WASHINGTON – Islamic State is likely using the bitcoin virtual online currency as a tool to secretly raise funds and settle transactions, a diplomatic source said Tuesday, quoting officials in the U.S.-led coalition against the group.
Members of the coalition worry that the use of bitcoin, which is harder to monitor than bank accounts, would make it even more difficult to choke off the funds and defeat the group, according to the source.
The suspicion about the use of bitcoin reinforces speculation that the social media-savvy group is using cyberspace not only to recruit new members but collect and secure money to fund its activities.
The extremist group has been apparently securing funds through trade in commodities such as petroleum and natural gas, but questions have remained about how its members transfer money and make payments, the source said.
It is widely believed that militants mostly exchange cash and jewelry, but this traditional way of exchanging assets faces the risk of being tracked down by enhanced monitoring by the coalition, including U.S. regulators.
Using bank accounts to funnel funds can also be monitored by financial authorities even if the money is dispersed into plural accounts, the source said.
These circumstances have apparently encouraged the extremists to rely on the bitcoin system as an alternative electronic transaction method, the source said.
The virtual currency in general provides users with greater secrecy and enables them to exchange it with major currencies such as the dollar and the yen online even though doing so is not authorized by governments or central banks.
U.S. President Barack Obama’s administration convened a ministerial meeting last week on how to contain the militants. Participants from more than 60 countries confirmed the need to cooperate in noncombat fields such as severing money flows to the extremists.
The source said the Islamic State group is a sophisticated user of information technology and that the coalition increasingly needs new approaches to defeating it.
The suspected use of bitcoin may be a sign, however, that the group has difficulties securing funds as demand for cheap oil it provides in the black market is declining amid a global fall in crude oil prices, the source said.