzing terrorism-related fund flows: quantifying the funds directly held by terrorist organizations, and identifying the service providers facilitating fund movements. Instances of terrorism financing often involve service providers like money services businesses, with the recently sanctioned Gaza-based business, Buy Cash, cited as an example. These service providers handle fund volumes larger than a typical individual yet smaller than a standard exchange, resembling over-the-counter (OTC) brokers or street-level money businesses like hawalas to varying extents.

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