How Blockchain Can Solve the Curious Case of Cryptocurrency and Terrorism
The transformation of terrorism from “dynamite to metaverse” and “AK-47 to virtual assets” is a matter of concern, Union Home Minister Amit Shah said last week. He was speaking at the Third No Money for Terror (NMFT) Ministerial Conference on the topic of counter-terrorism financing. “There is an increase in the use of virtual assets like cryptocurrency and we need to understand the patterns of these darknet activities and find their solutions,” he added.
Although government skepticism towards digital currency is nothing new, especially thanks to the latest FTX scandal, Indian players believe that the right set of regulations can further contribute to transparency. “Cryptocurrency is extremely transparent, much more than the traditional monetary economy, and this is well documented. Moreover, cryptocurrency is the worst tool to launder money,” Rajagopal Menon, VP of WazirX, a cryptocurrency exchange, told FE Blockchain.
Earlier in October, when the United Nations (UN) Counter-Terrorism Committee (CTC) held a meeting in New Delhi, similar remarks were made about how cryptocurrency funds terrorism. “Terrorist groups that have been shut out of the formal financial system are slowly turning to crypto to finance their heinous activities,” said Svetlana Martynova, United Nations (UN) Counter Terrorist Financing Coordinator, at the time.
Also Read: How Cryptocurrency is Funding Terrorism Across the Globe
Additionally, according to a report by Chainalysis, a blockchain analytics firm, 0.15% of all cryptocurrency transactions in 2021 were associated with illicit activity. “Decentralized finance (DeFi) appears to be an option for keeping track of digital payments. In order to ensure complete protection and security, “Zero Trust Architecture” (ZTA), a cybersecurity paradigm, is the need of the hour and this can be built on top of the layer 7 cybersecurity paradigm” , Dileep Seinberg, Founder and CEO, MuffinPay, a crypto bill payment company, said.
It should further be noted that countries such as the United States, Singapore, and Australia have raised similar concerns regarding digital assets. Earlier this month, the Australian government set up cryptocurrency divisions to maintain transaction records.
According to Swapnil Pawar, founder of Newrl, a decentralized finance company, the identityless Web3.0 is susceptible to being used for terrorist financing and money laundering purposes. “What we need to make Web3 secure is identity at the blockchain protocol layer. We shouldn’t confuse privacy with anonymity – there are clever ways to maintain privacy while being identifiable,” he added.
Furthermore, according to a report by Statista, the value of crypto lost to security threats increased ninefold between 2020 and 2021. The graph below shows the total value of cryptocurrency lost and recovered from a robbery and other attacks between March 2020 and February 2022.
According to industry experts, the immutable and public nature of blockchain makes cryptocurrency a poor choice for money laundering because it allows law enforcement to discover and track money laundering a lot. easier than cash transactions. “DeFi holds tremendous promise as a technology – to improve financial inclusion and enable access for those who are currently excluded from traditional finance. We need to promote safe DeFi to democratize access to credit, reduce friction in financial services and improve the enforceability of contracts,” added Pawar.
Also Read: Can Cryptocurrency Help Struggling Economies Beat Inflation
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