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memri
July 16, 2019 No.
192

Fears About New Facebook Cryptocurrency Are Overblown – While Main Threat Of Criminal Activity On Telegram App Is Being Criminally Ignored

As the ISIS Caliphate crumbles, the most significant and dangerous recent development in global terrorism is terrorists' embrace of cryptocurrencies to fund their activities. This has quietly become part of their cyber arsenal, and there is a lack of real understanding in the West of how to stop it. This lack of understanding extends to something far greater – tech companies' responsibility for the entire phenomenon of global jihad.

Highlighting this lack of understanding of this threat is the near hysteria that greeted Facebook's June 18 announcement of its Libra cryptocurrency, set for launch next year. U.S. media have labeled it a "terrible idea" "untethered in ambition," and "a bold, bad move" and House Financial Services Committee chairwoman Maxine Waters said Facebook was "continuing its unchecked expansion and extending its reach into the lives of its users" – and her call for hearings on Libra was backed by the senior-most Republican on the committee, Rep. Patrick McHenry.

Today, the Senate Banking Committee on Banking, Housing & Urban Affairs is holding a hearing examining Facebook's digital currency. The Banking Committee wrote an open letter to Facebook last month asking how Libra works and if sought input from regulators and market watchdogs.

Also, at a July 15 press conference, Treasury Secretary Steven Mnuchin expressed "very serious concerns" about Libra, saying, "This is indeed a national security issue." A few days previously, President Trump tweeted that Libra "will have little standing or dependability." Earlier, on July 10, Federal Reserve Chairman Jerome Powell said that Libra raised "many serious concerns," including potential risks to the stability of the financial system because of Facebook's huge user base.  Internationally, Bank of England Governor Mark Carney said Libra must be "subject to the highest standards of regulation"; French Finance Minister Bruno Le Maire encouraged finance leaders from G7 countries to prepare a report on it for next month; and German European Parliament member Markus Ferber said that Facebook could become a "shadow bank" and that regulators should be on high alert.

While concern about the threat of cryptocurrency use by bad actors, especially terrorist groups, is absolutely warranted, the focus should be not exclusively on Facebook but on the encrypted messaging app Telegram, known for several years now to be a favorite of terrorists and jihadis, including ISIS, and already being used for fundraising by terrorist groups.

Facebook has already shown signs that it takes the threat seriously, first partnering with Visa, Mastercard, PayPal Holdings, and Uber, and now planning for regulation by Swiss financial authorities. This gives hope that its cryptocurrency will operate responsibly and transparently, and will assure security – in contrast to the upcoming cryptocurrency of Telegram, a platform which has clearly shown that it cares nothing for the security of the West.

In today's Committee on Banking, Housing, and Urban Affairs hearing on "Examining Facebook's Proposed Digital Currency and Data Privacy Considerations," Sen. Catherine Cortez Masto asked Facebook representative David Marcus what the company would be doing about possible criminal and terrorist use of Libra, and about money laundering using it. He said that Facebook is making sure that the account of everyone using it will be connected to a government-authorized ID, that it is now working with the Treasury Department, is registered with FinCEN, and more – none of which Telegram will be doing for its cryptocurrency.

Telegram's threat will grow exponentially when it releases its own TON blockchain and Gram cryptocurrency, reportedly this fall. In 2018, the company raised $1.7 billion in two private initial coin offering rounds for them; on April 11, it was reported that TON is already in private testing mode. Gram will reportedly launch as one of the most valuable cryptocurrencies ever, and every user will automatically receive their own wallet for it. This will be a game-changer for terrorist groups' fundraising and should be the No. 1 focus for counterterrorism officials.

A recent issue of the ISIS weekly Al-Naba', released on its Telegram channel, highlighted the role of terrorism funding. ISIS supporters, it said, are duty-bound to give money to support jihad when they cannot physically participate, funding military operations, purchasing equipment, and supporting the fighters and their families. On July 11, 2019, the pro-Islamic State (ISIS) tech group Electronic Horizons Foundation (EHF) posted an article on its Telegram channel about various online payment platforms and services and their security implications. The article also warned of the security threats facing supporters of the mujahideen who send and receive money via the internet using bitcoin and other methods.

And just last month, the Telegram channel of a pro-Al-Qaeda jihadi fundraising campaign announced that since its launch at the beginning of the month, it has received donations over $185,000 for an operations center. Similarly, last month, on the occasion of Ramadan, the Gaza-based Salafi Jaysh Al-Ummah group urged supporters to donate using bitcoin, kicking off its annual "Equip A Fighter" campaign on Telegram. Providing its Bitcoin address, it stated, "Donate money for the sake of Allah to support the mujahideen in Jerusalem in their jihad to defeat the Jews... Wage jihad with your wealth and equip a fighter," and called on Muslims to fund the purchase of RPG launchers and other weapons.

One notable terrorist fundraiser encouraging the use of cryptocurrency is the Syria-based Saudi cleric Abdallah Al-Muhaysini. He was designated by the U.S. Treasury's Office of Foreign Assets Control as a key figure in the Al-Qaeda affiliate Jabhat Al-Nusra in November 2016; he played a crucial role in providing millions in funds to that and other terror organizations, including securing $5 million in donations to arm fighters. On March 26, 2019, in a video on his Telegram channel, he called on followers worldwide to donate in bitcoin to support Hamas. Bitcoin, he said, is "a good, secure method by which to deliver money" and to "engage in jihad."

Referencing a ruling on bitcoin's Islamic permissibility by Mauritanian cleric Muhammad Al-Hasan Walad Al-Didu, a Muslim Brotherhood scholar and International Union of Muslim Scholars member, Al-Muhaysini underlined that supporters were allowed to use bitcoin to support this Hamas fundraising campaign "in order to overcome the security risks of donating to jihad."

The Hamas fundraising campaign in bitcoin was launched January 29, 2019, on its social media accounts on Telegram, Twitter, Facebook, YouTube, Instagram and other platforms, when the organization's military wing, the Al-Qassam Brigades – also a designated terrorist organization – called for donations in bitcoin and other cryptocurrencies. It published its bitcoin address and provided instructions as to how to do this using a QR code and wallet address.

Supporters of Hamas's jihad worldwide seem to be responding to its call for funding in bitcoin. American New Jersey resident Jonathan Xie, 20, arrested May 22, donated to the Al-Qassam Brigades in bitcoin on its website. The FBI affidavit included Xie's email exchanges with Hamas in which he asked to "be allowed to join" the Brigades and requested instructions for donating.

Al-Qaeda's Syria branch Hay'at Tahrir Al-Sham (HTS) is also pushing fundraising through anonymous online banking and cryptocurrencies. An April 18 report published by its Ebaa' news agency on its Telegram channel educated its followers on bitcoin, calling it "the future currency of economy" and a "revolutionary idea." Also, on July 13, 2019, Hay'at Tahrir Al-Sham jurist Sheikh Abu Al-Fath Al-Farghali posted a video on his Telegram channel, which has over 10,000 members, declaring Bitcoin "permissible" according to shari'a.

Although cryptocurrency fundraising by terrorist groups and their supporters continues to spread, many who are attempting to do something about it, including government circles, or study it in depth, including academia, have neither fully understood the threat nor offered solid ideas for tackling it. The FinCEN Improvement Act of 2019, passed March 11 in the House, stipulates, inter alia, that the Financial Crimes Enforcement Network (FinCEN) must protect against terrorism, but fails to mention Telegram. A recently released and widely cited study by the RAND Corporation, "Terrorist Use of Cryptocurrencies: Technical and Organizational Barriers and Future Threats," did not mention Telegram once, and even concluded: "There is little indication that terrorist organizations are using cryptocurrency in any sort of extensive or systematic way."

Over the past few years, I have met with government officials, legislators, and other agencies about the need to act on terrorist use of Telegram. Just as pressure was brought to bear on platforms including YouTube, Twitter, and Facebook to tackle the terrorist content on their platforms, and senior executives from each of these companies were called to testify before Congress just this month, the same should apply to Telegram founder and CEO Pavel Durov. The threat is now not only Telegram itself; its TON and Gram are a looming catastrophe for counterterrorism efforts.

 

*Steven Stalinsky is the executive director of the Middle East Media Research Institute (MEMRI) the author of American Traitor: The Rise and Fall of al Qaeda's U.S.-born Leader Adam Gadahn, and author of an upcoming study The Coming Storm: Terrorists Using Cryptocurrency set for release this month