Cryptocurrencies and their links to the crime world

Cryptocurrency and its connection to crime

The euphoria of the crypto economy’s rise -in the eyes of a few -seems to have hidden behind it, an ominous possibility.

The possibility of digital assets and blockchain improving lives by breaking down financial barriers is how they caught the world’s attention. However, the possibility of criminal use, and the funding of terrorist organizations is one worth looking into.

crypto terrorism, crime world

Right from the beginning of the ICO boom, the rewards came with very real risks. Many investors fell victim to regular scammers, taking advantage of unsuspecting token buyers before making away with the loot (usually in ether).

However, the potential for cryptocurrency aided wrong-doing does not end there.

How can criminal organizations exploit cryptocurrency to suit their own ends?

According to a report by Cipher Trace Cryptocurrency Intelligence, an estimated $1,7 billion dollar’s worth of cryptocurrency stolen from investors over the course of 2018, hacking is one of the biggest risks faced by the everyday investor.

“These numbers only represent the loot from crypto crimes that CipherTrace can validate; we have little doubt that the true number of crypto asset losses is much larger,” 

CipherTrace CEO, Dave Jevans

According to the findings of the report, it is rather concerning that a staggering $1 billion of the rough total was stolen from exchanges. Further, the sheer volume of snatched tokens in 2018 is 3.6 times greater than that of 2018.

Right from the onset of 2018, cryptocurrency crime related headlines were dominated by thefts that involved hacking, the most publicized method being SIM-swapping.

In this method, the hacker will remotely assume control of the victim’s mobile device in order to gain access to their credentials. Thereafter the hacker will access the victim’s wallets and exchange accounts to commence with the process of looting. This method was regarded as a top priority threat during 2018.

“These aren’t street thugs — these are people who have master’s degrees in computer science. We’re starting to see more organization in the space with professional gangs bankrolling computer scientists.

CipherTrace CEO, Dave Jevans

As data from a separate report by Chainalysis -a firm that monitors cryptocurrency transactions and assists hedge funds in Anti Money Laundering (AML) compliance- points out, that the greater portion of the havoc wreaked on exchanges was the work of two groups.

To get away with the take, the hackers -said to be responsible for about $1billion dollar’s worth of damage- would generally funnel the stolen assets through an intricate network of wallets and exchanges. The groups would then go quiet until public interest died down before cashing out.

“When we look at these patterns it’s clear these are large, sophisticated hacking groups,”

Philip Gradwell, the Chief Economist at Chainalysis

For groups participating in syndicated criminality, cryptocurrencies may present a far less cumbersome means to transacting and laundering illicit funds.

According to the head of Europol, Rob Wainwright, cryptocurrency laundered funds account for 3-4% of Europe’s yearly criminal income. This is a figure between $4.2 billion and 5.6 billion dollars that is whitewashed through cryptocurrency annually. Though miniscule at this point, Europol and other agencies expect a steady rise in these figures overtime.

The possible use of cryptocurrencies by terrorist organizations

It has been noted over the resent years that the benefits offered by cryptocurrencies may be attractive to terrorists too.

Firstly, a cryptocurrency like Bitcoin offer a certain degree of anonymity, but then there are the cryptocurrencies like Monero, ZCash and Dash, which were specifically designed for a high degree of user anonymity. It is easy to see what authorities might be worried about in this regard.

Second, is the fact that crypto transactions are executed over the specific cryptocurrency’s distributed ledger, middle men like banks, that have to report suspicious transactions, have to a large degree been removed from the equation. This theoretically offers terrorist organizations an added layer of security when transacting.

“Illicit actors adopt new technologies earlier than the broader public. When paper checks, credit cards, and PayPal each emerged, criminals exploited them early on.”

Yaya Fanusie, a high-ranking analyst at the Foundation for Defense of Democracies.

Though limited to only a few cases, like the reports that came out of Syria in 2014 suggesting that Islamic state had used cryptocurrencies like Bitcoin for long range transactions. Or the 2017 case of a New York women who converted $62 000 into cryptocurrency, thereafter, sending the funds through China, Pakistan and Turkey in order to fund ISIL.

Fanusie remains adamant that this risk factor be looked into,

“There are enough case studies of jihadist groups experimenting with cryptocurrencies to suggest that law enforcement and the intelligence community must prepare for terrorists to try to exploit digital tokens as the technology spreads.

Yaya Fanusie, a high-ranking analyst at the Foundation for Defense of Democracies.

How would regulators and law enforcement go about monitoring these threats?

It may be a point of interest that 95% of laundered crypto coins were tracked back to darkweb based market places like the now defunct SilkRoad and Alpha Bay. This is according to research conducted by Elliptic and the Center on Sanctions and Illicit Finance.

For authorities with a goal of tracking and nabbing crypto crooks, there are techniques like “clustering”.

One such tool for this is Bitfury’s Crystal. This software tracks transactions accross the Bitcoin and Bitcoin Cash blockchain and can identify which wallets belong to the same user. This tool could prove invaluable to law enforcement and regulators tasked with monitoring the cryptocurrency market.

Not all are sold though

There are some who argue that cryptocurrency is a poor form of money for terrorist organizations. The logic here is anchored on the fact that blockchain technology’s immutability would only result in the creation of more paper trails that would lead authorities to the terrorists.


The tug of war between outlaws and the authorities is one that is millennia in existence. The advent of cryptocurrency is merely an evolution of an age-old feud and a change of the battlefield. As for now, the investor’s main source of comfort is to remain vigilant.


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