From Bitcoin to Tron: The Evolution of Terrorist Financing in the Digital Age

Israel faces a new threat in its fight against funding terrorist groups such as Hamas and Hezbollah. As it became known, the fast-growing Tron cryptocurrency network plays a key role in this area. The service is faster and cheaper than its biggest competitor, Bitcoin, and has already overtaken it as a platform for cryptocurrency transfers linked to groups that Israel, the United States and other countries designate as terrorists.

According to a recent analysis published by Reuters and interviews with seven experts in the field of financial crime and blockchain research, there has been a sharp increase in the seizure of Tron wallets by Israeli security services since 2021, while the number of seizures of Bitcoin wallets has decreased.

According to Mriganka Pattnaik, CEO of New York-based blockchain analysis company Merkle Science, terrorist organizations are increasingly favoring Tron because of its speed of transactions, low fees and stability.

Israel's National Bureau for Counter Terror Financing of Israel (NBCTF) froze 143 Tron wallets from July 2021 to October 2023 that were associated with a “terrorist organization” or used for “grave terrorist crimes”, according to terrorists.

A representative of the Tron platform, registered in the British Virgin Islands, Hayward Wong noted that any technology could in theory be used for dubious purposes, citing the example of the use of US dollars for money laundering. Wong emphasized that Tron does not control the use of its technology and is not affiliated in any way with groups identified by Israel as terrorists.

Experts argue that it was the improvement of the capacity of law enforcement agencies to monitor transactions in Bitcoin that led to the rapid transition of such illegal groups to Tron. According to  former director of Israel's anti-money laundering watchdog Shlomit Wagman, Tron is a major “blind spot” in countering terrorist financing.

At the same time, Tron has become the dominant blockchain platform for transactions with Tether, the largest “stablecoin” backed by reserves and aiming for a 1:1 ratio with the dollar. However, Tether representatives stated that they actively cooperate with law enforcement agencies, regularly monitoring and freezing tokens used for dubious purposes.

It is unclear whether global regulators will be able to develop effective measures to control the use of Tron and similar cryptocurrencies. But it is already clear that this method of exchanging money may become even more popular for illegal purposes than the ubiquitous Bitcoin.

The investigation highlights the challenges of combating terrorist financing in the era of cryptocurrencies and raises questions about the role and responsibility of technology platforms in this process.