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How Blockchain Can Solve the Curious Case of Cryptocurrency and Terrorism

As per industry experts, unlike cash which is difficult to track, blockchain has proven to be one of the most powerful tools for law enforcement.

The transformation of terrorism from “dynamite into a metaverse” and “AK-47s into virtual assets” is a concern, Union Home Minister Amit Shah said last week. He spoke at the third No Money for Terror (NMFT) Ministerial Conference on counterterrorism financing. “The use of virtual assets such as cryptocurrencies is on the rise, and we need to understand the patterns of these activities on the dark web and find solutions to them,” he added.

While government skepticism towards digital currency is not new, thanks in part to the latest FTX scandal, Indian players believe that the right set of rules can further promote transparency. “Cryptocurrency is extremely transparent, much more transparent than the traditional cash economy, and this is well documented. In addition, cryptocurrencies are the worst tool for money laundering,” said Rajagopal Menon, vice president of WazirX cryptocurrency exchange.

Earlier this October, when the United Nations (UN) Counter-Terrorism Committee held a meeting in New Delhi, similar remarks were made about how cryptocurrency finances terrorism. “Terrorist groups that have been excluded from the official financial system are gradually turning to cryptocurrencies to fund their nefarious activities,” Svetlana Martynova, coordinator for countering terrorist financing at the United Nations (UN), said at the time.

See also: How cryptocurrency finances terrorism around the world

Moreover, according to a report by Chainalysis, an analytics company, 0.15% of all cryptocurrency transactions in 2021 were related to some kind of illegal activity. “Decentralized finance (DeFi) is the ability to keep track of digital payments. To provide all-round protection and security, the Zero Trust Architecture (ZTA), the cybersecurity paradigm, is the need of the hour, and it can be built on the Layer 7 cybersecurity paradigm.” – Dilip Seinberg, Founder and CEO. This is reported by the company MuffinPay, which pays bills with cryptocurrency.

It should also be noted that countries such as the US, Singapore, and Australia have expressed similar concerns about digital assets. Earlier this month, the Australian government created cryptocurrency divisions to keep a record of transactions.

According to Swapnil Pawar, founder of decentralized finance company Newrl, Web3.0 without identification can be used for terrorist financing and money laundering. “To make web3 secure, we need authentication at the blockchain protocol level. We shouldn’t confuse privacy with anonymity – there are smart ways to maintain privacy while still being identifiable,” he added.

In addition, according to a Statista report, the value of cryptocurrency lost due to security threats has risen more than ninefold between 2020 and 2021. The chart below shows the total value of cryptocurrencies lost and recovered from theft and other attacks between March 2020 and March 2020. February 2022.

Source: Statistics

According to industry experts, the immutable and public nature of blockchain makes cryptocurrencies a poor choice for money laundering, as it allows law enforcement to detect and track money laundering much more easily than cash transactions. “DeFi as a technology is very promising – for expanding access to financial services and providing access for those who currently remain outside of traditional finance. We need to promote secure DeFi to democratize access to credit, reduce contention in financial services, and improve contract enforcement,” Pawar added.

Also Read: Can Cryptocurrency Help an Inflation-Fighting Economy Beat Inflation?

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Written by khirou

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