Inside the crackdown on IS’s favourite cryptocurrency (2024)

IS tried several means to continue receiving donations after Monero, its preferred cryptocurrency, was delisted on Binance

In early February 2024, news leaked that Binance, the world’s largest cryptocurrency exchange, would be delisting the ultra-secretive currency, Monero (XMR). Before the official announcement of the delisting on 20 February 2024, Al-Raud, an Islamic State (IS) affiliate site, had already opened a new cryptocurrency wallet for donors to continue to receive Monero payments outside Binance. Then, on 29 March 2024, about one month after Binance expelled Monero, Al-Raud added a new cryptocurrency called Zcash (ZEC) to accept donations from IS supporters.

The switch to Zcash was the first time Code for Africa detected an IS-affiliated website accepting donations through a cryptocurrency other than Monero. Zcash has privacy features similar to Monero’s and is still listed on Binance.

Monero’s delisting on Binance, which has more than 170 million users, would likely have been a major challenge to IS. Al-Raud is a significant player in IS’s digital operations — it is one of only four IS-affiliate websites and one of only two that publishes a cryptocurrency wallet address, the other being I’lam. In addition, Monero’s delisting on Binance could also have affected the flow of donations to IS and the group’s ability to convert Monero to traditional currency. IS donors may have also experienced roadblocks in acquiring Monero because they would have needed to buy it from other exchanges that might be less familiar to them.

As of June 2023, Al-Raud’s online wallet received payments only through Monero. In comments on the Al-Raud site, most donors mentioned Binance as the source for acquiring Monero. Moreover, losing the ability to use Binance to facilitate Monero transactions likely presented IS and its donors with higher transaction fees. Binance transaction fees are less than some other well known exchanges, such as Coinbase and Gemini. For example, the transaction fee at Coinbase is double Binance’s fee, and Gemini’s fee is four times more than Binance.

Crypto for extremists

Criminal networks, extremists, and right-wing groups have considered Monero as the cryptocurrency of choice for a long time. Fast Company, which said Monero might be ‘the most private’ of cryptocurrencies, explained: ‘Its default setting is anonymity, while other currencies simply feature anonymity as an option.’

IS is not the only extremist group to use Monero. The Counter Extremism Project, an international policy organisation that combats the growing threat of extremist ideologies, noted that as radicalism surges globally, cryptocurrency in general, and Monero in particular, is an attractive option because it is transnational. Al-Qaeda used Monero in Lebanon and Syria, for example.

In the US, the Southern Poverty Law Center (SPLC) found that far-right groups and white supremacists have profited from the use of cryptocurrency: ‘The extreme far right’s early embrace of cryptocurrencies such as Bitcoin and Monero has allowed them to expand their movement and to obscure funding sources.’ The SPLC noted that US neo-Nazi and founder of the website The Daily Stormer, Andrew Anglin, said Monero could be used to work around ‘spies from the various “woke” anti-freedom organisations’.

Other white supremacist groups such as the National Justice Party, which is linked to pro-Russia propagandists, have accepted Monero and Bitcoin since 2021.

The crackdown on cryptocurrency’s relationship with extremists is growing. In April, the EU released the world’s first comprehensive regulatory framework for crypto assets. Now, other exchanges, like Kraken, are delisting Monero.

Sidestepping the restrictions

After the news that Binance would delist Monero, Al-Raud opened a new wallet and anonymous commenters provided directions to people seeking avenues to donate. They also explained how to navigate the new system.

One commenter shared technical information about how to obtain Monero without using Binance by using other exchanges like Local Monero and Monerujo.

Al-Raud administrators also shared information on private anonymous platforms like Telegram and Session, a web3-based messaging platform that does not require any identification method to use. Administrators told users who reached out on those platforms that they would receive intel on how to obtain XMR using traditional currencies such as dollars and euros by avoiding identity verification.

Now, with Zcash, IS has found an alternative method of receiving donations via Binance.

US wields the big stick

The US justice department prosecutors charged Binance with facilitating the movement of billions of dollars for extremists, criminal networks, and sanctions violators in November 2023.

When Binance removed the privacy-focused coin, it appeared to be a strategic move in line with its new approach to operating in the US market. After the accusations founder and chief executive Changpeng Zhao stepped down, pleading guilty to criminal charges and admitting that Binance failed to take basic anti-money laundering steps to check the flow of illicit money. The US justice department and the treasury department’s Financial Crimes Enforcement Network found that company employees were engaged in various misconduct and that many were aware of the consequences of allowing millions of illegal transactions. Binance agreed to pay $4.3 billion in fines and restitution to the US government and Zhao a $50 million fine. Zhao was sentenced to four months in prison on 30 April 2024.

Binance was not the first exchange to delist Monero. It was delisted by OKX, the world’s fourth-biggest cryptocurrency exchange, in January 2024. A month later, on 20 February 2024 (the same day it was delisted from Binance), Monero was also delisted from LiteFinance, an electronic communication network used by crypto traders. LiteFinance explained that it removed Monero due to its liquidity provider’s decision to delist the cryptocurrency.