Groups linked to Russia and Iran are increasingly using cryptocurrency to finance the purchase of cheap combat drones and components. This is stated in a new report by the blockchain analysis company Chainalysis, reports "Reuters".
Commercially available drones have become a central topic in the conflicts in Ukraine and the Middle East, but because the cheap drones are widely available on global e-commerce platforms, it is often difficult for authorities to track who is behind the purchases and what their intentions are with the products.
While most drone purchases are made through traditional financial channels, public procurement networks are increasingly intersecting with blockchain - the public digital ledger on which cryptocurrencies are based, Chainalysis found. This ledger allows investigators to map the path of a transaction from its origin to its destination.
Blockchain researchers at Chainalysis were able to trace the flow of cryptocurrency from individual wallets associated with drone developers or paramilitary groups to the purchase of cheap drones and their components from suppliers on e-commerce sites.
The report states that since Russia’s invasion of Ukraine in 2022, pro-Russian groups have raised over $8.3 million in crypto donations, with drones among the purchases specifically listed.
"There is this incredible opportunity in blockchain, once you have identified the supplier, to see the activity of the counterparty and make assessments that help clarify that use and the intent behind the purchase," explained Andrew Fierman, head of the National Security Intelligence Division at the Chainalysis.
Chainalysis matched cryptocurrency transactions between $2,200 and $3,500 with the exact prices of drones and drone components on e-commerce platforms, he added.
"We saw everything from the request for the drones and parts and how much they wanted to get, to the photos showing that they purchased these goods," Fierman said.
The report also found that Iran-linked groups are using cryptocurrencies to purchase drone parts and sell military equipment. It specifically singles out a crypto wallet with ties to Iran’s Revolutionary Guard Corps that purchased drone parts from a Hong Kong-based supplier.
Of course, the total volume of cryptocurrencies associated with drone purchases remains small compared to overall military spending, but the report argues that blockchain can help authorities better track purchases that would otherwise go unreported.
"Blockchain can provide a lot of information that isn’t necessarily traditionally available," Fierman said.