(New York, N.Y.) — Fortune recently reported that Binance, the world’s largest cryptocurrency exchange, has responded to more than 47,000 law enforcement requests this year but distinguished itself by proactively sharing intelligence with Central Asian law enforcement authorities that led to the capture and arrest of a high-ranking member of ISIS-Khorasan Province (ISIS-K) in Istanbul. The firm claims to have built a team of cybersecurity experts that monitored a pro-ISIS Telegram channel to locate and analyze a crypto wallet address used by the ISIS-K leader to receive donations. Binance reportedly enlisted assistance of a crypto forensics firm and the National Bank of Tajikistan to investigate terror financing, demonstrating the complex layers of government and private sector cooperation that must take place to proactively identify and stamp out covert terror financing through cryptocurrency. 

Following the arrest of the ISIS-K official, the National Bank of Tajikistan’s financial monitoring department issued a statement pledging “close collaboration” with industry players “to combat criminal activities and build a safer cybersecurity space in the region.” 

Binance’s discovery follows a year of tumultuous press for the cryptocurrency industry. Far-right groups utilize privacy coins like Monero to crowd-fund their agenda, and ISIS groups across Tajikistan, Indonesia, and Afghanistan leverage Tether to circumvent transnational banking. The myriad options throughout the broader cryptocurrency world pose ongoing systemic challenges for governments and law enforcement authorities to effectively stay ahead of the latest trends in crypto financing of terror activities and dissemination of propaganda to incite violence and attacks. 

Earlier this year, CEP Senior Director Dr. Hans-Jakob Schindler weighed in on the critical shortcomings present in the regulatory framework, saying, 

“While regulators and policymakers dither and try to decide if cryptocurrencies have a future in the economy, early adopters, including terrorists and violent extremists, exploit a law enforcement blind spot. The ease by which money laundering and terrorism financing occur with cryptocurrencies and the more dangerous privacy coins are becoming a security threat of our own making through bureaucratic inaction.” 

Global governments and regulatory bodies have struggled to keep pace with the rapid technological growth and expansion of crypto and blockchain technologies since its inception in 2009. Following public pressure, some in the private sector have taken limited action. While it is an encouraging sign that Binance has begun to interdict the misuse of its services to a certain extent, this only occurred after the exchange was under sustained pressure by regulators in the U.S. In addition, as regular U.S. indictments demonstrate, this technology remains of interest to terrorist groups, including global terrorism networks such as ISIS, presenting a range of issues. 

First, the inconsistent global regulatory environment for cryptocurrencies hampers effective law enforcement cooperation and allows malign actors, such as terrorists, to hop between jurisdictions to avoid prosecution. Secondly, addressing new technologies such as tumblers, mixers, and “privacy coins” that obfuscate transaction paths of cryptocurrency transactions and encrypt user data would require additional support and cooperation from the private sector—something that continues to be the exception. Finally, decentralized wallets and exchanges require new regulatory concepts as the financial intermediary is eliminated by such freely available shareware. 

These complex and interlinking challenges would require that existing standards developed by the Financial Action Task Force (FATF) are implemented globally in an uniform manner. Furthermore, private sector stakeholders should begin prioritizing preventing the misuse of their systems over profits. Guidance in this regard has also been developed but remains ignored by many in the industry.