The crypto art market is now worth well over $1 billion. The market, made up of non-fungible tokens (NFTs) that allow users to verify their ownership of a unique piece of art on the blockchain, has been hailed as a possible means of returning to the heyday of sales in both music and visual art. Importantly, the digitization of verifiable art ownership could provide a key pathway to investing wealth in digital assets in the long term.
It could also prove a key tool in terrorists’ efforts to securely store wealth over extended periods of time.
The relationship between terrorism and cryptocurrency, much like that between terrorism and the illicit antiquities trade, is widely written about but poorly understood. Illicit antiquities sales were widely believed to be fueling terrorism cells around the world, and such claims were even made by the assistant district attorney of New York some years back. That assumption proved to be false. The global marketplace of illicit goods was composed primarily of small, organized gangs and ambitious amateurs who were seeking to capitalize on the chaos of regional conflict.
Likewise, the belief that terrorists use cryptocurrency to buy low and sell high in an effort to sequester millions in loot is erroneous. Rather, terrorist organizations such as ISIS typically leverage cryptocurrencies to conceal smaller amounts of stored wealth and to receive financial support from wealthy supporters with greater anonymity.
Vitally, the prevalence of cryptocurrency as a means of wealth storage (as opposed to wealth generation) is sharply increasing among terrorist groups in the wake of ISIS’ loss of territory.
In August, US authorities seized more than 300 crypto accounts linked to the al-Qassam Brigades, Hamas, al-Qaeda, and ISIS. Though far from billions, the cryptocurrency seized in that operation was then equivalent to over $2 million. Had that wealth all been stored in Bitcoin, it would now be worth nearly $10 million.
It is this potential for passive wealth generation and secure long-term wealth storage that makes the newly ascendent crypto art market rife with opportunity for bad actors.
By leveraging a distributed network of accounts to purchase crypto art, the small but cash rich remnants of ISIS and other terror cells could feasibly store wealth in assets that will likely retain a relatively more stable value than the cryptocurrencies that are used to purchase them.
Similarly to how wealthy foreign investors poured billions into luxury properties throughout London, Miami, and New York in an effort to conceal their riches, so too could terrorists store and transfer wealth with NFTs.
There will be hurdles, of course. Some inconvenience still exists concerning the conversion of crypto into cash and its withdrawal, particularly so in conflict-torn regions. Another is the documented nature of the blockchain and NFTs generally.
Relatively rudimentary workarounds already exist for these issues, however.
Cryptocurrencies such as Zcash already deploy increased measures to guard the privacy of transactional details and have been favored by terrorists in the past. Further, NFT sales and purchases and cash-outs could be carried out by anonymous proxies by leveraging radicalized or otherwise sympathetic contacts in the West and Near East.
Again, though, the real allure of NFT ownership among terrorist groups is not likely to be as a source of income, but as a long-term wealth asset that is capable of being passed between those with access to the crypto wallet that owns it. NFTs therefore may become a key tool in sustaining long-term terrorist and criminal enterprises by offering a means of maintaining and transferring the ownership of wealth between select players.
Defense and security experts would do well to mind the long-term ramifications of the new, digital haute. Quickly receding are the days of static luxury condos, safety deposit boxes, and complex shell schemes.
Arrived are the days of 34-character addresses and the digital ledger.