Key Points

Financial regulators around the world are trying to contain illicit funding in cryptocurrency markets. Jihadist groups thus far have not raised much money, but the Hamas campaign shows that no matter the price of Bitcoin, cryptocurrencies are a new and easily accessible way to diversify their funding portfolio. It is unlikely that terrorist cryptocurrency crowdfunding is going away soon.

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Much of the gap between the above-ground and underground crypto spaces comes from the tension between privacy and security. Financial policymakers should look at ideas for embedding AML-compliant blockchain-based systems into the banking sector that include measures for optimal (but not fully anonymous) privacy in transactions, as some academic researchers recently discussed. FATF’s update to its standards is just one step. Next, member states will have to develop a plan for dealing with the crypto underground. That playbook probably will not be found in the banking sector, but in deeper study of decentralized platforms. It is time for financial authorities to add more computer scientists to their teams of criminologists, lawyers, and finance experts.

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While Iran is unlikely to match the cyber capabilities of Russia, China, or even North Korea in the short term, this third-tier actor has already racked up some notable wins. Between 2011 and 2013, in some of their first forays into cyberwarfare, Iranian hackers cost U.S. financial institutions tens of millions of dollars and knocked Saudi Aramco’s business operations offline for months. Over the past two years, Iranian hackers hit more than 200 companies around the world, inflicting hundreds of millions dollars’ worth of damage, according to a new Microsoft report. We downplay this evolving menace at our peril.

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*Arrest figures for Russia include the arrest of Canadian citizen Karim Baratov for hacking Yahoo on behalf of Russia.

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The Islamic Republic of Iran has a long way to go before it’s ready to launch a national cryptocurrency. Tehran’s central bank has that ambition, but the effort remains at the experimental stage. Some recent media reports claim that Iran has “launched” a state cryptocurrency based on gold called the Peyman. What really is happening, however, is less dramatic. It has few immediate implications for Iranian sanctions evasion, but does signal Iran’s strategic intent to use blockchain technology to develop long-term sanctions resistance.

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