Reports surfaced this past week that the international terrorist syndicate ISIS is holding a multi million dollar war chest in Bitcoin. The articles took their verbal cues from statements made by Hans-Jakob Schindler, director of the Counter Extremism Project, when he pondered if part of $300 million in ISIS’s unaccounted funds were hidden in cryptocurrency.
The image of the world’s most infamous terror cell stashing away $300 million in cyberspace (and using Bitcoin, nonetheless) is scandalous. So of course, in an age of clickbait, juicy headlines about ISIS’s crypto war chest fed curious readers a narrative that had superficial appeal: that dastardly cryptocoin is abetting those nefarious terrorist!
Juicy as it is, it’s not true—at least not entirely. There’s no evidence in Shindler’s comments or his think tank’s research to suggest that ISIS has a significant (let alone a majority) of its funds in Bitcoin, and we actually have research from blockchain researchers that suggest ISIS is not using orange coin toward violent ends.
ISIS and Bitcoin
The media blew Schindler’s comments out of context. Bitcoin blockchain analysis firm Chainalysis discusses how egregiously these statements were misrepresented in a recent blog post.
First off, Chainalysis clarifies in the post that they are just theory without any hard evidence. Schindler said that cryptocurrencies could be “one of the ways” (emphasis mine) ISIS has obscured the $300 million authorities have searched for since 2017; he never said it is the way they are doing it (his phrases is peppered with conditional phrasing because they don’t know for sure).
Hard evidence or not, the media ran with the story to craft the narrative you’d expect from seeing ISIS and Bitcoin in the same sentence: Bitcoin funds terrorism.
“While Schindler’s statement suggests that he does not have hard evidence and is speculating on a theory,” Chainalysis writes, “media sensationalized it into headlines including “Fears missing ISIS millions are hidden in cryptocurrency ready for use as war chest,” “ISIS has £246million Bitcoin war chest to spend on bloody terror comeback campaign, expert warns,” and “ISIS’s $300 million war chest is hidden in Bitcoin, says think tank”.”
Some of the less brash among these articles try to cover themselves by using the same conditionals in Shcindler’s speech, but the headlines (which the majority of web surfers never dive beyond) are attention grabbing and tell the sensational side only.
Chainalysis’ own reporting states that “Schindler’s theory is also highly unlikely,” adding “that most terrorism financing campaigns have raised less than $10,000, indicating limited adoption.”
If ISIS is using Bitcoin to fuel its war machine, then it would need a place to liquidate it, thus “trading volume of regional exchanges and money service businesses would have reflected this flow of funds,” Chainalysis argues.
So Bitcoin is not even “the ideal storage mechanism,” as described by Schindler. Even if it is “unseizable for most governments,” it’s less than “unfindable” as he claims. Chainalysis’ own research and blockchain mapping has sniffed out terror funds before, and using the same data and analysis, they have no reason or evidence to believe that ISIS is holding any significant amount in Bitcoin.
Fool Me Once, Shame On Who?
As CoinCenter communications head Neeraj Agrawal posted on Twitter in reference to how the original story snowballed, “This happens all the time.”
It’s even happened frequently with reports on Bitcoin-funded terrorism, Chainalysis assents, as the blog post points out another instance in 2019 when an ISIS attack was misconstrued as being funded by Bitcoin.
The truth is, terror cells do use cryptocurrency, but its use as a fundraising mechanism is still very nascent—and Bitcoin isn’t as useful for terrorism funding because, as Chainalysis points out, it’s easy to trace and would be difficult for these cells to liquidate.
That doesn’t mean that it’s not part of the strategy. But it’s not the whole hog. ISIS holds (and extracts) funds from various sources: oil, antique trading, cash hoarding, robbery, kidnapping, counterfeiting, and weapon’s selling among many others.
That they would put all (or even multiple millions) of their worth in Bitcoin (when they have no sure fire way of accumulating or offloading it without making noise in the first place) seems pretty far fetched.
But hey, it gets clicks, and that’s what keeps the lights on.