Following the recent attacks in Europe, Bitcoin has been linked to the Islamic State of Iraq and the Levant (ISIL). According to American Banker, FinCEN Director Jennifer Shasky Calvery noticed the trend, "There has been public reporting of connections of ISIL promoting the use of bitcoin and virtual currencies as a means of moving and raising funds.”
In its recently released publication, the European Union Institute for Security Studies states that ISIL has been using bitcoin to supply its military force with weapons, including assault rifles and missiles, on the Dark Web through the Tor network.
“While the EU boasts some of the toughest firearms regulations in the world, procuring guns within its borders is still possible, partly thanks to the Dark Web. EuroGuns is an online marketplace which deals in all kinds of weapons and sends them via regular mail. AK-47s – the type of assault rifle used by the Kouachi brothers in the Charlie Hebdo attacks – are sold for $550 each on EuroArms, one of the largest online black markets for purchasing weapons.”
- European Union Institute for Security Studies
Ghost Security Group (GSG) offered a clear and differing opinion on the group's use of virtual currencies. “There is zero connection between Paris attackers and cryptocurrencies.”
However, ISIL militants have been developing an independent financial system based on the gold dinar, silver dirhams, and copper coins, in an effort to “emancipate itself from the satanic global economic system.”
“I think we are also very focused on the traditional means of moving funds so I think we need to keep our focus on both areas."
- Jennifer Shasky Calvery, FinCEN Director
The allegations of ISIL using bitcoin emerged after the arrest of Ali Shukri Amin in August, a young American who provided explicit material support to ISIL, including steps to setting up bitcoin accounts, receiving donations, and securing funds.
“[Bitcoin] is a digital only currency created through a process called mining. A mining machine is a powerful computer that processes recent transactions sent through the Bitcoin network, and validates them.”
- Ali Shukri Amin
Amin further explained the importance of anonymizing wallets, which are used to distort the pathway of bitcoin transactions to make them as untraceable as possible.
While bitcoin is often referred to as pseudo anonymous, the network is based on a distributed ledger that is completely transparent and publicly accessible. All transactions on the Bitcoin blockchain are traceable unless the origin and pathway of the transactions are distorted, using platforms like Dark Wallet, which discreetly sits on web browsers to make transactions nearly untraceable.
“Dark Wallet is a new Bitcoin wallet designed to completely hide the activities of it’s users, providing total online anonymity. It eliminates government regulation that tries to identify bitcoins through associating them with an individuals wallets. It mixes all transactions together into an indecipherable mess, making Bitcoin untrackable,” said Amin.
Quickly after the publication of his proposal Amin was arrested, and he has since been sentenced to 11 years in prison. Since then, law enforcement has continued to claim that Amin had helped ISIS with innovative tools and software, needed to ensure the anonymity of the terrorist group.
“Ali Shukri Amin is a young American who used social media to provide material support to ISIL,” said Assistant Attorney General Carlin. “ISIL continues to use social media to send their violent and hateful message around the world in an attempt to radicalize, recruit and incite youth and others to support their cause. More and more, their propaganda is seeping into our communities and reaching those who are most vulnerable. The Department of Justice will continue to use all tools to disrupt the threats that ISIL poses, and our efforts will be furthered by parents and other members of our community willing to take action to confront and deter this threat wherever it may surface.”
Russian president Vladimir Putin joined the conversation recently, announcing on national television that it is not bitcoin, nor their gold-based currency system, that have been funding ISIL militants. Putin stated that ISIL derives the majority of its revenue from oil reserves, which they have illegally seized in both Syria and Egypt.
During his discussion on financial systems and the operations of ISIL, Putin claimed that the mainstream media has turned their attention to innovative systems like bitcoin, while it was, and always has been, the US government that built and funded ISIL.
“Who on earth armed the Islamic State of Iraq and the Levant? Who armed the Syrians that were fighting with Assad? Who created the necessary political or informational climate that facilitated this situation? Who pushed for the delivery of arms to the area? Do you really not understand as to who is fighting in Syria? They are mercenaries, mostly,” Putin questioned.
“So arm them and pay them a certain amount of money, i even know what these amounts are. So they fight, they have the arms, you can’t get them to return the weapons of course, at the end and then they discover elsewhere pays a little more so they go fight there. Then they occupy the oil fields, wherever in Iraq, in Syria. They start extracting the oil and this oil is purchased by somebody. Do you believe US does not know who is buying it? Is it not their allies that are buying oil from ISIS?”
- Vladimir Putin, President of Russia
Information security expert, tech-entrepreneur and author Andreas Antonopoulos emphasized a similar point recently. “US and allies funded ISIS against Assad, provided weapons, provided training and now will blame bitcoin for the blowback.”
Aside from the remarks and discussions from political and entrepreneurial figures, European Union countries and justice ministers are planning to work with the EU Commission to implement strict regulations and policies to discourage the use of bitcoin in illegal marketplaces and on the Dark Web.
The point was clarified by the Council of the EU, in a recent invite for proposals to strengthen, harmonise, and improve the powers and cooperation between European member state Financial Intelligence Units. One of the main goals is to ensure fast access to information, in order to enhance the effectiveness and efficiency of the fight against terrorist financing.
The invitation is for proposals that are inline with Financial Action Task Force Recommendations, “to strengthen controls of non-banking payment methods such as electronic/anonymous payments, money remittances, cash-carriers, virtual currencies, transfers of gold or precious metals and pre-paid cards in line with the risk they present”