In recent years, the use of cryptocurrency by criminal organizations and terrorist groups has been a growing concern for governments and blockchain intelligence platforms worldwide. Among these groups, the Islamic State of Iraq and Syria (ISIS) and its affiliates have been actively leveraging cryptocurrencies to facilitate their operations and fundraising campaigns. Blockchain intelligence platform TRM Labs recently released a report shedding light on the escalating use of cryptocurrency by ISIS affiliates across Asia, with a particular emphasis on their preference for Tether (USDT) on the Tron network. This article delves into the key findings of TRM Labs' report and explores the reasons behind this shift towards using stablecoins for illicit activities.
Mounting Evidence of Crypto Usage by ISIS
On July 21, TRM Labs published a report providing evidence of an increasing trend of cryptocurrency usage by pro-ISIS networks in Tajikistan, Indonesia, and Afghanistan. The report highlights the significant on-chain connections between these groups and pro-ISIS fundraising campaigns in Syria. TRM Labs observed a mounting on-chain evidence from the past twelve months, indicating the utilization of cryptocurrencies to aid and facilitate their operations.
Tether (USDT) on the Tron Network - A Preferred Choice
The report emphasizes that the majority of transactions related to these cases involved the use of Tether (USDT) on the Tron network. This stablecoin has gained popularity among criminals and terrorist groups due to its perceived stability and ease of use. TRM Labs' findings are further corroborated by Tara Annison, a former head of technical crypto advisory at Elliptic, who also noted the increasing popularity of Tron and Tether for illicit purposes. Criminals have reportedly shifted away from using Bitcoin for these activities and have embraced stablecoins like USDT due to their liquidity and volume on decentralized exchanges (DEXs), making money laundering relatively simple.
Indonesia-Based Exchanges and Pro-ISIS Fundraising
The report also highlights the significant involvement of Indonesian-based exchanges in sending funds to addresses associated with pro-ISIS fundraising campaigns in Syria. An alarming amount of over USD 517,000 was sent in 2022 alone by individuals using these exchanges to addresses identified by TRM Labs as belonging to pro-ISIS fundraising campaigns in Syria. These campaigns purportedly claim to support and "help free ISIS families held in Syrian camps." All transfers were executed using USDT on the Tron network, with each increment set at $10,000.
Impact of Crypto Usage in Recruitment
The report uncovers a disturbing instance in Tajikistan where cryptocurrency was used to recruit fighters for ISIS's affiliate in Afghanistan. TRM Labs identified a fundraising campaign that had been operational for over a year, linked to an address that received approximately $2 million in USDT on Tron in 2022. Through blockchain tracing, TRM Labs was able to identify the flow of funds and subsequently informed the exchange used by the group for cashing out. This chain of events led to Turkish authorities arresting a senior ISIS fundraiser, Shamil Hukumatov, on June 22.
Media Unit Linked to ISIS in Pakistan
In another concerning development, TRM Labs identified a media unit connected to ISIS's affiliate in Pakistan promoting its capability to accept donations in cryptocurrency during the second half of 2022. The addresses controlled by this group reportedly had a total volume of approximately $40,000 over the last twelve months.
Trend Shift from Bitcoin to Tron
TRM Labs' June 28 report reveals that the volume of illicit finance involving Bitcoin had significantly decreased over the past seven years. While Bitcoin was once the "exclusive currency" for terrorist financing, by 2022, Tron emerged as the preferred choice, accounting for 92% of terrorist financing cases.
Conclusion
The report by TRM Labs provides critical insights into the growing use of cryptocurrency by ISIS affiliates in Asia, with a focus on their preference for Tether (USDT) on the Tron network. The shift towards using stablecoins for illicit activities has raised concerns among governments and regulatory authorities worldwide. Addressing these challenges will require concerted efforts from both the blockchain industry and law enforcement agencies to develop robust mechanisms for tracking and preventing illicit cryptocurrency transactions. By staying vigilant and proactive, we can work towards minimizing the misuse of cryptocurrencies for nefarious purposes and ensuring the continued growth and adoption of blockchain technology for legitimate use cases.
