Terrorism is a word that sends shivers to many whenever it is mentioned in any conversation. Terrorists have been responsible for the most heinous and despicable acts of violence of our time. From the September 11th destruction of the New York Twin Towers to the London underground train bombings, the world has constantly faced this threat since then.
In response, governments around the world have united efforts in combating this scourge by enacting laws that pre-empt future terrorist acts. Many such laws include the Anti Money Laundering (AML) as well as Combating the Financing of Terrorism (CFT) provisions.
By identifying and stopping the transfer of money to religious fanatics, authorities have been able to prevent terrorism events. Nevertheless, the problem remains just as much as that of money laundering or tax evasions.
Criminals and terrorists are always trying to find ways to circumvent these regulations and crypto-currencies are identified as one of the many ways. So while Satoshi Nakamoto had pure intentions when he released the whitepaper for Bitcoin in 2009, somehow the narrative was changed.
Those engaged in the fight against terrorism argue that Bitcoin and other crypto-currencies have opened a new funding channel that made their task harder.
Crypto-currencies like Bitcoin are impossible to trace, they offer complete privacy to holders. It is this feature that has created problems for Bitcoin adoption efforts. Most governments and regulatory authorities have refused to give recognition to this privately issued digital currency, in part because it denies them the ability to determine the identity of those using the currency.
Without knowing the identity of those behind the transactions, many have been quick to conclude that terrorists and criminals behind most Bitcoin transactions.
This is how they justify their fight against or opposition to crypto-currencies, a stance supported by the gullible. But just how accurate is this assertion that terrorists are now heavily relying on crypto-currencies to finance their operations?
Well, no one is really in a position to tell that because crypto transactions are private, third parties cannot really tell who is sending or receiving funds. So opposition to Bitcoin is largely based on the assumption that terrorists and money launders favour this currency than actual evidence.
To illustrate, in Europe, a BBC report states that, “Europol estimates that £3-4 billion is laundered using cryptoassets each year in Europe. This remains a relatively small proportion of total funds estimated to be laundered in Europe, however, which stands at £100 billion.”
So even by Europol’s own admission, only a small fraction of funds is believed or assumed to be laundered via crypto-currencies. Apparently money launderers still prefer the traditional channels, fiat money and the conventional financial system. It is a mystery then how opponents of Bitcoin are so adamant that the crypto has become the terrorist’s currency of choice hence it has to be curtailed.
Central banks around the world have issued advisories against use or holding crypto-currencies partly because it is used to finance illicit transactions. Regular financial institutions are forbidden from integrating their systems with crypto exchanges.
Associating of crypto-currencies with terrorism financing somehow blurs on-going efforts explain the actual benefits of using such a medium of exchange. Crypto-currencies can potentially solve problems that have existed for decades.
Take the plight of undocumented immigrants for instance. Every year, millions of people take on the risky adventure of migrating to foreign lands in search of better life.
Those managing to make it often lack identification documents that are recognized by their host countries. This forces them to accept menial jobs that pay the least. As if that is not enough, these migrants will face problems each time they try to send money to families back home.
To use registered or formal money transfer agencies, one has to have government issued identification documents, which is not an option for illegal immigrants. Faced with this situation, undocumented migrants are forced to resort to informal channels, which can be anything from unregistered couriers to friends and family members.
These channels are not only expensive but risky as well; the funds might not reach the intended beneficiary. Therefore the coming onboard of crypto-currencies has been a welcome relief as this gives senders an efficient and more secure option.
Additionally, crypto-currencies like Bitcoin prioritize privacy, there are no cumbersome Know Your Customer (KYC) processes involved. KYC processes are known to be the reason why many remain unbanked or choose to use informal channels.
Clearly, it these attributes that are forcing this economic group to use crypto-currencies when remitting funds. This might explain why the numbers of those using crypto-currencies is increasing but how then this is seen as terrorism financing is quite baffling.
To illustrate, in 2015 millions of migrants from North Africa, the Middle East and Asia reached Europe in search of better economic fortunes. Germany had the highest numbers by far. So when a bigger number of these migrants begin sending money to their respective home countries like Afghanistan, Syria, Mali, Somalia etc, there should be no alarm.
Things will only get murky when a Financial Action Task Force (FATF) report to the G20 notes that suspicious transaction reporting linked to crypto-currencies is rising globally! Such transacting might be seen as suspicious because the receiving countries are blacklisted as terrorist hotbeds.
A spike in crypto remittances from Germany to Syria might be construed as growth in funding of terrorist groups when in fact it is money sent to support those that stayed behind.
Important innovations should not be curtailed simply because terrorists or criminals are using the same. It is imperative to remember that terrorists or criminal gangs will always be there and they will still use the social media that we love so much, the latest IPhone or traditional financial systems.
It is the job of those tasked with fighting such vices to find ways of achieving this (combating terrorism and money laundering) without inconveniencing those who want peace and are law abiding. Also we need to assure entrepreneurs that their efforts will be rewarded instead of being punished. That way we will continue to enjoy new ground breaking innovations.
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