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[flagged] Terrorists Turn to Bitcoin for Funding, and They’re Learning Fast (nytimes.com)
42 points by sneeze-slayer 32 days ago | hide | past | web | favorite | 77 comments



"a method that makes the donations nearly impossible for law enforcement to track" -

This is an incredible statement, Bitcoin is a public ledger. It is the very opposite of anonymous. It is extremely easy for sophisticated governments in the USA and Israel to identify who has donated. I can imagine these authorities chuckling at the naivete of the "Terrorist"/"Palestinian authority" "secret" fundraising effort.


Do bitcoin mixers really work, with respect to this? Especially those who break links through fiat.

If yes, then they may publish a dynamic list of mixers to use, and SoF would be non-determinable. Mixers may have more problems than usual then, but afaik they are already banned in all white business bitcoin operations, so probably not a big deal for them.

Otoh, CIAs could control the pipe by powering some mixers themselves and promoting them among enemies.


You can at least trace the money back to a mixer. Large amounts of money being sent to a terrorist organisation. The money is being mixed by a mixer. Easy to shut down the mixer. If mixers are being used and they aren't being shut down it's because it is easy to trace the money through the mixer (or, perhaps the government doesn't care, but that seems unlikely).

The funny thing is that if the mixer is hard monitor because it is going through fiat currency, then you never needed BTC in the first place -- you just launder money through it.

I frequently say this: if you think a news story seems strange, look at what the reporter has written previously. Newspapers are making it easy these days, which is awesome. This is Nathaniel Popper's recent work: https://www.nytimes.com/by/nathaniel-popper He gets paid to write controversial stories about cryptocurrency (and impossible burgers :-D ).


Hmm, I have a couple of questions on this.

>then you never needed BTC in the first place -- you just launder money through it.

I’m afraid I don’t understand this part. Their goal is not to launder money, but to receive funds from “around the world” (and blow up someone). Of course easy laundering may be profitable^ to criminals, but how are these two connected here?

>Easy to shut down the mixer.

Easy in which country? How a mixer in any “closed” country could be shut down? Say DPRK or strong middle east countries who oppose “west world” to be opaque enough, but not technically aware of these activities (or simply don’t care, as you mentioned). Couldn’t that basically turn “person X consciously funds hamas” into “someone in country Y funds hamas as a hidden detail of business operation”?

^ Our company tried to create a btc-based business in EU. Banks required us to provide sof for every transaction, including banning any amount from fraud/criminal lists, and mixers were all in these lists. I doubt that you can easily launder via well-known, big enough mixers. At least to my understanding, EU is very aware of grey money that comes from btc market.


> Easy to shut down the mixer.

A counterexample is Bitcoin Fog.


Mixers do not work for any significant amount of Bitcoin. There just isn't sufficient cover traffic. Blockchain analysis firms put the effort into the teduis task of untangling them.


Yes but there is no ID required to initiate transactions. How do you translate the parties involved in the transaction to actual people behind it?


Police work. I wouldn't bet on being able to identify any particular individual, but you're always leaking more than you think.


How about exchanging BTC for Monero, making a Monero transaction and exchanging Monero back into BTC?


"It is extremely easy for sophisticated governments in the USA and Israel to identify who has donated"

Not really.

If someone is sending money from their Coinbase on-exchange wallet then fair enough, but if the wallet holder has not been through a KYC process then (while it's in the public ledger) it's still almost impossible to track the source of the funds - knowing the source and destination wallets tells you nothing.


You know more than the source and destination for a transaction - you know the entire chain of custody for any flow of value.

Governments are very certainly tracking this. With augmentation and pattern matching, they will know quite a bit.


You can't spend crypto directly on many things, most need fiat. Currently on ramps and off ramps are still used and can be used to identify suspects.


That gets very hard very quickly if you're involving something like monero and are happy to pay some fees and don't require giant amounts in one transaction.


> Bitcoin is a public ledger. It is the very opposite of anonymous

That's rather misleading, you can see the wallet address but you don't know who controls the wallet. I assumed bitcoin advocates here would prefer not to spread misinformation.


You very much do. Or rather, there are several companies that do so called blockchain analysis and cluster addresses together in order to identify to whom they belong. They are quite efficient at what they do. If you're unable to identify an owner of an address, you are at least able to identify the on ramp or off ramp the individual used and use that information to identify your suspect.


Anyone who cares about anonymity uses a Bitcoin mixer.

Notwithstanding what you say about blockchain analysis, I'm not aware that anything mixed by Bitcoin Fog has been deanonymized. And that includes some major Bitcoin thefts, such as the 96000 BTC from Sheep Marketplace.


I'm curious, if I use a private wallet how would they know that it is mine, John Dever, living at 109 Aston Avenue, NY?


They know your IP address.


You mean the IP of your Tor exit node.


Sure, if you're aware enough to use Tor.

But I wonder what percentage of "terrorist" contributors know to use Tor.


Let me understand, they are smart enough to use bitcoin and dumb enough to not use Tor? I am not sure how big is the intersection of these two sets.


Maybe you're right.


But isn't the address is published on their website... ?


Destination is ofcourse (which can also be generated new for each donation btw) but what about the source? It could be anyone. There are services and protocol like coinjoin and tumble that will mix transactions, making it further impossible to narrow down on the right source


just because it is published that doesn't mean it's easy to track who the funds are coming from.

In traditional finance there is usually some sort of method in place that directly associates (either concretely as in say requiring an ID or loosely as in just having video surveillance correlated with say a money order or money gram transfer) a persons identity with an account anytime they are conducting any form of financial transaction.

With bitcoin, there is no way to pinpoint exactly who created an address. I can create thousands of wallets, and distribute them to all my terrorist buddies across the world for example, and it's not like traditional finance where i had to get somebody connected to the government (as the banks are) to sign off on me doing that.

The only weaknesses bitcoin has that I can see is

1.

that people's computers are typically less secure and easier to break into than banks who do a good job implementing security, and therefore its way easier to steal..

2. Because its decentralized and entirely electronic based when somebody actually steals your money it is virtually impossible to reverse that without requiring a hard fork of the block chain and for some currencies you just can't do that. (for example, nobody is going to be able to hardfork btc and take over it just because somebody ripped off a $1m worth of BTC from joe shmoe who hadn't updated his Ubuntu PC in 2 months because he's too lazy to type in his password everyday)

And lastly, the fact that bitcoin (and all other currency for that matter) becomes virtually worthless when nobody is willing to give you fiat in exchange for it. There is always going to be a weakness in the fact that these terrorists are going to need to convert their bitcoin into fiat eventually. Realistically, it doesn't actually make any sense why terrorist organizations would do this because of this weakness. You'd have to find a buyer for them who can give you fiat directly without raising suspicion. Which means direct cash exchanges and if you are already at that level of coming out into the open. You might as well just mail people cash using bogus identities and PO boxes.


The second point is true for large quantities, e.g. if they want to cash in on 100MUS$. But they can still pay hosting fees, or send the coins to their friends in western countries to seed propaganda (or worse) there.

//edit: The important thing then is that the coins are not "tainted" as being terrorist donations. With the system described in the article that may be possible.


All this is based on assumption that those "terrorists" exist and need a sophisticated a reliable banking system. A simpler theory is that "terrorists" are state actors who challenge each other to get something practical in return. State actors don't need this bitcoin stuff: they can just send golden bullions in a diplomatic airplane and this transaction will be completely untraceable.


> All this is based on assumption that those "terrorists" exist and need a sophisticated a reliable banking system.

And that they don't have one. They've used the hawala system since pretty much forever.


There is an interesting dynamic at play here. Western democracies have arguably created the foundation for developing bitcoin with their highly functional education systems and uncensored exchange between citizens. They also created the desire to implement something like bitcoin with their (more or less) subtle movement towards authority and policing.

Next step, western governments (correctly) identify bitcoin as a threat to their current policy enforcements. Now we see the narrative spun against bitcoin as a tool of evil powers and criminals. Sooner or later it will be attacked more or less directly. Thus, the governments confirm the motivation for creating bitcoin in the first place to their own citizen. "See, the White House /wants/ to control us. We /need/ tools like it." You could replace bitcoin with any other technology that protects privacy btw. be it Tor, GPG, or whatever.

So what happens now: Will the governments increase the motivation for the developers of said tools in an endless arms race, creating a vicious cycle, where governments trigger the development of better and better tools for criminals? Or will they at some point start to attack the means to actually implement these tools? Will there be a form of arms control for compilers? Like a government-controlled app store?


It's worth adding that "terrorists" is a fictional organization and merely means "the bad guys".


Propaganda. They used to turn to dollars. We should ban that currency


Another hitjob on Bitcoin paid for & promoted by old money.

Terrorists using Bitcoin for funding are idiots. They're creating an undeniable, timestamped treasure trove of digital evidence which is far simpler to trace and track than any cash transactions.

I would hope intelligence services are trying to lure terrorists in to using Bitcoin by pushing articles like this as opposed to actually believing that Bitcoin transactions can't be tracked and can't be used to hunt down funding sources.


Another hitjob on Bitcoin paid for & promoted by old money.

If it's true that the banks and old businesses are paying for news articles to denounce Bitcoin then that's a lot more interesting than this article. I think it's much more likely that a journalist read that a law enforcement agency confiscated a few Bitcoin and saw an angle for an edgy "OMG terrorists!" article.


Bitcoin doesn't track who made the transaction, it tracks which computer made the transaction. This is an important distinction because the banking system is fully setup to track who makes transactions, they don't care which computer makes them.

Now law enforcement need to do the job of the banking system: figure out who made the transaction.


True, but by the time something goes wrong (read: explosions) having a digital paper trail is moot.


... promoted by old money.

I didn't know old money was defined as anyone who didn't want to get attacked by well-funded terrorists. In the future, I'd avoid this kind of conspiracy theory advocacy as it weakens any argument you staple it to.

AML/KYC and the OFAC list aren't there because the acronyms make you sound fancy. They're there because society agrees payments should be censorable.


Does it agree? Or is the average person just too uninformed and powerless to do anything about it, particularly because sinister effects of such procedures are long-term and hard to see?

After all, Bitcoin and other cryptocurrencies are also a product of society.


If you don't want to have an OFAC list I suggest you petition your congressperson and see how far you get. Or take your case to the people! Tell me, who do you want to pay that you can't right now, because they're Syrian/Iranian/North Korean?


I don't have a congressperson. I like having privacy in my payments even though I (to my knowledge) do not fund criminals. I do find that I share this sentiment with many people I talk to about it.


Bitcoin payments aren’t private or anonymous, they’re pseudonymous and consequently if it ever actually catches on beyond the seedy underbelly of scamming investors, automated deanonymization will be standard, and you will somehow enjoy even less privacy.


I doubt routine, automated deanonymization will ever be the standard for Bitcoin, but even if so, there are better alternatives when it comes to privacy, such as Monero. I have no doubt others will appears too.

In any case, the point is that privacy of financial transactions is a good thing.


You say that like it's self-evident, but it isn't. You haven't presented a compelling argument for why absolute privacy in financial transactions matters, let alone is an objective good.

However, my argument isn't just against private, it's also against trustless. Censoring transactions to entities deemed by society as harmful (terrorists, sanctioned entities) is a good thing. This cannot be implemented with a trustless system. If Monero were totally private but had a way of determining if the payees were sanctioned entities, that would be one thing, but it doesn't. Auditability matters. How can you track down the next Enron if you can't see their transactions? How can you follow the flow of stolen money? It's fantasy.

Default-hidden, available on subpoena is the middle ground all law and order societies have deemed to be the right place to draw the line. You need to have a solid basis for why this should be thrown away, and how you plan to address these things.

This feels like a software engineering "this system is too complicated to modify, let's throw it out and start over; thus solving the problem once and for all" type deal.


> You say that like it's self-evident, but it isn't. You haven't presented a compelling argument for why absolute privacy in financial transactions matters, let alone is an objective good.

Well, it works both ways. The same could be said about your position.

I do think privacy should be the default everywhere and I consider this an objective good. I do not trust centralized entities scrutinizing my life and deciding what's right and what's wrong, especially since those entities are in a constant state of flux depending on power games I have no control over.

Society used and continues to use cash for centuries, a method of payment which fundamentally leaves no trail by itself... And the world did not end.

Auditability can be enforced in the business sector, where it matters the most. There is no reason my personal transactions need to be auditable by anyone.

> Default-hidden, available on subpoena is the middle ground all law and order societies have deemed to be the right place to draw the line.

Technology like Monero seem to me to be the result of people deciding otherwise. Monero and similar tech exists and isn't likely going away. How do you plan to address that?


OMG terrorists!

What next? We must not use knifes for cutting our food because terrorists use knifes to do bad stuff?


Literally what is happening in the UK. Not that I agree with this.


What are you referring to? Do you have a source?



When Algeria start their revolution and resistance they were called terrorists for years till they got their freedom now they are heroes, history just repeating it self.


Slightly misleading headline. They're remarkably late to turn to Bitcoin, but they're learning very fast. The body of the article makes this clear.


And that they're learning that Bitcoin is not the best options

> in part by using cryptocurrencies that provide even more privacy than Bitcoin.


Wow it's so good that even terrorists are using it? Imagine that, terrorists are ditching the all-powerful greenback cash for bitcoin. Surely this is bad for bitcoin


Fascinating, so you're telling me, that a permissionless, decentralized, trustless payments system can be used to pay literally anyone even if the broader society is being physically attacked by the payees? Truly, I'm shocked. SHOCKED. It's almost like those characteristics aren't desirable in a payments system.


And look which 127 time Pulitzer price winner isnt above acting as a propaganda outlet. Its just sad, the headline is just the cherry on top.


Bitcoin is more empowering for criminals than for law-abiding citizens, true or false? The same cannot be said of cash, in my opinion.


False. No criminal wants a complete digital trail of their transactions.


In theory, Bitcoin is about creating a global anarcho-capitalist economy which can't be taxed by governments or interfered with by law enforcement (irregardless of whether it can be in practice.) It's about empowering people and dis-empowering the state. It just happens that criminals are the ones who find those features more attractive than fiat.

And it's kind of funny seeing people here get offended at the idea that criminals would find it useful. That's supposed to be a feature, not a bug.


True because generously, the only thing Bitcoin adds above and beyond what you can do with cash is skirt the law and pay anyone you want even if it's illegal to do so.


This, as well as transferring 2 billion dollars around the world withing few minuets for a few dollars.


This is a half-baked talking point. If you're saying a single person can't send two billion dollars in cash in the current system, then, great, nobody cares. That's not a problem people have. If you're suggesting international remittences aren't a solved problem at a small scale, I suggest you do some research.

Further Bitcoin's wild volatility means that no, you can't send "a few billion dollars" within a "few minutes" for a "few dollars". To send dollars, you first need to pay an exchange a 1% fee to buy BTC, wait a few days for it to clear, pay a BTC transaction fee, wait a few hours for the confirmations, pay the destination exchange a 1% fee, then wait for that to clear. All in you're talking a few dollars, a few days, a few percent and huge volatility risk.

Or, you fire up Interactive Brokers and pay mid-market rates for an exchange with a fee of $20 per million, confirmed instantly. Or TransferWise. Or Western Union (believe it or not they're pretty competitive).


Yes, it is half-baked but still carries a kernel of truth. Most people don't need to transfer two billion dollars, but they still have issues with smaller amounts. It is possible to use alternative means, but they will often be more expensive and less flexible.

It is true that you need to own BTC to send X dollars, but that is true with regards to any other means - you have to own bank dollars to wire dollars, to get them you have to convert from your local currency or to deposit your "real", cash dollar notes to your bank. And depend on where you are, this may be faster or slower process than converting cash to BTC. Perhaps you are an American and used to have USD available in the banks, consider then having to transfer CHF. There are lots of places where you can buy BTC with cash pretty much immediately. Transferring cash to bank dollars or converting local currency will often take longer and will be more of a hassle. And if you think 1% is bad, try converting currencies at the bank, your credit card or street change places.


Within Europe you have SEPA, its free/instant. Within Canada you have Interac eTransfer, it’s free/instant. Within the US you have Venmo and Square Cash.

Internationally you have TransferWise, it takes a day or two and costs 0.75% and carries no volatility risk. Or IB. Or WU. Or myriad other options, there’s sites to compare rates. Along the USD-INR corridor it’s totally possible to pay 0% with these services.

You’re dramatically understating the cost and risk of a BTC exchange. It’s 2% + $3 + volatility and it moves 10% in days. Or the risk an exchange just goes under with all your money like the guy who lost $400K trying to do Forex in Quadriga.

No idea how it works in CH but the majority of credit cards in the US charge no foreign transaction fees (mid-market rates) and why use a street change place when you can use an ATM in the foreign country for a low fixed dollar fee if any.

If you investigated your options you’d realize this problem is already solved and better.


Well, seems like the options you have are better for you. In the market I operate in credit cards fees are %2.5-3. Street change places are popular because they are the cheapest option. Using SEPA is expensive and is not instant (your bank will usually transmit the transaction about a day after you order it). And anyway, a day or two is far from instant.

I didn't understate the risk of BTC exchanges, I didn't discuss it at all. I also didn't and wouldn't claim that BTC is flawless or close to that. There are multiple downsides, risk and usability issues. I only reacted to your claim that it is only useful for illegal ends.


> Well, seems like the options you have are better for you. In the market I operate in credit cards fees are %2.5-3.

Where, out of curiosity? And is a TransferWise Borderless account an option for you, to sidestep this?

> Street change places are popular because they are the cheapest option. Using SEPA is expensive and is not instant (your bank will usually transmit the transaction about a day after you order it). And anyway, a day or two is far from instant.

TransferWise remains a risk free option less than 1%. SEPA payments cost the same as a domestic transfer, often free, or a few cents, and within the Euro zone there’s no currency to convert. Further they are instant from a network perspective but banks do all offer processing time guarantees. And while potentially far from instant at minimum one SEPA transaction is required to move money into or out of the Eurozone via an exchange so you’re just adding needless extra steps.

> I didn't understate the risk of BTC exchanges, I didn't discuss it at all. I also didn't and wouldn't claim that BTC is flawless or close to that. There are multiple downsides, risk and usability issues. I only reacted to your claim that it is only useful for illegal ends.

By omitting it you made it seem like a viable option, it’s not. The risk was left out of the “couple of dollars” quote like a resort fee at a hotel. There are better, cheaper, faster options. Crypto has no business in the conversation because they’re so clumsy and expensive.

Imo in a market where better options exist, showing up with a worse one by all metrics with no path or plan to improve it doesn’t demonstrate its viability or fitness for purpose. Which means by de facto that this isn’t an example of a legitimate use case. Why would you use a worse product?

For instance it’s like me showing up and saying for $1000 I’ll fly your money personally - with a nontrivial risk I’ll get bored and just keep your money. That doesn’t demonstrate my legitimacy as a money transmitter. Or trying to sell a typewriter as a computer. Or a horse next to a car dealership. Sure you could but why?


wait, what? can i not pay in cash for illegal product/service?


Well if you want to pay someone on the international sanctions list in cash you're going to need to buy a plane ticket, and check your duffel back of money. If you want to wire it to them, you definitely can't (or if the wire goes through expect a knock on the door). So while in theory, yes, in practice, no.


I can’t even..

First, whatever you’re wiring - isn’t cash pretty much by definition.

Second - why is your default example of paying for illegal product/service is about somebody in a different country on an international sanctions list? How about buying drugs on the street? Doesn’t involve planes and duffel bags of money. Does involve cash.


Scope and breadth of effect, mostly. The AML/KYC/OFAC processes are designed to both enforce international sanctions [1, 2] and also to operate at a more local level [3]. Cryptocurrencies like Monero and Zcash specifically make traceability difficult or impossible. This situation is strictly worse along all axes. Just because it's currently possible to do something illegal (and we're working hard to crack down on that) doesn't mean our new goal should be to enable that faster, cheaper and easier (and not bother with enforcement at all) -- it's regressive.

[1] https://cointelegraph.com/news/iran-recognizes-bitcoin-and-c...

[2] https://www.independent.co.uk/life-style/gadgets-and-tech/ne...

[3] https://thenextweb.com/hardfork/2019/05/03/wall-street-marke...


The question was if it’s possible to pay with cash for illegal products/services.

You keep dodging and dancing around easy and obvious answer - of course yes!

Now the question becomes - why is it so hard for you to admit that cash is being used for illegal purposes?


No, I didn't dodge your question, I answered it -- on both a local and global scale. Yes, it is. Of course it is. I didn't think I had to because to say no would be insane and that it went without saying. I don't believe anyone has ever made that argument.

However, cash is difficult to transact in material quantities due to it's physical volume, the fact you have to defend it, and the fact that few legitimate businesses accept meaningful quantities. If you want to make a larger purchase you have to deposit it into a bank account somewhere and launder it which is when AML/KYC/OFAC come into play.

It's irrelevant to this conversation that cash is being used for illegal purposes, because we're making active attempts to stop that from happening. You're proposing we switch to a technology stack that makes it harder to enforce the law, intentionally, along every axis. That makes this regressive. If that's your argument, own it, but let's not mince words.


cash fuels orders of magnitude more illegal activities. It’s hypocritical to go after crypto to solve illegal activities problem when you havent solves them for cash or at least brought down to crypto levels.

And lastly - “let’s ban bitcoin because bad people do bad things” is the same argument as “let’s ban encryption because bad people communicate bad things”.

If you’re for government control of every aspect of your life, if you’re for asking permission to transact or communicate - we just have completely different world views.

Unfortunately there is no middle ground - either you have security or you are backdoored. Either you have financial freedom or you don’t.

Governments should target bad people not genuinely useful tools used by bad people. I don’t care that it’s hard - that’s what I pay taxes for, not to yield control over my life even further.


> cash fuels orders of magnitude more illegal activities. It’s hypocritical to go after crypto to solve illegal activities problem when you havent solves them for cash or at least brought down to crypto levels.

No, that’s not what I’m saying. I’m saying we shouldn’t advocate a worse solution than what we have today, along every axis. If crypto replaced cash illegal activities would be easier and limited to 7tx/sec (haha, jokes, ish)

To be clear I’m also not proposing banning bitcoin, I’m just proposing not giving it a platform like I would with offensive speech. You’re free to say anything and use bitcoin all you want but that doesn’t mean you’re entitled to a platform to do so.

> If you’re for government control of every aspect of your life, if you’re for asking permission to transact or communicate - we just have completely different world views.

Bitcoin hash power is 80% in the control of 3 mining pools in the PRC who could with the stroke of a pen censor everything. Due to efficiency of scale proof of work always centralizes along the cheapest resources. Going all in on PoW coins is outsourcing control of your sovereign currency to a totalitarian ethnostate but with extra steps. Why not transact in Renminbi and save some electricity? I’ll stick to sovereign management thanks.

> Governments should target bad people not genuinely useful tools used by bad people. I don’t care that it’s hard - that’s what I pay taxes for, not to yield control over my life even further.

Now this is a truly novel argument: make the job of the government harder so you get value for your tax dollars. Even to the detriment of your self and the broader society.


> we shouldn’t advocate a worse solution than what we have today, along every axis

Crypto is actually better than cash on every axis

> limited to 7tx/sec (haha, jokes, ish)

Just shows you’re not very informed on the topic

> Bitcoin hash power is 80% in the control of 3 mining pools in the PRC who could with the stroke of a pen censor everything

Miners don’t control the network so they can’t really censor without consequences. Mining pools are composed of many independent miners, you can’t take over them by taking over pool operator - they will just leave and form another pool.

> Now this is a truly novel argument: make the job of the government harder so you get value for your tax dollars.

Job of government becomes harder/easier due to emergence of new tech not because you or I want it.


Cryptocurrency can adapt & wallets can be frozen in some instances. Point being, something can be done. Governments can pick and choose their cryptocurrency once Swift is replaced by Japan.

Fiat money can't & will always be used for terrorism.


There is no way to reliably freeze BTC wallets as far as I'm aware. At best you could convince certain exchanges or miners to blacklist them, but even one that allows a trade or transaction to go through should be enough to swap to a different currency and lose anyone following the trail. Curious if there's another way that I don't know about.


BTC, no.. if you’re implemented a cryptocurrency using for example ethereum, you could easily do that, and some actually do so.


So something can be done, if the terrorists happen to be using a crypto with that functionality included. So basically, nothing can be done if they just use a different network? Or even just the most popular network.





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