Policymakers in the US and Europe have long worried that terrorist groups might use cryptocurrencies to fund attacks and operations. Stateless digital money that can’t be blocked certainly sounds like a dangerous proposition. Zoobia Shahnaz, a Pakistani-American woman, helped feed that narrative when she was indicted for laundering money through bitcoin in December 2017. She pleaded guilty to “providing material support to ISIS” in November.
Seeing the words “bitcoin” and “ISIS” so close together may seem alarming. However, if you look closely, Shahnaz didn’t send bitcoin to ISIS. She bought bitcoin using credit cards and converted it into US dollars. Then, she wired those US dollars to the terrorist group through “shell entities” in Pakistan, China, and Turkey. That’s a critical distinction, and it demonstrates that using crypto as currency is a hassle—even for terrorists.
A European Parliament study found last year that terrorist groups rarely use crypto. “In their current form and at current levels of adoption, [virtual currencies] may not present terrorist actors with substantial advantages over other methods of funding and financing they already utilise.” Like civilians, terrorists have better options. Traditional, government-issued currency offers a stable medium of exchange. Precious stones and metals are other alternatives, says the OECD. These are reliable forms of money, with risks that are well understood.