March 22nd’s morning saw an attack on Brussels, Belgium killing at least 34 people. Will virtual currencies be increasingly under the scanner as a result?

Frequent attacks on Europe seem to be an unfortunate reality, given that the attack on Brussels Airport and the Maalbeek Subway Station came just four months after the Paris attacks on November 13, 2015. Terrorism is now a global phenomenon with global connotations. These type of terrorist attacks mean that terror financing is a deep concern of security agencies, governments and the public.

As virtual currencies increasingly under the scanner, is there scope for weeding out illegal use of Bitcoin and other Cryptocurrencies by terrorists and their sympathisers? Will the dragnet of government regulations bring down the very edifice of Bitcoin? Let us explore the answer to these questions among the grim and sinister backdrop of the attacks in Belgium.

Will terrorist attacks destroy the virtual currency?

Bitcoin as well as other Cryptocurrencies are in the crosshairs of governments. In fact the European Union is considering tightening its hold on virtual currencies like Bitcoin and on prepaid cards as well. The multinational bloc wants to bring increased regulation in play starting June 2016.

New financial tools such as virtual currencies create new challenges in terms of combatting terrorist financing. Highly versatile criminals are quick to switch to new channels if existing ones become too risky – European Union

The concerns of national governments are not completely baseless and unfounded, as the Paris attackers of November 13 used prepaid cards to pay for hotel rooms.

What is being done?

We must start out by saying that government issued fiat money is completely untraceable in its cash form. Eric Grill of CoinOutlet, a provider of Bitcoin ATMs has his say.

“I think virtual currencies are a terrible way to fund terrorism, it’s much better to use fiat currency which is not traceable.”

Bitcoin on the other hand uses the Blockchain technology which puts all the information about transactions in open domain. In fact the now infamous Silk Road case has illustrated how once a Bitcoin wallet is tied to a suspect in a criminal investigation, looking up transactions becomes relatively easy for prosecutors.

The paper A Fistful of Bitcoins: Characterizing Payments Among Men with No Names by researchers at the University of California, San Diego takes an in-depth look at tracing Bitcoins.

Terrorism finances itself with fiat cash

We must keep in mind that international terrorism has been financing itself long before virtual currencies, prepaid cards or other means of electronic funds transfer. Anyone who has been or lived in South Asia, Africa or West Asia will know about Hawala transactions, which were used extensively by Al Qaeda before 9/11. Similarly cash or fiat currencies have been the favoured choice of many terror operatives as they are completely untraceable. Aaron Koenig founder and organiser of Bitcoin Exchange Berlin (BXB), Europe’s first in-person Bitcoin exchange and the General Secretary of the Global Bitcoin Alliance, a decentralised network of non-profit organisations that promotes Bitcoin, echoes this sentiment.

“Virtual currencies like the US Dollar or the Euro, which can be created out of thin air by central banks, are indeed used to fund all kinds of terror, both by governments and by terrorist organisations. So I think they should be banned. Only real money like gold, silver and bitcoin should be allowed.”

Currency is just a tool in the hands of people and people have the power to do good or bad with it. Bitcoin is an open, transparent and secure way of transferring money, which is perhaps way more secure than some of the more traditional means like government issued cash.

“The on-/off-ramps or currency translation points are subject to the same obligations as any other financial institution”, says Juan Llanos, a lecturer, moderator, panelist and organizer of anti-money laundering Bitcoin and crypto-currency conferences, seminars, workshops and webcasts.

“Bitcoin exchanges, in the US and Europe, at a minimum, are obligated to comply with Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regulations. These regulations contain deterrent and detective measures such as the obligation to obtain and verify the identity of all participants to a transaction (KYC), the obligation to monitor and investigate transactional activity, and the the obligation to submit various relevant reports to the authorities”.