Anika Begay
In a surprising turn of events, the Islamic State (IS) group is now promoting the use of cryptocurrencies to support its terrorist operations, as long as they comply with the principles of Sharia law, a new report has revealed.
The research, compiled by the United Nations Sanctions Monitoring and Analytical Support Team, shows that Islamic State affiliates are demanding Sharia-compliant controls for the digital assets they increasingly rely on to support their operations.
This is a significant change, as Sharia law has always been against cryptocurrencies. The UN report further highlights the extensive guidance IS offers its associates on cryptocurrency transfers. To enable these transactions, the terrorist group has even created specialized channels on the Telegram messaging service, such as CryptoHalal and Umma Crypto.
Sharia Compliance with Blockchain
Cryptocurrency has long been at odds with Sharia law, the religious law derived from Islamic beliefs. The distributed nature of digital assets and their widespread use for gambling and other illicit activities have made them incompatible with Sharia values in the past.
The UN assessment, however, suggests that IS is now seeking compromises to allow cryptocurrencies to be more Sharia-compliant. Stricter rules and monitoring could help ensure that the money is not used for illegal activities or to support terrorism.
Total crypto market cap at $2.16 trillion on the daily chart: TradingView.com
Ramifications for the cryptocurrency sector
The Islamic State’s push for a Sharia-compliant cryptocurrency could have major effects on the entire bitcoin market. There could be a greater demand for additional control and monitoring of the cryptocurrency ecosystem if more terrorist groups and other illegal entities attempt to use digital assets.
Image: GV Wire
More stringent know-your-customer (KYC) and anti-money laundering (AML) policies may be required of cryptocurrency exchanges, wallet providers, and other service providers to prevent their platforms from being used to finance terrorism. This could lead to increased compliance costs and possibly limit the availability of cryptocurrencies to legitimate consumers.
A worrying development
The alarming growth in the Islamic State’s demand for Sharia law concessions for cryptocurrencies underscores the continuing attempts by terrorist groups to use digital assets for their nefarious purposes. Regulators, law enforcement, and industry players will be especially important as the cryptocurrency sector develops, helping to reduce the dangers of terrorist financing and other illegal activities.
The UN study reminds us of the need to maintain a strong and secure cryptographic environment that is resistant to misuse by malicious actors.
Featured image from Spiegel, chart from TradingView
