While the adoption of cryptocurrencies has led to revolutionary financial breakthroughs, it has provided opportunities for criminals. Extremist groups are using pseudonymous cryptocurrencies such as Monero to a greater extent to avoid detection by law enforcement and circumvent the financial system. This trend poses important challenges for regulators and underscores the pressing need for more effective tracking and disruption strategies. Eleanor Brooks, a veteran blockchain researcher, discusses this alarming development. She shares how hate groups are using digital currencies and what that means for our online safety.
The Extremist Cryptocurrency Landscape
The sad truth is that countless extremist groups and individuals are increasingly getting the hang of virtual currencies to fund their agendas. As we noted earlier this year, in 2023 extremists increasingly looked to raise funds on-platform through Virtual Asset Service Providers (VASPs). Additionally, this new trend demonstrates their conscious effort to go around established financial institutions. This shift towards cryptocurrency highlights the need for increased vigilance and more robust regulatory frameworks within the digital asset space.
As recent attacks on mosques in Christchurch, New Zealand by far-right extremists demonstrated in 2019, these consequences can be catastrophic and wide-reaching. Even deprived of financial capital, they can do phenomenal damage. The NZ $60,000 (roughly $33,567 USD) attacks expose a growing and sobering truth. Extremist groups are capable of causing catastrophic harm without an exorbitant monetary investment. This relatively low cost highlights the ease with which even small amounts of cryptocurrency can facilitate significant acts of terror.
So far in 2023, in their annual record keeping, the ADL Center on Extremism (COE) has tracked 15 groups and individuals spreading white supremacy and antisemitism. These organizations and their backers funneled a whopping $142,546 in crypto through 22 separate service providers to do it. This evidence underscores the ways in which extremist groups are operating within and exploiting the cryptocurrency space. It raises the alarm on the need to track and stop these money streams.
Geographical Trends
Until 2017, North America had the largest share of on-chain flows to extremist groups. This trend further underscored the region’s precocious embrace of cryptocurrency. The landscape has since shifted. From 2022 to 2024, Europe’s share skyrocketed, peaking at over almost 50% of all global inflows. This change suggests a growing adoption of cryptocurrency by extremist groups in Europe, potentially driven by stricter regulations and crackdowns on traditional financial channels.
Extremist groups in Europe are using crypto to a greater extent. This alarming trend demonstrates a dire need for nations to cooperate when monitoring and dismantling these financial networks. So law enforcement agencies need to coordinate closely with regulatory bodies. Combined, they are able to share vital information and coordinate their efforts to combat the illicit use of all types of digital currencies.
VASP Policies and Enforcement
The effectiveness of VASPs in preventing the use of their platforms for extremist financing ranges widely. Some service providers already have or enforce anti-hate content policies. Of those, only one expressly forbids the funding of hatred or extremism. Without comprehensive policies in place, this leaves behind a perilous loophole. Extremist groups can use it to transfer money under the radar.
Ten of the 15 extremists in the ADL study either used Coinbase themselves or received funds from supporters using the service. It’s clear from the high usage rate that we need to enforce our anti-hate policies more vigorously. Second, we need to improve the monitoring of all transactions to prevent the financing of extremism on the platform.
Kraken tops the list among platforms that enable extremist funding with $79,548.76 in related funds. This total accounts for a shocking 55.8% of all extremist money in our dataset. That money exclusively comprised donations from extremists sent directly to the service—which has totaled $10,511.52 so far in 2023. When the entirety of this large sum is taken into account, it uncovers a more urgent problem. Kraken and other VASPs need to immediately be doing much more to detect and prevent funds from flowing to extremist actors.
Platforms and Their Role
Social media platforms and anonymous online communities have become key enablers in allowing these extremist groups to organize, coordinate and carry out their activities. These platforms increasingly become centers of recruitment, propaganda spread, and even financial coordination. Additionally, some platforms have very poor content moderation policies. This major weakness allows extremist groups to flourish and continue their work largely without accountability.
Lax content moderation has helped Gab become a breeding ground for conspiracy theorists and far-right influencers. As a consequence, it has become a magnet for white supremacists, neo-Nazis, and the militia movement. The platform’s permissive censorship environment lets extremist groups widely promote their ideologies and harvest their financial support without fear of retribution.
As of December 2023, Binance does not have policies prohibiting hate, extremism and violence incitement within its T&Cs. This absence is troubling, as it calls into question the platform’s commitment to fighting this content. The lack of coherent, enforceable guidelines leaves the door wide open for extremist, terrorist organizations to continue using the platform as a financial incubator. Without clear rules prohibiting such behavior, they have a hospitable place to act.
The Need for Proactive Measures
In this current climate, it is essential to recognize and cut off the money that supports dangerous players and their intolerance. We have to take a more holistic approach. This means increasing the oversight over cryptocurrency transaction flows, advancing rigorous penalties for anti-hate policies by VASPs, and increasing collaboration and knowledge-sharing between law enforcement and regulatory agencies.
The average annual deposit amount jumped dramatically in 2022, resulting in an atypical one-time spike. Moreover, some major ideologies in some areas are enjoying extraordinary double-digit annual increases. What we want are targeted, effective strategies to counter key extremist ideologies. Beyond that, we need to look at places—specifically, states or municipalities—where cryptocurrency adoption is on the rise.
This language would not fly in U.S. user agreements. Germany, Austria, and the Baltic countries criminalize hate speech, Nazi symbols, and Holocaust denial, with strict penalties and bans. This gap highlights the critical necessity for unified global standards. We need to create robust enforcement tools to prevent bad actor, hate-fueled organizations from taking advantage of regulatory gaps.
Despite this, a full picture indicates overall observable crypto funding is kind of stagnating YoY. While this trend seems encouraging, we need to remain vigilant. We must continue to track these kinds of cryptocurrency transactions so that extremist groups cannot discover alternative methods to finance their operations.
Challenges and Solutions
Addressing the use of cryptocurrencies by extremist groups raises many complications. The new anonymity and decentralization of digital currencies presents an entirely new challenge to investigators’ efforts to track and trace illicit transactions. Further, the international nature of cryptocurrency markets necessitates abroad cooperation to address illicit activities at their source.
Regulatory Hurdles
Regulators will have a daunting task on their hands. They need to stop bad actors from accessing crypto’s benefits while promoting activity that helps the U.S. lead the world in this innovative sector. Needlessly burdensome regulations can suffocate the development of positive digital currency use cases. Conversely, lax regulation could allow extremist organizations to act with impunity.
One answer lies in creating more tailored regulatory regimes. These operations should target more focused high-risk areas, such as transactions that are to or from known extremist actors. Such frameworks would adopt heightened due diligence requirements for VASPs and increased monitoring of suspicious transactions.
Technological Solutions
Technological solutions are equally important to the role technological solutions can play fighting the use of cryptocurrencies by extremist groups. You can deploy blockchain analytics tools and the ability to track and trace transactions. These tools help detect patterns of illicit activity and flag suspicious accounts.
AI and ML are great at analyzing massive amounts of transaction data. They are best at finding future indicators of the financing of extremism. Combined, these technologies can position law enforcement agencies and financial sector regulators to detect and disrupt illicit financial networks with new effectiveness.
International Cooperation
International cooperation will be necessary to account for the global nature of cryptocurrency markets. Law enforcement agencies and regulatory bodies must work together to share information, coordinate investigations, and develop common standards for regulating digital currencies.
One promising approach is to create a global task force. This new task force would zero in on combatting the illegal use of crypto. Equally important, this envisioned task force could bring experts together across borders. Working together, they can develop best practices, create common enforcement strategies, and coordinate enforcement actions.
Public Awareness and Education
Second, it’s important to educate the public about risks posed by crypto and extremist financing. By taking these steps we can ensure that digital currencies are not used for illegal activities. Education campaigns can help individuals to recognize the signs of extremist activity and report suspicious transactions to the appropriate authorities.
Education programs also serve to empower VASPs and other stakeholders in the cryptocurrency ecosystem. They support these businesses to comprehend their responsibilities under anti-money laundering (AML) and counter-terrorist financing (CTF) regulations.
The Broader Implications
The adoption of cryptocurrencies by extremist groups has wider implications for the future of online safety and combatting hate speech. The ability to finance extremist activities through digital currencies can embolden hate groups and enable them to spread their ideologies more widely.
Hate speech and extremist propaganda rushed to fill the void online. This wave has the potential to toxify our social fabric, deepening toxic polarization, bigotry, and hate-fueled violence. Cutting off the financial underpinnings of extremist groups is thus critical for supporting the safety of people online and fighting against hate speech.
Protecting Vulnerable Communities
It is common for extremist organizations to prey upon marginalized communities, including communities of color, faith-based communities, and the LGBTQ+ community. The increasing ability to fund extremist activities via cryptocurrencies only heightens these communities’ threats.
Safeguarding at-risk communities requires a holistic strategy. We must do a better job monitoring the spread of hate speech online, protecting those who fall victim to hate crimes, and offering interventions specifically to combat extremist ideologies.
Promoting Tolerance and Inclusion
At the end of the day, the battle against extremism is a commitment to making societies more tolerant and inclusive for all their citizens. This means creating community, conversation, and appreciation across cultural divides, confronting and combating bias and bigotry, and uplifting our broad mosaic of identities.
Education also serves as an important tool in fostering societal tolerance and inclusion. By teaching young people about the dangers of extremism and the importance of respecting human rights, we can help to build a more just and equitable society.
Eleanor Brooks emphasizes that the increasing use of cryptocurrencies by extremist groups poses a serious threat to online safety and the fight against hate speech. Let’s get the hard work done and effectively move forward with the best solutions. Collectively, we can dismantle illicit financial networks and cultivate a more accepting and inclusive community.
