Online currency venture for IS

The latest ploy by the "Islamic State" in its quest to carve out a state from nations in the Middle East and Africa illustrates a political project that encompasses all aspects of life, especially those which concern finance and economy.

Intent on transforming itself from a group of militants from disparate backgrounds to a recognized nation, "Islamic State" (IS) is continuing to buildup state-like institutions and services, including schools, hospitals and now a treasury.

Its apparent use of the decentralized technology bitcoin has come at nearly the same time as IS minted and released its own currency, the "gold dinar." The group's use of the two currencies, however, will likely serve different purposes.

Digital transactions

The technology behind the digital currency bitcoin makes it difficult to trace, with a single unidentifiable wallet - or account - having received around $23 million (20.3 million euros) worth of bitcoin in the past month.

The EU Institute for Security Studies (EUISS) published a report in June detailing IS' use of digital currencies and encrypted platforms, noting that such practices makes it "particularly hard to trace" the flow of finances and black market goods.

"Sadaqa (private donations) constitute one of ISIL's main sources of revenue, and its supporters around the world have allegedly used digital currencies such as bitcoin to transfer money quickly to accounts held by ISIL militants while minimizing the risk of detection," wrote EUISS junior analyst Beatrice Berton, referring to IS by an alternate acronym.

Thousands of dollars worth of bitcoin has been sent to accounts purportedly affiliated with "Islamic State," with the one of the accounts registering its first transaction in 2012.

However, following a chain of transactions from the concerned account leads to another with more than $3 million (2.65 million euros) in bitcoin, though it is unclear who the account's owner is.

The account in question was discovered by anti-IS hacker group GhostSec, formerly affiliated with hacktivist collective Anonymous.

Ideological underpinnings

An essay written by 17-year-old Ali Amin entitled "Bitcoin and the Charity of Violent Physical Struggle" has posited bitcoin as an alternative currency for "Islamic State" after lambasting the use of foreign money as a means of exchange.

"A proposed solution to this is something known as bitcoin," wrote Amin under the alias Taqi'ul Deen al-Munthir.

Amin, better known for his now-suspended Twitter handle AmreekiWitness, was arrested in June in the US state of Virginia for providing material support to the "terrorist organization" by teaching "Islamic State" militants how to use bitcoin and encrypted platforms to stay anonymous online. In August he was sentenced to 11 years in prison.

Before his arrest, Amin had proposed a bitcoin marketplace structured on Islamic jurisprudence, wherein moderators would become qadis, the title used for judges when the Ottoman Empire and historical caliphate were one.

"New developments in bitcoin have allowed marketplaces that run on whatever law system the individuals choose. This instantly allows for Shariah only compliant markets that cross all borders, nation state regulations, send money instantly and are untrackable (sic) by kafir governments," Amin wrote, using the Arabic word for "infidels" when referring to Western states.

"This system has the potential to revive the lost sunnah of donating to the mujahedeen, it is simple, easy, and we ask Allah to hasten it's usage for us," Amin wrote.

'Golden dinar'

While international donations reach the terrorist groups in the form of encrypted bitcoins, "Islamic State" has also introduced its own currency in at least some of the territory it controls.

From commodities exchanges to coin minting, a video released in early September entitled "Rise of the Khilafah: Return of the Gold Dinar" provides a financial history of the development of currency, ending with an apparent release of the "Islamic State" currency.

According to the video, the militant group has restored "the gold dinar and silver durham as the ultimate measure of goods and services."

"A map of the world is featured on the coin's reverse, denoting the tidings of the prophet…concerning the territory that his ummah's reign would reach, including Constantinople, Rome and America," the narrator stated.

The video also shows the militants distributing the new currency to ordinary people in what appears to be the Syrian city Raqqa, the militant group's de facto capital.

Establishing a currency is only one step in the militant group's state crafting ambitions, one that may further embed it in Iraq and Syria amid an international effort to uproot the unsparing militant group.