OBSERVARE
Universidade Autónoma de Lisboa
e-ISSN: 1647-7251
VOL. 17, Nº. 1
May 2026
285
CRYPTOCURRENCY TERRORISM FINANCING: A THREAT ASSESSMENT AND
ANALYSIS OF GLOBAL RESPONSES
KANGDIM DINGJI MAZA
mdingji@gmai.com
teaches at the Department of Political Science, Karl Kümm University, Vom-Plateau State,
(Nigeria). He earned his PhD from the Department of Political Science and International
Relations, Near East University KKTC, Via Mersin 10, Turkey. Dr. Dingji’s research focuses on
issues around conflict, terrorism, insurgency, counterinsurgency, international security, and
complex transnational threats in transitioned societies. He has published widely in these thematic
areas in reputable local and international journals, policy briefs, and conferences. His research
work can be found in academic journals such as: Religions, Sage Open, Journal of African Union
Studies, Siyasal: Journal of Political Science. https://orcid.org/0000-0003-1059-8707
NANJWAN YALE DAMAP
nkydamap@gmail.com
Lawyer by training and currently a Doctoral Researcher at the Department of International
Investment Law, University of Derby (United Kingdom). Damap’s research interests revolve
around issues regarding the regulation of cryptocurrency through the various legal instruments
instituted by international actors. https://orcid.org/0009-0006-0481-3203
KWOPNAN IBRAHIM BULUS
kapal4uall@gmail.com
Docent at the Department of Political Science, University of Jos, Plateau State (Nigeria). He
has a PhD from the Department of Politics and International Studies, Girne American
University, Northern Cyprus, Via Mersin 10, Turkey. His research interests cover Gendered
Narratives, on Peace, Conflict, and Security in post-conflict societies. He has several
publications around these thematic areas and is consistently driven by the desire to teach,
research, and provide community service. https://orcid.org/0000-0001-5579-8329
Abstract
The rise and popularity of cryptocurrency in the global financial system has presented
opportunities and challenges in the fight against terrorism financing. This is because, the
decentralized, pseudonymous, safety, privacy, and borderless nature of these digital
currencies and assets has created the opportunity for terror groups to exploit. Terror groups
take advantage of these opportunities to fund their operations, launder assets, organize, plan
attacks, and consolidate their presence in the global financial system. Using the qualitative
method of research, through the use of academic and non-academic documents, reports, and
analysis from relevant institutions such as the Financial Action Taskforce (FATF), the United
Nations (UN), The Inter-Governmental Action Group against Money Laundering in West Africa
(GIABA), national governments and other relevant agencies, this article examines the global
counter-measures taken by these actors in combating cryptocurrency terrorism financing. The
article examine the prospects and challenges faced in combating the menace. The findings of
the article show that in spite of the global efforts aimed at combating cryptocurrency terrorism
financing the lack of global regulations and laws against money laundering, terrorism financing
through the cryptocurrency ecosystem, lack of effective synergy and collaboration by relevant
actors in the fight against cryptocurrency and terrorism financing and the evolving nature of
the crypto and tactics of terror groups to evade surveillance continue to affect the counter-
measures. To address these gaps, the article recommends the need for more collaboration
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e-ISSN: 1647-7251
VOL. 17, Nº. 1
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Cryptocurrency Terrorism Financing: A Threat Assessment and Analysis of Global Responses
Kangdim Dingji Maza, Nanjwan Yale Damap, Kwopnan Ibrahim Bulus
286
among actors in combating this threat, strengthening a stronger regulatory framework to
protect and guarantee the safety of the cryptocurrency users from threats posed by terror
groups and other transnational criminal networks operating in the crypto digital space..
Keywords
Cryptocurrency, Counterterrorism, Terrorism Financing, Financial Action Taskforce (FATF),
The Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA), &
The United Nations (UN).
Resumo
A ascensão e a popularidade das criptomoedas no sistema financeiro global têm apresentado
oportunidades e desafios na luta contra o financiamento do terrorismo. Isto deve-se ao facto
de a natureza descentralizada, pseudónima, segura, privada e sem fronteiras destas moedas
e ativos digitais ter criado oportunidades que os grupos terroristas podem explorar. Os grupos
terroristas aproveitam-se destas oportunidades para financiar as suas operações, branquear
ativos, organizar-se, planear ataques e consolidar a sua presença no sistema financeiro global.
Utilizando o método de investigação qualitativa, através do recurso a documentos académicos
e não académicos, relatórios e análises de instituições relevantes, tais como o Grupo de Ação
Financeira Internacional (GAFI), as Nações Unidas (ONU), o Grupo de Ação
Intergovernamental contra a Lavagem de Dinheiro na África Ocidental (GIABA), governos
nacionais e outras agências relevantes, este artigo examina as contramedidas globais
adotadas por estes atores no combate ao financiamento do terrorismo através de
criptomoedas. O artigo examina as perspetivas e os desafios enfrentados no combate a esta
ameaça. As conclusões do artigo mostram que, apesar dos esforços globais destinados a
combater o financiamento do terrorismo através de criptomoedas, a falta de regulamentação
e legislação globais contra a lavagem de dinheiro e o financiamento do terrorismo através do
ecossistema das criptomoedas, a falta de sinergia e colaboração eficazes por parte dos atores
relevantes na luta contra o financiamento do terrorismo através de criptomoedas, bem como
a natureza em evolução das criptomoedas e as táticas dos grupos terroristas para escapar à
vigilância, continuam a afetar as medidas de combate. Para colmatar estas lacunas, o artigo
recomenda a necessidade de uma maior colaboração entre os intervenientes no combate a
esta ameaça, reforçando um quadro regulamentar mais sólido para proteger e garantir a
segurança dos utilizadores de criptomoedas contra as ameaças representadas por grupos
terroristas e outras redes criminosas transnacionais que operam no espaço digital das
criptomoedas.
Palavras-chave
Criptomoedas, Contraterrorismo, Financiamento do Terrorismo, Grupo de Ação Financeira
Internacional (GAFI), Grupo Intergovernamental de Ação contra a Lavagem de Dinheiro na
África Ocidental (GIABA) e Organização das Nações Unidas (ONU).
How to cite this article
Maza, Kangdim Dingji, Damap, Nanjwan Yale & Bulus, Kwopnan Ibrahim (2026). Cryptocurrency
Terrorism Financing: A Threat Assessment and Analysis of Global Responses. Janus.net, e-journal
of international relations, VOL. 17, Nº. 1, May 2026, pp. 285-303. https://doi.org/10.26619/1647-
7251.17.1.15
Article submitted on 18 June 2025 and accepted on 16 January 2026.
JANUS.NET, e-journal of International Relations
e-ISSN: 1647-7251
VOL. 17, Nº. 1
May 2026, pp. 285-303
Cryptocurrency Terrorism Financing: A Threat Assessment and Analysis of Global Responses
Kangdim Dingji Maza, Nanjwan Yale Damap, Kwopnan Ibrahim Bulus
287
CRYPTOCURRENCY TERRORISM FINANCING: A THREAT
ASSESSMENT AND ANALYSIS OF GLOBAL RESPONSES
KANGDIM DINGJI MAZA
NANJWAN YALE DAMAP
KWOPNAN IBRAHIM BULUS
Introduction
The emergence of cryptocurrency has led to a paradigm shift throughout the international
economic and financial system, necessitating a departure from the traditional financial
system to a private and digitised system through blockchain technology (Zhuk, 2024).
Cryptocurrency has been used as a means of exchange presupposing currency as well as
a store of value (Mattke, Maier & Reis, 2020). There is no monolithic definition as to what
cryptocurrency entails, as expressed in several studies. However, despite this non-
monolithic stance, most of the studies regarding the subject matter have a consensus
that the term could be operationalized as a digital currency typically lacking a centralized
authority responsible for regulation and ensuring strict compliance. Rather, it utilises a
decentralised system for transaction recording and issuance management. It relies on
cryptography to prevent counterfeiting and fraud, thereby ensuring the security of
transactions. The emphasis on security provides reassurance and instills confidence in
the system (Zohuri, Nguyen & Moghaddam, 2022). Other studies similarly describe
cryptocurrency as an electronic and virtual currency created to facilitate and buying,
selling, and exchange of goods and services irrespective of physical borders, territories
without any interference from a central authority (He, Li, Wang & Shah, 2024). It
achieves this through encryption technology, which controls the creation of units and
verifies transactions (Ibid).
The inherent characteristic of cryptocurrency resonates in its decentralisation and
anonymity, and global accessibility devoid of the control of any centralized issuing
authority, such as a Bank or a trusted party, has given rise to a myriad of challenges
(Sharma, Pant, Sharma & Brahmachari, 2020). Proponents of the cryptocurrency school
of thought, such as Changpeng Zhao (CZ) and Vitalik Buterin, believe that cryptocurrency
emerged due to a lack of confidence in the extant international financial system (Doll-
Steinberg & Leaf, 2023). Events of the 2008 economic recession alongside the COVID-
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Cryptocurrency Terrorism Financing: A Threat Assessment and Analysis of Global Responses
Kangdim Dingji Maza, Nanjwan Yale Damap, Kwopnan Ibrahim Bulus
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19 that followed, fuelled by the COVID Lock malware, became widespread due to the
COVID and further propelled the use of cryptocurrency as a means of exchange, thus
solidifying and entrenching the use of cryptocurrency in different jurisdictions (Dyntu &
Dykyj, 2021).
The emergence of cryptocurrency has heralded an era where terrorist groups can take
advantage of the anonymity of cryptocurrency, its decentralised and global accessibility
to perpetrate transnational organised crimes in the form of Terrorism Financing (TF)
(Majumder, Routh & Singha, 2019; Sestino, Tuček & Bresciani, 2024). Terrorist groups
across the globe have used cryptocurrency as a conduit for the transfer of funds for
terrorism in different parts of the world. Cryptocurrencies, owing to their anonymity,
decentralized, and unregulated nature, have opened up vistas of opportunities and
alternative channels for terrorist groups to fund, plan, and carry out attacks covertly
without any scintilla of trace (Akcinaroglu & Shi, 2023). According to a US Department
of Justice press release (15 December 2022), “defendants collected and transferred
approximately USD 35,000 through cryptocurrency and other electronic means to Bitcoin
wallets and accounts they believed to be funding ISIS” (See DOJ, 2022). The report also
assert that Terrorist organisations are also using cryptocurrencies to raise funds. For
example, Islamic State in Iraq and Syria (ISIS) called for cryptocurrency donations in
this memorable poster (Ibid).
As put forward by the Anti-Money Laundering & Counter Financing of Terrorism AML/CFT,
Terrorism financing is a course of action leading to the provision and facilitation of
financial assistance to terror groups to enable them to carry out their violent act of terror
on states and non-state actors in society (FATF Report 2015). This definition further
supports the definition by Wang & Zhu (20221) that terrorist financing is the economic
basis of terrorist activities and the lifeline of all terrorist organizations. Interestingly,
since the emergence of cryptocurrency and its increasing usage, terrorist organizations
have leveraged its non-regulatory and unrestricted access to plan and carry out attacks.
Consequently, legislators around the world have called for global action to regulate the
sale, purchase, and limit the exchange of cryptocurrencies (Ibrahim, 2019). According to
the FATF 2023 Report, most time, terrorism financing takes the form of using digitally
enabled technology for crowdfunding (see FATF Report, 2023). Research from notable
institutions such as the FATF and subsequent assessments on emerging terrorist
financing risks further revealed that terror groups and other violent non-state actors
driven by ethnic and racial hate continue to rely on online crowdfunding as an avenue to
fund their operations (FATF, 2015). This was evidenced in situations where violent
extremist and terrorist groups often exploit and hijack the unregulated donation-based
crowdfunding support to fund and sustain their operations (see FATF, 2023). The report
gave examples with ISIS and other Salafist groups operating in Europe, particularly
Germany, under the guise of charity organizations using crypto to plan, fund, and carry
out acts of terror (Ibid).
The rise in using cryptocurrency systems to facilitate transnational organised crimes and
support the activities of terrorist groups across the world is most alarming, hence the
need to nip it in the bud to prevent it from resulting in increased global insecurity as
currently being experienced (Carata, 2017). Studies by Amiram, Jørgensen, & Rabetti
(2022) revealed that given the increase in terrorism financing, global peace has remained
elusive, leaving many weaker states and developed states vulnerable to the activities
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Cryptocurrency Terrorism Financing: A Threat Assessment and Analysis of Global Responses
Kangdim Dingji Maza, Nanjwan Yale Damap, Kwopnan Ibrahim Bulus
289
and threats of terror attacks. Although there have been responses by international
organisations such as the Financial Action Task Force (FATF) in collaboration with
Financial Intelligence Unit (FIU’s), and International Police Organisation (Interpol) to
address the menace of Terrorism financing, the phenomenon has continued due to the
privacy-enhanced features of certain cryptocurrencies such as Monero and Zcash, used
for crowdfunding for terrorism making them invisible for regulators(Gordon, 2011; Rébé,
2019; Wagman, 2022).
This article, therefore seeks to examine the strengths and weaknesses of the initiatives
by international organisations such as the Financial Action Task Force (FATF) in curtailing
terrorism financing and ensuring global peace. The challenges faced by these
international organisations and lessons drawn from their regulatory challenges are used
to inform the development of a suitable global regulatory framework to ensure global
peace. To do this, the article uses the qualitative research approach by integrating
academic and non-academic literature such as journal articles and reports from relevant
regulatory agencies at the global, sub-regional, and national levels such as the Financial
Action Task Force (FATF), United Nations Office on Drugs and Crime (UNODC), The Inter-
Governmental Action Group against Money Laundering in West Africa (GIABA) and other
relevant material relevant to analyzing the relationship between cryptocurrency,
terrorism financing and its implication on various global countermeasures. This method
relies on secondary data analysis, where the emphasis is carried out by reviewing and
assessing extant policies, international laws, policies, and regulations from relevant
institutions and actors in combating terrorism financing and other forms of transnational
organized crimes. Needless to say, this method offers a comprehensive threat
assessment of the various measures taken by relevant actors towards combating
terrorism financing.
The research questions posed by this article are as follows: How is cryptocurrency used
as a tool for financing terrorism? What are the regulatory and enforcement challenges in
addressing terrorism financing? What measures have been implemented to stem the tide
of terrorism financing globally, and how effective are these measures?
Following the introduction, the second section offers a theoretical discussion on the
relationship between cryptocurrency and terrorism financing. The third section assesses
how terror groups use various cryptocurrency methods to fund their operations and carry
out their activities. The fourth section of the article responds to the global responses by
relevant actors in the international arena to counter the threat of terrorism financing
through cryptocurrency platforms. The fifth section addresses the challenges and threats
faced by relevant actors in the global response to combating cryptocurrency terrorism
financing. The sixth section concludes the article by providing a general overview and
implications on how relevant actors involved in countering cryptocurrency terrorism
financing can adequately achieve their objective in an evolving and challenging global
financial and international system.
Cryptocurrency and Terrorism Financing: Theoretical Discussions
Research has shown that several theoretical paradigms from multiple academic
disciplines, ranging from Criminology, Economics, Political Science, Psychology, and
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International Relations, seek to assess and explain the relationship between
cryptocurrency and terrorism financing (Hasan, 2023; Saha, Hasan, Mahmud, Ahmed,
Parvin & Karmakar, 2024). These perspectives explain the link between cryptocurrency
and terrorism financing.
As argued and put forward by the proponents of the Routine Activity Theory (RAT), try
to link cryptocurrency financing because terror groups are often considered motivated
offenders, exploit the vulnerability, lack of regulations, and censorship of the digital
financial ecosystem to carry out their acts of terror and other forms of activities ( Lee &
Choi, 2022). Terrorist organizations believed that using this avenue would make it
difficult for relevant regulatory agencies to detect, track, and counter their threats.
Perspectives such as the Rational Choice Theory (RCT) and the Economic Theory of Crime
see members of terrorist organizations are rational actors who always assess their
economic benefits, opportunities, and risks before carrying out their attacks ( Luong,
2024). Contextualizing this paradigm to cryptocurrency financing suggest the fact that
the digital ecosystem operates within the prism of anonymity, borderless structure,
decentralized financing, cost-effectiveness, and blockchain technology provides the
platform for easy movement and laundering of assets and funds, does not only make it
attractive for them, it also reduces the risk, scrutiny, and exposure from relevant
regulatory agencies and traditional financial institutions (Klein, Assadi & Zwilling, 2024).
The Network Theory (NT) situates its stance on the fact that the decentralized nature of
digital funds and the crypto financial network presents the perfect opportunity for terror
groups to fund their operations through crowdfunding, peer-to-peer transactions, and
other digital marketplaces (Ferretti & D'Angelo, 2020). They easily launder and fund their
operations without using the traditional banking system, which makes it difficult and
cumbersome to fund their operations (Ekici & Tuzuner, 2024). Studies have also shown
that global terrorist organizations such as the Islamic State in Iraq and Syria (ISIS), Al-
Qaeda, and Hezbollah are leveraging on the advantage of these decentralized financial
networks to not only fund their operations but also recruit and attract foreign fighters
(Eaddy, 2019; Kushelevitch, 2025; Manning, Akartuna & Johnson, 2025).
In perspective, operationally, these theories offer a multipronged analysis and
understanding of how terrorist organizations fund their operations through the digital
ecosystem enabled by the growing global presence of cryptocurrency (Whyte 2023). This
is because, within the theoretical lens of the routine activity approach, terrorist
organizations exploit the opportunities offered by the decentralized nature of digital
finance and the economic structure to effectively sustain and fund their operations
(Movchan, Shliakhovskyi, Kozii & Fedchak, 2023). The Rational Choice stance seeks to
point out the strategic resilience framework for these terror groups to adapt by thinking
rationally and leveraging the opportunities offered by cryptocurrency to plan, fund, and
carry out their attacks (Farber & Yehezkel, 2025). The theoretical integration of the
economic theory of crime further justifies, measures, and points out the cost-benefit logic
for terrorist groups and other violent non-state actors to make meaningful financial
decisions that will not only sustain and consolidate the financial base of such groups, but
the economic perspectives on crime will also determine the longevity of these groups
(Whyte 2023; Bătușaru & Sbârcea, 2024; Akcinaroglu & Shi, 2025). The final theoretical
intersection of the network theory further puts the crypto economy and ecosystem in
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Cryptocurrency Terrorism Financing: A Threat Assessment and Analysis of Global Responses
Kangdim Dingji Maza, Nanjwan Yale Damap, Kwopnan Ibrahim Bulus
291
relation to decentralized and cell-like structures of modern terrorist organizations, which
operate across different layers and network cells (Cascavilla, 2024).
Collectively, these theoretical positions further explain and reveal that financing terrorism
today is an evolving process that requires technological, strategic thinking, economic
incentives, and a decentralized network or layers, which tend to create the perfect
opportunity for terrorist organizations to effectively fund their operations, carry out
attacks, consolidate, and expand their frontiers without being hindered by territoriality
and geography (Cascavilla, 2024; Akcinaroglu & Shi, 2025). It is also vital to state that
the emergence of cryptocurrency does not create funding for acts of terror, but the
innovation it brought to the digital financial ecosystem, directly or indirectly, created the
platform for these violent non-state actors to fund and carry out their operations (Whyte,
2023). Therefore, understanding how terrorist organizations fund their operations and
activities requires the integration and understanding of these integrated theoretical
positions, given the fact that any counter terrorism measure must also address the
structural deficits associated with the decentralized structure of cryptocurrency
operations, altering the cost-benefit advantages by the economic opportunities
associated with cries and disrupting the illicit networks that explain the operations of
modern terrorist organizations.
How are Cryptocurrencies used to fund terror?
The decentralized, borderless, non-regulatory, cost-effective, and pseudonymous nature
of cryptocurrency has increasingly become an avenue through which terror groups use
to not only fund their operations, but also plan, recruit, and facilitate their attacks in the
global system (Akcinaroglu & Shi, 2025). Research by experts reveals that due to the
non-complexity and flexibility of the crypto ecosystem, it has become an easy avenue for
terror organizations to continue perpetrating, sustaining, and consolidating themselves
despite the various measures taken by states and non-state actors to combat their
activities (Dyntu & Dykyj, 2021). Terror groups use several cryptocurrency avenues and
methods to fund their operations around the world, as evidence from studies has shown
there are several ways these organizations use to fund their operations (Akram, Nasar &
Rehman, 2021). This argument is further supported by evidence suggesting that terror
groups, including Al-Qaeda, ISIS, the Houthis in Yemen, and Hamas, have increasingly
resorted to and turned to cryptocurrencies as a means to finance and sustain their
operations and organizations (Krylova, 2023; Darwish, 2024). These groups are said to
consistently use the cryptocurrency space to solicit funds through encrypted messaging
platforms, social media, and darknet platforms (Bauer & Levitt, 2020). This fundraising
process is usually carried out under the guise of false humanitarian support for charity
organizations and crowdfunding activities (Vidino, Lewis, & Mines, 2020).
The fact that cryptocurrency presents an opportunity for Peer-to-Peer (P2P) transactions
under its platform makes it easy for terror groups to use this method to fund its
operations (Jovanovic, Kostić, Sebastian & Sedej, 2022). This is because P2P allows for
direct transactions between persons irrespective of boundaries and the challenges
associated with the traditional banking system, where it is easier to monitor, track, and
regulate the movement of funds (Ibid). In addition, P2P transactions are not only
anonymous, easier, faster, not regulated, and difficult to track, which makes terrorist
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Cryptocurrency Terrorism Financing: A Threat Assessment and Analysis of Global Responses
Kangdim Dingji Maza, Nanjwan Yale Damap, Kwopnan Ibrahim Bulus
292
organizations leverage on these advantages to easily launder funds which making it
difficult to trace (Teichmann, 2022).
Other studies revealed that terrorist organizations also take advantage of the fact that
the use of mixers and tumblers for crypto transactions to fund their operations (Mehta &
Chawla, 2024). This process involves the mixing of funds gotten through illicit means
such as trafficking of drugs, persons, drug sales, kidnapping for ransom, etc., with clean
funds by these transnational terror groups, thereby hindering the ability of law
enforcement agencies to trace the origin of such funds and monitor such transactions
(Burgess, Hamilton & Leuprecht, 2024; Navani & Cirella, 2024). This service has further
enabled these groups to finance, consolidate, and sustain their activities, knowing it will
be difficult to counter.
Research has also revealed that the use of privacy coins such as Monero and Zcash with
enhanced security features, non-detectability, and traceability features has become an
attractive digital coin used by terrorists to fund their operations (Silfversten, Favaro,
Slapakova, Ishikawa, Liu, & Salas, 2020; Gross, Sedlmeir, Babel, Bechtel & Schellinger,
2021). This is because, unlike Bitcoin, whose transactions are sometimes traced, the
introduction of these privacy coins into the crypto ecosystem has become a conduit used
by terror groups and other transnational criminal organizations to fund their operations
(Søgaard, 2024).
Furthermore, it has been revealed that the darknet marketplace has become an attractive
and resource marketplace for these transnational terror organizations to purchase goods
and services (Rawat, Mahor, Chouhan, Pachlasiya, Telang & Garg, 2022). Studies have
shown that terrorist organizations like ISIS have used the dark web as a space for the
procurement of weapons, recruiting fighters, planning, and executing attacks, and other
resources needed for the expansion and sustainability of the organizations (Lakomy,
2024). The ongoing conflict in the Middle East between Israel and Hamas saw Hamas
increasingly leverage cryptocurrency to plan and execute the October 7th, 2023, attacks
(Darwish, 2024). The demand for ransom payment through cryptocurrency by terrorist
organizations is also another method through which these organizations finance their
operations. Studies have shown that terror groups like Al Qaeda, Boko Haram, Boko
Haram, and ISIS are exploring the digital financial system to not only fund their
operations but also demand ransom payments from their kidnapped victims (Gross,
Sedlmeir, Babel, Bechtel & Schellinger, 2021; Ofusori & Hendradi, 2023; Goldbarsht,
2024).
It is on this note that, in today’s international system, technological and innovative
advancements meant for the development of societies have also become an alternative
and high-resource avenue for terror groups to fund and sustain their operations.
What are the Global Responses Cryptocurrency Terrorism Financing?
It is trite that the emergence of cryptocurrency as a conduit pipe for terrorism financing
has led to regulatory approaches around the world, particularly by states and
international organisations, to curtail it (Majumder, Routh & Singha, 2019). Research
had shown that finance serves as the lifeblood of terrorist groups, which not only
guarantees the organization's operations, survival, and longevity; yet, paradoxically, it
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e-ISSN: 1647-7251
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May 2026, pp. 285-303
Cryptocurrency Terrorism Financing: A Threat Assessment and Analysis of Global Responses
Kangdim Dingji Maza, Nanjwan Yale Damap, Kwopnan Ibrahim Bulus
293
also represents one of their most significant vulnerabilities, as these funds are constantly
monitored, detected and disrupted by states and non-state actors in their
counterterrorism engagements (Lormel, 2018). Therefore, disrupting the flow of funds is
an antidote to preventing terrorism. One of the major international organisations
providing a roadmap to mitigate terrorism financing using cryptocurrency is the Financial
Action Task Force (Haider & Akhtar, 2024). The Financial Action Task Force (FATF) is a
global organisation saddled with the responsibility of tackling money laundering,
terrorism, and proliferation financing through research and monitoring how criminals
raise, use, and move funds across the world. The role of the FATF is to set standards for
compliance by states on how best to curtail terrorism financing (Bondaroff & Morrow,
2024).
The FATF has developed recommendations to be adhered to by states in the fight against
terrorism financing, as well as funding for weapons of mass destruction. These
recommendations are required to be implemented by member states of the FATF (Ibid).
The FATF 40 recommendations are divided into seven distinct parts which include the
following: AML/CFT Policies and coordination, Money laundering and confiscation,
Terrorist financing and financing of proliferation, Preventive measures, Transparency and
beneficial ownership of legal persons and arrangements, Powers and responsibilities of
competent authorities and other institutional measures, international cooperation (see
FATF Report 2015). Beyond these recommendations, the FATF has also developed
recommendations regarding virtual currencies (Anggriawan & Susila, 2024). In this
context, these virtual assets refer to any digital representation of value that can be
electronically traded, transferred, used for payment, and exchanged for goods and
services (Hrytsai, 2022). They have the potential of faster, cheaper, and easier payments
without regard to the conventional payment system (Ibid). However, they are
unregulated, thereby subjecting the process to enormous risk and becoming a haven for
financial transactions of criminals and terrorists, making it easy for them to explore
(Adaramola, 2025). Under the virtual currency standard, countries are expected to
understand the money laundering and terrorist financing risks the sector faces, Licence
or register virtual asset service providers, and supervise the sector in the same way it
supervises other financial institutions (Ngo, Pham, Chung & Ryu, 2025). On the other
hand, Virtual Assets service providers are expected to implement the same preventive
measures as financial institutions, including customer due diligence, record keeping, and
reporting of suspicious transactions, and obtain, hold, and securely transmit originator
and beneficiary information when making transfers (see FATF Report, 2023).
Furthermore, research also revealed that national and regional governments have
adopted diverse regulatory approaches to curtail terrorism financing within their
jurisdictions (Giraldo & Trinkunas, 2007). As noted by Stigall, Miller & Donatucci, (2020),
concerning National governments, the United States has played a vital role in stamping
out terrorism financing. This is evidenced by the 2018 National Strategy for
counterterrorism, which has an objective of examining:
“the capacity of terrorists to conduct attacks in the homeland and against
vital United States interests overseas is sharply diminished; The sources of
strength and support upon which terrorists rely are severed; Terrorists’
ability to radicalize, recruit, and mobilize to violence in the homeland is
diminished; Americans are prepared and protected from terrorist attacks in
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the homeland, including through more exacting border security and law
enforcement actions; Terrorists are unable to acquire or use WMDs, including
chemical, biological, radiological, and nuclear weapons, and other advanced
weaponry; and public sector partners, private sector partners, and foreign
partners to take a greater role in preventing and countering terrorism” (see
US Center for Counterterrorism, 2018).
Studies also revealed that in 2020, the US recorded the largest seizure of terrorist
organizations' monetary funds in the form of cryptocurrency accounts of about 150
Bitcoin and 155 virtual currencies tied to Al-Qaeda (Mokhemar, 2022). The United States
has also responded by identifying state sponsorship of terrorism financing and meting
out necessary sanctions (Byman, 2020).
Other studies have also revealed that the European Union (EU) has responded to the
emergence of cryptocurrency as a tool for terrorism financing through the process of
issuing several directives and regulations to counter-terrorism financing, including
Directive (EU) 2015/849 (Schindler, 2022). The fourth Anti-Money Laundering Directive
(4AMLD) aims to prevent the financial system from being used for money laundering
and terrorist financing. In the same vein, the New Anti-Money Laundering Directive
(AMLD 6) and the Regulation of the European Parliament and the Council on the
prevention of the use of the financial system for money laundering or terrorist financing
present clearer rules for preventing money laundering and terrorist financing by the
European Union (Premti, Jafarinejad & Balani, 2021).
In terms of law enforcement from the regional and international sphere in combating
terrorism financing, Europol, Interpol, and the UNODC have played significant roles. In
the case of Europol, several initiatives have been adopted to ensure enforcement and
mitigate the risks of terrorism financing (D’Amato & Terlizzi, 2022). The Europol and
Basel Institute consider investing in preventing and combating the misuse of the crypto
ecosystem for financial crime as vital to safeguard both national and international
security (Freudlsperger, Maricut-Akbik & Migliorati, 2022). They do that through
investing in research and innovation, capacity building, and cross-border, multi-
stakeholder collaborations are therefore pivotal in mitigating the menace of terrorism
financing through cryptocurrency (Wahl, 2024). This position was also re-echoed by John
Brandolino, UNODC Director, Division of Treaty Affairs during the 8th cryptocurrency
conference in Vienna, 2024, stating that:
“Multilateral collaboration is essential to dismantling the finances of criminal
organisations and terrorists. UNODC fully supports and promotes efforts to
collectively strengthen our ability to prevent and counter the criminal misuse
of crypto assets, which in turn contributes to overall global security” (see
UNODC, 2024).
This was also re-echoed by Iker Lekuona, Director of the Basel Institute’s International
Centre for Asset Recovery (ICAR), who said:
“In our work assisting with major transnational corruption and asset recovery
cases, we see how money launderers and other criminals systematically
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target weak links in the chain. All institutions involved in detecting and
investigating financial crimes and in recovering assets need to build their
capacity to work on crypto-related cases” (UNODC, 2024).
Law enforcement also involves the sharing of information between law enforcement
agencies, financial institutions, financial intelligence unit (FIU) to track the movement of
funds, ascertaining the source and purpose of usage of the funds (Wagman, 2022). This
helps in determining the legality or otherwise of these funds for prosecution by law
enforcement agencies, in collaboration with the FATF (Ibid).
Private sectors also have a role to play, particularly cryptocurrency exchanges and fintech
companies, through compliance and monitoring (Alam & Zameni, 2019). This is because,
cryptocurrency exchanges are required by law to provide know your customers KYC
information for purposes of traceability for funds with the potential to be used for
terrorism financing (Hasan, Talukder, Saju & Lysuzzaman, 2024). This involves the
collection of identifying information from users for a range of reasons, such as confirming
users are not subject to sanctions, blocking individuals residing in prohibited jurisdictions,
and empowering proactive investigations in case of future suspicious activity (Ibid). They
are also obliged to monitor transactions on an ongoing basis for suspicious activity that
could reveal money laundering, terrorism financing, or other forms of financial crime.
They are also required to monitor transactions effectively, as businesses will undoubtedly
encounter some risky behaviour requiring direct outreach to customers, updating
records, and reporting suspicious activity to relevant enforcement bodies (Takaragi,
Kubota, Wohlgemuth, Umezawa & Koyanagi, 2023). Cryptocurrency service providers
(VASPs) are also obliged to collect and disclose sender and beneficiary information for
crypto asset transfers under FATF CTF standards (Kapsis, 2023). This is in conformity
with the travel rule as developed by the Financial Action Task Force in their
recommendations. This information helps regulators and law enforcement agencies to
unravel the identity of criminals in various locations across the world. In the United
Kingdom, for instance, crypto firms are required to register with the Financial Conduct
Authority FCA and comply with the requirements of the regulations, if they intend to
provide certain crypto asset services by way of business, and if this service will be during
business carried on by them in the United Kingdom (see FCA 2019).
Studies by Uzougbo, Ikegwu & Adewusi (2024) also revealed a need for increased
cooperation between the public and private sectors is essential for effective enforcement
of cryptocurrency laws, given their important role in detecting and preventing illicit
activities.
What are the Challenges and Gaps in addressing these threats?
The regulatory challenge in curtailing the use of cryptocurrencies as a channel for
terrorism financing is embedded in the technology that governs cryptocurrency itself.
Cryptocurrency exchanges like Coinbase often include user-centric information such as
the “Know Your Customer” information needed for compliance with regulatory
frameworks for transferring cryptocurrency and converting cryptocurrency to fiat
(Kazerani, Rosati & Lesser, 2017). Consequently, due to its anonymity and decentralised
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nature, cryptocurrency allows criminals to go undetected, particularly with
cryptocurrencies with enhanced privacy features (Ibid). Research revealed that
Cryptocurrencies with enhanced privacy features, such as Monero and Zcash, make
identification of participants very challenging (Zhao & Zhang, 2021). In Monero, the
privacy of the receiver identity is protected with a stealth address generated by the
transaction sender, even the transaction receiver does not know the stealth address
(Ibid). All Monero transactions are private by default, and the transaction amount is
hidden with a cryptographic method (Thyagarajan, Malavolta, Schmidt & Schröder,
2020). In Monero, ring signatures and confidential transactions are combined to create
Ring CT transactions, which can hide both the amount and origin of Monero transactions
(Ibid). The implementation of robust security features, such as enhanced privacy
features, makes it difficult for hackers to gain access, preventing unfortunate hacks such
as the Mt. Gox exchange hack and the DAO attack on Ethereum (Arnone, 2024). In
response to this concern, several privacy-enhanced cryptocurrencies have been
developed that store the information “on-chain” (i.e., on the public blockchain) in a
privacy-respecting manner that attempts to make the sender and receiver anonymous
to third parties (Zheng, Xie, Dai, Chen & Wang, 2018).
Although these cryptocurrencies with enhanced privacy features provide security for the
cryptocurrency against hacks, criminals explore these privatised features to avoid being
detected as they engage in illicit activities using cryptocurrency (Maurushat & Halpin,
2022). However, for cryptocurrencies with decentralised and enhanced privacy features,
such “Know Your Customer” information is non-existent, making it difficult for regulators
to navigate and identify participants (Ibid).
Another challenge to cryptocurrency regulation lies on the fragmented regulatory
approach across the world (Al-Tawil, 2023). Different international organisations and
jurisdictions across the globe have developed approaches in diverse ways as to curtail
transnational organised crimes like terrorism financing (Wronka, 2024). This multifaceted
approach most often leads to regulatory arbitrage since there is no global consensus on
a single window to curtail this transnational offence (Perdana & Jiow, 2024). This is
because criminals are likely to explore less stringent jurisdictions to continue in their
nefarious activities, thereby making regulatory approaches less effective. Therefore,
developing standardised regulations across jurisdictions is necessary, considering the
transnational nature of terrorist financing and money laundering (Al Naqbi, Nobanee &
Ellili, 2025). This would greatly aid AML/CFT efforts in cases that span multiple
international jurisdictions by fostering greater communication and the pooling of
resources. Second, standardisation would mitigate the legal and jurisdictional mosaic of
international perspectives on Bitcoin use and regulation (Fletcher, Larkin & Corbet,
2021).
In terms of enforcement gaps, the cryptocurrency regime is shrouded by inadequate
enforcement in certain jurisdictions (Guseva, 2022). While there is effective enforcement
in some jurisdictions, others are lagging, given room for arbitrage (Brummer, Yadav &
Zaring, 2022). This creates a problem given the nature of cryptocurrency. Consequently,
studies have also shown that law enforcement in certain jurisdictions does not have the
requisite expertise to deal with complex issues relating to cryptocurrency (Uzougbo,
Ikegwu & Adewusi, 2024). Cryptocurrency transaction involves parties in different
countries, and they normally create ambiguity on which jurisdiction's laws apply. This
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ambiguity can lead to regulatory gaps and enforcement challenges, which allow illicit
activities such as money laundering and terrorism financing to flourish (Ibid).
Furthermore, another issue that poses a challenge to dealing with the issue of terrorism
financing is inadequate international collaboration and information sharing by relevant
stakeholders involved in tackling this challenge (Amiram, Jørgensen & Rabetti, 2022).
Although certain international organisations have developed approaches fostering
international cooperation by ensuring cross border cooperation in different jurisdictions,
whether such initiatives have yielded positive result or is limited by sovereignty of states
as this is a challenge to the effective regulation of cryptocurrency for counter terrorism
financing since cross border information sharing need to be carried out with speed to
prevent acts of terrorism happening.
Whilst regulatory approaches to curtailing cryptocurrency as a tool for terrorism financing
is a step in the right direction, the major challenge is how this can be done without
infringing on private rights of individuals. Hence the need to balance financial privacy
with regulation becomes desirable (Li, Susilo, Yang, Yu, Du, Liu & Guizani, 2019). In
addition, overregulation also whittles down the development of cryptocurrency as it
stifles innovation and prevents it from growth (Džafić & Hečimović, 2023). Therefore,
balancing regulation with innovation is necessary.
Conclusion
The emergence of cryptocurrency is a game-changer in today’s global financial system
given the immense opportunities and advantages it has in respecting individual and group
privacy, ensuring financial decentralization, securing digital assets, dismantling some of
the barriers associated with traditional banking, financial systems, and combating
terrorism and other forms of complex global transnational crimes. Its efficiency in
strengthening inclusion, non-regulatory, and non-interference nature from external
sources makes it attractive to individuals and organizations who respect trade secrecy
and financial anonymity. However, despite its attractive features, it has also presented
an opportunity for terror groups and other criminal organizations to not only evade
surveillance from relevant security agencies in countering the illicit movements and
laundering of funds, but the platform is also an avenue for these groups to fund their
operations but carry out other activities that threaten the peace and stability of the global
financial and security system.
The findings of this study, suggest that these terrorist organizations have been leveraging
on the fact that cryptocurrency transactions mostly involve P2P transactions, privacy
coins, and dark web marketplaces to perpetuate their acts of terror and fund their
operations despite the global efforts and responses from states and non-state actors in
combating terrorism financing. Therefore, to combat these challenges, it is important for
relevant actors such as states, global, regional, and sub-regional financial regulators, and
other sectors utilizing the crypto digital space to strengthen and enhance their
surveillance capabilities of tracking and stopping the various channels used by these
groups to fund their operations. It is also important for these actors to initiate measures
that further strengthen the safety and security of users in the crypto ecosystem and
other Anti-Money Laundering Measures at the global, regional, sub-regional, national,
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and individual levels. Furthermore, the need for increased stakeholder collaboration in
the fight against terrorism financing is important, because counterterrorism involves the
coalition of the willing for it to be more viable and effective.
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