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Improve the anonymity of cryptocurrency.
Anonymity is an important attribute that distinguishes cryptocurrency from traditional financial currency; it allows users who use cryptocurrency to hide their identity, thus hindering the tracking and monitoring of judicial institutions. With the development of information technology, the anonymity of cryptocurrencies has improved. Taking Bitcoin as an example, users of crypto currency hold the private key used in the transaction, allowing the transaction to proceed while concealing the user’s personal identity. In addition, crypto- currency developers often use a variety of means to enhance anonymity, such as mixing a variety of cryptocurrencies, confusing IP addresses, and hiding currency ownership. The use of these means significantly improves the anonymity of crypto-currencies. For example, Monero, a more private currency than Bitcoin, whose value is still less than 2% of the value of Bitcoin, is a hidden tool for terrorist organizations to raise and transfer funds (Dion-Schwarz et al., 2019).
The anonymity of transactions is an important factor in the financing activities of terrorist organizations. In most countries and regions of the world, it is illegal to provide financial support to known terrorist organizations, and anonymity ensures that the funds are difficult to trace.
Therefore, an increase in anonymity will greadly promote terrorist organizations’ use of cryptocurrencies. Not only can terrorists benefit from the anonymity of crypto- currency, but organizations or individuals that try to support terrorism through donations can also re- duce their risk of being prosecuted.
EXPANDING THE CRYPTOCURRENCY MARKET.
One of the preconditions for the greater use of cryptocurrency by terrorist organizations is the expansion of the cryptocurrency market. The continuous growth of the monetary market means that the acceptability and trust of users in this transaction mode is improving. At present, especially in areas where terrorist organizations are active, the acceptability of cryptocurrencies is still low.
The Middle East is a source of terrorist organizations and an area with a high incidence of terrorist attacks. However, there are almost no Bitcoin ATMs in the Middle East. As of January 2018, except for Israel, only Saudi Arabia has an ATM in the Middle East. Although the future development of cryptocurrency technology is unpredictable, if the number of users using cryptocurrency increases significantly worldwide, terrorist organizations are likely to increase their use. In addition, an actual terrorist attack will also affect the global use of cryptocurrencies.
Previous studies have shown that there is a relationship between terrorist attacks and cryptocurrency returns, but there is controversy about whether the relationship is positive or negative. On the one hand, terrorist attacks may lead to a risk aversion reaction in traditional financial markets, which will lead to a shift in investment in cryptocurrency. On the other hand, terrorist attacks may lead to people emigrating from nations or regions that do not regulate cryptocurrency because they remain vulnerable to hackers and cyber theft (Patel and Pereira, 2021).
As a major source of financing activities of terrorist organizations, the drug trade has proved that the monthly income of international crypto- currency can reach several million US dollars through the sale of illegal drugs alone (Kruithof et al., 2016). Cryptocurrency is gradually being used in the dark web market because of its suitable properties. The increase in transactions in the dark web market will inevitably stimulate the use of cryptocurrency by terrorist organizations. There is no clear or positive evidence for the use of crypto- currency in the darknet markets by terrorist organizations currently. However, as cryptocurrency becomes more friendly to the new generation of terrorists, terrorists’ use of cryptocurrency become more active (Dostov and Shust, 2014).
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