Is crypto really to blame?

The ghastly events of this past month raise again some troubling questions: Does crypto have a terrorist fundraising problem? Are its networks really being exploited by terrorists to wreak global havoc? If so, what must it do better?

On the other hand, maybe the problem is one of perception — more appearance than reality — because public blockchains, after all, are transparent and traceable. In that event, how does the industry turn around a less-than-sterling reputation?

Cryptocurrencies like Bitcoin (BTC) have been associated with illicit activities almost from their inception. This image has been difficult to shake, even as analytical groups like Chainalysis assert that “terrorism financing is a very small portion of the already very small portion of cryptocurrency transaction volume that is illicit.”

But in early October, the world awoke to Hamas’ incursion into southern Israel, and shortly after, Israeli police announced it had frozen cryptocurrency accounts used by Hamas as part of its ongoing efforts to locate the “financial infrastructure in cryptocurrencies used by terror entities to fund their activities.”

A week later, a group of 28 United States senators and 76 Congressional representatives — led by Senator Elizabeth Warren — sent a letter to high-level Biden administration officials asking what steps are being taken “to address the use of cryptocurrency by terrorist organizations.”

So once again, the industry finds itself on the defensive as governments, legislators and even asset managers are asking: Are crypto’s networks again being exploited by the worst of the worst?

“Out of proportion to the facts”

“If any terrorist organization is using crypto for fundraising, then I’d argue it’s a problem,” Cody Carbone, vice president, policy at the Chamber of Digital Commerce, told Cointelegraph. But recent reports, including those appearing in The Wall Street Journal and later cited in the Warren coalition’s letter, were inaccurate. Carbone said: 

“I believe the numbers being used by WSJ and Senator Warren’s coalition are skewed or downright incorrect. According to Chainalysis, of the roughly $82 million in cryptocurrency received by the WSJ posted address, about $450,000 worth of funds were transferred from the known terror-affiliated wallet.” 

Kristin Smith, CEO of the Blockchain Association, told Cointelegraph: “We view…