Reports have revealed a surprising development with the Islamic State (IS) group now endorsing the use of cryptocurrency to fund its terrorist activities, as long as it aligns with Sharia law principles.
The UN’s Analytical Support and Sanctions Monitoring Team compiled research indicating that IS affiliates are requesting Sharia compliance checks for the digital assets they increasingly rely on to finance their operations.
This marks a significant shift, as Sharia law has traditionally been against cryptocurrency. The UN report highlights the detailed guidelines provided by IS to ensure Sharia compliance in crypto transactions. The terror group has even established specialized channels on the Telegram messaging service, such as CryptoHalal and Umma Crypto, to facilitate these transactions.
Sharia Compliance with Blockchain
Sharia law has historically conflicted with cryptocurrency due to its decentralized nature and association with illicit activities. However, the UN assessment suggests that IS is seeking compromises to make cryptocurrencies more Sharia-compliant. Enhanced rules and monitoring could help ensure that funds are not misused for illegal purposes or to support terrorism.
Total crypto market cap at $2.16 trillion on the daily chart: TradingView.com
Ramifications for the Crypto Sector
The Islamic State’s push for Sharia-compliant crypto could have significant implications for the entire cryptocurrency market. Increased demand for stricter controls and monitoring of the crypto ecosystem may arise if more terrorist groups and illicit entities attempt to utilize digital assets.
Image: GV Wire
Exchanges, wallet providers, and other cryptocurrency service providers may need to strengthen their know-your-customer (KYC) and anti-money laundering (AML) policies to prevent their platforms from being exploited for terrorism funding. This could lead to higher compliance costs and potentially restrict access to cryptocurrencies for legitimate users.
A Cause for Concern
The increasing demand from the Islamic State for Sharia law concessions in the realm of cryptocurrencies underscores the ongoing efforts of terrorist groups to use digital resources for malicious purposes. Regulators, law enforcement agencies, and industry stakeholders will play a crucial role in mitigating the risks associated with terrorist financing and illicit activities in the crypto space.
The UN study serves as a reminder of the importance of maintaining a secure and robust crypto environment that is resilient to misuse by malicious actors.
Featured image from Spiegel, chart from TradingView
