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America’s far-right extremists fundraise through cryptocurrency

Al Qaeda, Islamic State, ISIS, Hamas, Hezbollah, Houthis, Taliban, Cryptocurrency, Bitcoin

International

America’s far-right extremists fundraise through cryptocurrency

While cryptocurrency is becoming increasing popular amongst radical Islamic militancy groups such as Al Qaeda, Islamic State (ISIS), Hamas, Hezbollah, Houthis and the Taliban, a new report released by the Foundation for Defense of Democracies (FDD) reveals how America’s far-right domestic extremists fundraise through cryptocurrency.

The report, by Dr. Daveed Gartenstein-Ross, CEO of Valens Global and a senior advisor to FDD, and Varsha Koduvayur, an analyst at Valens Global, details how domestic extremists have increasingly pivoted to using cryptocurrency as banks and traditional financial providers have halted their ability to monetize hate on their platforms.

In “Crypto-Fascists: Cryptocurrency Usage by Domestic Extremists”, the authors note that white supremacist groups and individuals have raised millions of dollars in cryptocurrency through three major avenues. First, they solicit cryptocurrency donations for content they produce, such as radio shows, podcasts, or video streams. Second, they produce extremism-related merchandise that can be purchased with cryptocurrency. Third, they accept cryptocurrency donations for general support.

The report provides several examples of this activity. Andrew Anglin, publisher of the neo-Nazi message board and website The Daily Stormer, is known to have at least 200 different Bitcoin wallets. Nick Fuentes, host of the white nationalist podcast America First, raised almost $94,000 from cryptocurrency donations on the video-streaming platform DLive. Fuentes also operates a store that sells themed merchandise that can be purchased with the cryptocurrency Litecoin. The National Socialist Movement, which has called for all non-whites to be forcefully removed from the United States, accepts donations in Bitcoin. And Jason Kessler, an organizer of the highly controversial 2017 “Unite the Right” rally in Charlottesville, solicits donations for his legal defense fund in Bitcoin.

The authors note that extremists have increasingly sought ways to obfuscate their identity to make tracing cryptocurrency payments more difficult, adopting protocols like “mixing” or “coinjoining” to hide ownership of their funds. The authors also identify ways that extremists could potentially exploit cryptocurrency in the future – such as procuring black market goods or paying for illicit services with cryptocurrency, or utilizing smart contracts, a computerized protocol that automatically executes a contract and thus removes the middleman, to sponsor terrorist activities.

“Domestic extremists have migrated to cryptocurrencies for various reasons, including attempts to avoid paying legal judgments, the need to circumvent a denial of service by more traditional financial institutions (such as PayPal), and general privacy concerns”, the authors write. They continue: “To mitigate the continued threat posed by white supremacist extremists and their supporters, the US government and the private sector should institute policies that target extremists’ use of cryptocurrency”, noting that a whole-of-society response will be necessary to mitigate this risk.

The authors provide several recommendations for policymakers and the private sector to cut off extremists’ cryptocurrency funding flows, which include: increasing US government-led terrorist designations of violent white supremacist groups; supporting global standards for virtual assets to close the gap between countries with strong regulatory regimes and countries with weaker ones; establishing regulations for central bank digital currencies, privacy coins, and other cryptocurrency instruments; and encouraging knowledge- and information-sharing partnerships between blockchain firms and watchdog groups.

The authors further wrote:

Cryptocurrency can also be used to pay for legal defense, purchase supplies (including VPNs), or provide general support to a group or to particular individuals. In addition to protecting the privacy of donors, cryptocurrency frequently lies beyond the grasp of courts that have imposed financial penalties on extremists. For example, the neo-Nazi publication The Daily Stormer accepts cryptocurrency donations allegedly in part to avoid paying off millions of dollars in civil judgments against publisher Andrew Anglin.

As Anglin’s case shows, domestic extremists may benefit from the lack of an adequate regulatory and compliance framework around cryptocurrency. Moreover, ongoing enhancements of user privacy in certain cryptocurrencies, notably the emergence of “privacy coins” such as Monero, can further insulate these groups from law enforcement and compliance professionals. Domestic extremists may also use techniques known as “mixing” and “coinjoining” to camouflage their transactions within larger flows of cryptocurrency trading activity.

To address the challenges posed by domestic extremists’ use of cryptocurrency, policymakers, private-sector firms, and civil society actors should become more vigilant. The US government should designate more violent white supremacist groups as terrorist organizations, as today only one such organization (the Russian Imperial Movement) has been designated. Designating others would help to cut off their funding flows and other means of support. Policymakers should also enhance the regulation of the cryptocurrency industry. This should include establishing uniform standards for cryptocurrency exchanges and virtual asset service providers; bringing “stablecoins” and privacy coins, as well as decentralized finance, within the regulatory perimeter; and supporting global standards for virtual assets, among other measures. Blockchain analysis firms and nonpartisan watchdog groups should monitor extremists’ use of cryptocurrency and assess the risks associated with different exchanges. Extremists will continue exploiting cryptocurrency to support their illicit activities unless policymakers fill today’s regulatory gaps while the private sector and civil society amplify their efforts to expose the profits of hate.

Contents published under this byline are those created by the news team of BLiTZ

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