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A new report from a British defense and security think tank, the Royal United Services Institute (RUSI), reveals that reports of terrorism financed through Bitcoin are greatly exaggerated.
‘Treating Cryptocurrencies as an Exceptional Threat is a Misleading Impression’
RUSI consultant David Carlisle said that there is a lot of attention given to the possibility of bitcoin being used as a terrorist financing tool but “overreaction could stifle an important new financial technology”. He noted that there are very few instances where cryptocurrencies have been used for terrorism. However, the prospect of utilizing virtual currencies for terrorist activity has produced a significant response from many governments. Believing the response to be sensationalized, he states that:
Treating cryptocurrencies as an exceptional threat creates the misleading impression that more conventional financial products are not already equally, or more, vulnerable to terrorist exploitation.
The RUSI contributor says that it is not yet clear whether cryptocurrencies will be used in terrorist financing. At the moment, Carlisle explains that terrorists already have a vast array of existing “financing streams, which show little sign of drying up”. Additionally, another RUSI report reveals that lone actors and small cell terrorists are using financial services such as student loans, payday loans, welfare benefits, and cash.
Traditional Financial Services are Harder to Track than Bitcoin
Furthermore, law enforcement has a difficult time investigating terrorists using traditional mediums of exchange. Cryptocurrencies like bitcoin, for example, are not entirely anonymous, as most blockchains are openly available to the public, explains Carlisle.
“Cryptocurrencies are also not necessarily impenetrable fortresses of secrecy — With bitcoin, which is by far the most widely used cryptocurrency and relies on a public ledger — the blockchain — to record transactions, law enforcement agencies have a number of methods for uncovering illicit activity”, Carlisle’s report details.
‘Countries Should Pursue a Sensible Approach’
Carlisle believes that cryptocurrencies are an innovative force and “overreaction and panic in this early stage in cryptocurrencies’ history would be misguided”. The report explains that Bitcoin could reduce the costs typically found at traditional payment providers and offer a better form of financial inclusion to citizens worldwide. The RUSI report states: “Virtual currencies, therefore, offer governments a test case in harnessing the promise of technological innovation while also managing financial crime risks that are still only taking shape”.
“Countries should pursue a sensible approach — Countries should take the time to monitor and assess the effectiveness of new regulation before rushing into further action”, Carlisle concludes in his paper.
What do you think about governments overreacting towards Bitcoin and terrorist financing? Let us know in the comments below.
Images courtesy of Pixabay and the RUSI website.
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