How Crypto Deregulation Could Empower Terrorism and Extremism

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President-elect Donald Trump’s campaign promises to deregulate cryptocurrency have sparked warnings from experts about the potential consequences for terrorism and domestic extremism financing. Cryptocurrency, already a preferred method for funding illicit activities, could see increased use by extremist groups and terrorist organizations under a less regulated framework.

The Risks of Deregulating Cryptocurrency

Cryptocurrencies have gained popularity among extremist groups for their ability to bypass traditional financial institutions and avoid detection. Unlike traditional currencies, cryptocurrencies like Bitcoin and Monero allow anonymous transactions, making them attractive for those seeking to fund illegal activities.

Monero, in particular, is favored for its untraceability. Extremist groups, such as neo-Nazi organizations and pro-Islamic State propagandists, have already turned to Monero for fundraising efforts. The Counter Extremism Project reports that these groups solicit donations via cryptocurrency wallets that can be easily shared online, enabling global supporters to contribute without exposing their identities.

Jessica Davis, a former Canadian intelligence official, highlights the growing threat: “Any loosening of regulations on crypto—or even the perception of loosening—will likely increase its use among extremists.”

Extremist Groups’ Use of Cryptocurrency

On Election Day, neo-Nazi group The Base solicited donations in cryptocurrency to fund military-style training and equipment purchases. Their transparent appeals for funds to acquire items like ammunition, drones, and tactical gear underline the ease with which groups can crowdfund through decentralized digital currencies.

Pro-Islamic State groups have similarly embraced cryptocurrencies, not only for fundraising but also for disseminating propaganda. Platforms offering advice on purchasing untraceable currencies like Monero have proliferated in extremist circles.

Trump’s Changing Stance on Cryptocurrency

Donald Trump once dismissed cryptocurrency as a “scam against the dollar.” However, during his presidential campaign, he reversed his position, courting donations from crypto-friendly Silicon Valley tech moguls. Reports indicate that a pro-Trump political action committee received over $7 million in cryptocurrency donations between June and October 2024.

Experts argue that this shift could embolden extremists, as Trump’s deregulatory agenda aligns with their interests in maintaining anonymity and circumventing financial oversight.

The Broader Implications of Cryptocurrency Deregulation

Deregulating cryptocurrency could undermine existing anti-money laundering (AML) and counter-terrorism financing (CTF) measures. Cryptocurrencies are not inherently illegal, but their misuse by bad actors poses significant risks to national and international security.

The Financial Action Task Force (FATF) has repeatedly emphasized the need for robust crypto regulations to prevent illicit use. Countries worldwide have adopted varying levels of oversight, with some requiring identity verification for crypto transactions to deter misuse. A rollback of such measures in the U.S. could weaken global efforts to combat financial crimes.

Furthermore, cryptocurrency deregulation could stifle innovation by creating a perception that the industry is synonymous with illicit activities. Legitimate businesses leveraging blockchain technology for positive applications might struggle with reputational damage as unregulated markets invite criminal exploitation.

The Call for Balanced Regulation

Experts stress the importance of balanced regulation to mitigate risks without stifling innovation. Strict AML and CTF measures are essential to preventing the misuse of cryptocurrencies, but they must be designed to allow the technology to thrive responsibly.

As Trump’s administration considers sweeping deregulation, it faces mounting pressure from lawmakers, security experts, and international bodies to ensure that any changes do not inadvertently empower extremists or terrorists.

Conclusion

The potential deregulation of cryptocurrency under President-elect Trump’s administration raises significant concerns about its use in financing terrorism and extremism. While the technology offers tremendous benefits, its unregulated use could exacerbate security threats and hinder efforts to combat financial crimes.

The debate underscores the need for thoughtful policies that balance innovation with oversight, ensuring cryptocurrencies are used responsibly while safeguarding against their misuse.

Source: AlterNet