According to a recent Europol investigation, there is no evidence linking the Islamic State with Bitcoin. It has been feared by both the media and governments that ISIS used Bitcoin or other cryptocurrencies for their cause. This fear increased after the November 13 Paris attacks, and that made Europol conclude an investigation of the case. The official report goes by:
“There is no evidence however of IS-financing networks in existence. Despite third party reporting suggesting the use of anonymous currencies like bitcoin by terrorists to finance their activities, this has not been confirmed by law enforcement. The financing of terrorist operations has not undergone any marked changes in the recent past. The sources of funding of the operatives in the EU are largely unknown.”
According to experts, possible payment methods for the Islamic State would be bank transfers and cash, instead of Bitcoin. Unlike traditional financing methods, BTC transactions can be easily tracked on a public ledger in real-time, which offers no advantage to the terrorists.
It is not stated in the Europol report that altcoins (alternative cryptocurrencies, such as litecoin) were involved in ISIS’ financing. The agency only referred to Bitcoin by name in their investigation.
The report also includes the communication for the Islamic State:
“The internet and social media are used for communication and the acquisition of goods (weapons, fake IDs) and services, made relatively safe for terrorists with the availability of secure and inherently encrypted appliances, such as WhatsApp, Skype and Viber. On Facebook, VKA and Twitter they join closed and hidden groups that can be accessed by invitation only, and use coded language.”
Europol also acknowledges the fact that the terrorist group is using Tor for anonymity:
“The use of encryption and anonymizing tools prevent conventional observation by security authorities. There is evidence of a level of technical knowledge available to religiously inspired terrorist groups, allowing them to make their use of the internet and social media invisible to intelligence and law enforcement agencies.”