Introduction
Terrorist exploitation of digital financing is a technological, regulatory, and enforcement problem everywhere extremists operate – all over the world. Indonesia, with its evolving domestic digital technology and history of Islamist extremism, make it a key case study in understanding terrorist financing. Groups like Jemaah Islamiyah (JI), Mujahid Indonesia Timur (MIT), and emerging cells have adapted their financing methods from traditional hawala and zakat-based charities to using cryptocurrencies and digital payment systems in order to evade detection. This Insight explores how these groups exploit Indonesia’s digital landscape to fund operations more securely and indirectly. The findings aim to help Indonesian and international authorities, along with tech companies, address the growing use of cryptocurrency to finance terrorism. By recognising this threat, both domestic and international firms can collaborate with governments and other stakeholders to strengthen systems and prevent exploitation.
Terrorists are Evading Detection and Funding Operations
The rise of digital financing, particularly cryptocurrency built on blockchain, has made financial transactions easier for users but more challenging for governments to monitor than traditional financing methods. This has created massive opportunity for misuse by extremist and terrorist actors for illicit funding.
Bitcoin, for example, is a decentralised digital currency that operates on a peer-to-peer network. While it is not truly anonymous, users can enhance privacy using tools like TOR/I2P, generating new wallet addresses for each transaction. Hierarchical Deterministic (HD) wallets further obscure identity by automatically creating a tree of wallet addresses from a single seed code.
Cryptocurrencies can be traded on centralised or decentralised exchanges. Third parties manage centralised exchanges, while decentralised ones rely on peer-to-peer protocols, giving users more control. Large exchanges can serve as anonymisers by mixing deposited coins with others, complicating traceability.
Additionally, users may employ mixers or “tumblers”— services that mix Bitcoins to obscure their origin. These can be centralised (charging fees) or peer-to-peer (operated without intermediaries). However, mixers carry risks, especially regarding trust and reliability.
Through these tools and methods, non-state actors are obscuring financial transactions and receiving funding from internal and external sources, even from remote, hidden locations. The digital landscape has made it easier for such groups to operate anonymously.
Terrorist groups have been using and exploiting cryptocurrency for years. Since at least 2019, Hamas has conducted donation drives using cryptocurrency. US congressional findings estimated that up to $165 million in crypto-linked transactions may have helped finance Hamas prior to the October 2023 attacks. Notably, on 13 August 2020, the US Department of Justice announced the largest-ever cryptocurrency seizure related to terrorism. It involved three designated Foreign Terrorist Organisations: Hamas’ military wing (al-Qassam Brigades), al-Qaeda, and ISIS. Authorities seized millions of dollars, over 300 crypto accounts, four websites, and social media pages tied to these groups.
These organisations, among the most prominent in the Jihadist world, have clearly demonstrated how cryptocurrency can be exploited for illicit financing. This poses a significant concern for Indonesia, where extremist actors could be inspired to adopt similar methods. Indonesian authorities must investigate and monitor such risks to prevent similar activities within the country.
Indonesian Analysis
Indonesian terrorist groups have increasingly turned to cryptocurrency to evade detection. Despite the country’s 2013 anti-terrorism financing law, groups continue to adapt and avoid law enforcement scrutiny.
Indonesia has a vast Non-Profit Organisation (NPO) network, with over 1,000 registered organisations, though many operate unregistered. Efforts by the Ministry of Religion to regulate many unregistered Islamic charities through the zakat management regime face significant limitations.
In discussing the financing of Indonesian terrorism, it is crucial to address the legal grey areas surrounding many NPOs. In March 2020, the Central Jakarta District Court listed several individuals and organisations on the domestic sanctions list for ties to terrorist groups like Hayat Tahrir Al-Sham (HTS). Several identified entities highlight the vulnerability of unregistered NPOs in terrorism financing, as they were responsible for funnelling resources to groups like HTS.
Later that year, more organisations were found to be run by ISIS supporters. These NPOs exploit religious sentiments, which resonate deeply in Indonesia, the world’s largest Muslim-majority country. By appealing to shared beliefs like zakat, they gain trust, mobilise resources, and operate under the guise of humanitarian work. This trust is easily exploited, especially in areas with weak regulatory oversight, making some religious NPOs a channel for extremist funding.
The problem of unregistered NPOs persists, and according to a representative from Densus 88, a counter-terrorism unit of the Indonesian government, hundreds of NPOs were under surveillance for their involvement in terrorism as of December 2021.
According to a May 2024 report by Indonesia’s Financial Transaction Reports and Analysis Center (PPATK), many NPOs have been added to the sanctions list for links to terrorism. One example is the Hilal Ahmar Society Indonesia (HASI), affiliated with Jemaah Islamiyah and operating under the guise of a humanitarian foundation in cities like Jakarta, Lampung, Semarang, and Yogyakarta. Despite such listings, the vast presence of NPOs in Indonesian Muslim society makes it difficult to determine how many are acting as shell organisations, funnelling funds to terrorist groups, and those with completely acceptable operations.
Indonesia Confronts Crypto-Fueled Terrorism Amid Rising ISIS Ties and Regulatory Gaps
Cryptocurrency use in terrorist financing in Indonesia dates back to at least 2017. Indonesia’s Anti-Money Laundering/Counter-Terrorism Financing (AML/CTF) agency was among the first to link crypto to terrorism globally, citing ISIS member Bahrun Naim’s use of Bitcoin to fund militants across Indonesia, avoiding formal financial systems. Platforms like PayPal were also used for funding. With the crypto market reaching $3.4 trillion in May 2025, its decentralised nature poses growing risks, as it is increasingly exploited by arms dealers, traffickers, and terrorists. Reports from the U.S. Treasury and the UN confirm rising crypto use by ISIS supporters in Asia. In 2023, TRM Labs uncovered on-chain evidence of ISIS-affiliated networks in Tajikistan, Indonesia, Pakistan, and Afghanistan using Tether (USDT) on the Tron network. In 2022, over $517,000 was sent via Indonesian exchanges to wallets tied to ISIS fundraising in Syria. These campaigns, often masked as humanitarian aid for ISIS families, saw regular $10,000 transfers. In May 2022, the U.S. sanctioned five Indonesians for facilitating such transactions to ISIS in Syria.
Figure 1: Transfers to Syria-based exchanges and pro-ISIS fundraising campaigns (Source: TRM Labs)
Indonesia is increasingly entangled in the evolving nexus of terrorist financing, with groups shifting from traditional cash methods to decentralised financial systems like cryptocurrency, particularly Bitcoin. As most terrorist funds in Indonesia come from domestic sources—mainly local donations—this shift poses new challenges. To counter this, Indonesia launched the SIPENDAR platform in 2021. Developed by PPATK, an independent Indonesian government agency established to prevent and combat terrorism financing regime in Indonesia, SIPENDAR is a centralised database that enables real-time information sharing between financial institutions and law enforcement. It allows Densus 88 to access financial intelligence and trace networks supporting terrorism. Through this system, PPATK can issue data requests to reporting entities within 24 hours, enabling authorities to conduct proactive investigations beyond just past attacks.
To combat the use of cryptocurrency by terrorist actors, Indonesia has implemented several safeguards. Cryptocurrency exchanges are required to follow Know Your Customer (KYC) and Anti-Money Laundering (AML), ensuring user identity verification and enabling monitoring of suspicious activity. Financial intelligence units, with support from exchanges, use blockchain analytics tools to trace transactions. While blockchain data is public, identifying users often requires international cooperation, especially when funds cross borders or use privacy-enhancing tools. Indonesia works closely with global partners to monitor and disrupt illicit crypto flows.
Despite recent progress, Indonesia still faces significant gaps in addressing the risks of cryptocurrency in terrorist financing. The primary anti-terrorism law (Law No. 15/2003) and the 2013 terrorist financing law (No. 9/2013) lack explicit provisions for virtual assets, falling behind the Financial Action Task Force (FATF) standards. A new rule in 2024 put Indonesia’s Financial Services Authority (OJK) in charge of crypto, replacing the previous regulator, Bappebti. It also requires crypto platforms to follow anti-money laundering rules. But so far, these changes are still just getting started.
Closing the Gaps: Advancing Indonesia’s Fight Against Terrorist Financing
Indonesia adopted the FATF travel rule in 2021, requiring identification of parties in crypto transactions above USD 1,000. However, regulatory enforcement and institutional capacity still lag behind more advanced jurisdictions like Singapore, the EU, and the U.S. Local Virtual Asset Service Providers (VASPs) are in early compliance phases, and there is a pressing need for trained personnel who understand the complexities of digital finance and terrorist threats.
Oversight of non-profit organisations (NPOs) also remains weak, despite their known vulnerability to abuse in terrorist financing. With thousands of NPOs operating in Indonesia, monitoring both their physical and digital transactions is crucial.
To effectively combat terrorism financing, Indonesia must strengthen its regulatory capacity, invest in specialised training for tech companies, and deepen international cooperation, especially with experienced partners like Singapore. Singapore has implemented various measures to combat illicit activities, including the Inter-Ministry Committee on Terrorist Designation (IMC-TD), which involves multiple government agencies, and a Financial Intelligence Unit (FIU) with a robust suspicious transaction reporting regime to detect and prevent money laundering and terrorism financing. Cutting off both domestic and international funding streams is essential. This requires stronger oversight of digital transactions and continuous regulatory adaptation. With improved enforcement, Indonesia can uncover hidden networks and significantly disrupt terrorist financing activities.
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Mochammad Jose Akmal is a driven Government Science student at Universitas Diponegoro with a strong foundation in political analysis, journalism, and international affairs. He has experience working with prominent institutions including the European Union Delegation and Kontan, and has contributed to global publications like International Policy Digest. Jose specializes in strategic communication, foreign policy, and public diplomacy, and his work bridges policy research with real-world impact.
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