March 30 (Reuters) – Groups linked to Russia and Iran are increasingly using cryptocurrencies to finance the purchase of low-cost drones and military components, according to a new report from blockchain analytics firm Chainalysis.
Commercially available drones have become central to the wars in Ukraine and the Middle East, but because low-cost drones are widely available on global e-commerce platforms, it is often a challenge for authorities to track who is behind the purchases and what their intention with the products might be.
While most drone purchases are made using traditional financial paths, procurement networks are increasingly intersecting with blockchain, the public digital ledger on which cryptocurrencies are based, Chainalysis has found. This record allows investigators to map the path of a transaction from its origin to its destination.
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Blockchain researchers at Chainalysis were able to track the flow of cryptocurrencies from individual wallets connected to drone developers or paramilitary groups to the purchase of low-cost drones and their components from suppliers on e-commerce sites.
Since Russia’s invasion of Ukraine in 2022, pro-Russian groups have raised more than $8.3 million in cryptocurrency donations, and drones are among the specifically itemized purchases made with those donations, according to the survey.
“On blockchain, there’s this incredible opportunity, once you’ve identified the vendor, to see counterparty activity and make assessments that help clarify that usage and the intent behind the purchase,” said Andrew Fierman, head of national security intelligence at Chainalysis.
Chainalysis was able to compare transactions with digital currencies worth between $2,200 and $3,500 with the exact prices of drones and components on e-commerce platforms, Fierman said.
“We saw everything, from the request for the drones and the parts and how much they were wanting to get, to the photos that showed they purchased these products,” he said.
The study also found that groups linked to Iran are using cryptocurrencies to acquire drone parts and sell military equipment. He specifically highlighted a cryptocurrency wallet with connections to Iran’s Islamic Revolutionary Guard Corps, purchasing drone parts from a Hong Kong-based supplier.
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To be sure, the total volume of cryptocurrencies linked to drone purchases remains small compared to overall military spending, but the survey claims that blockchain could help authorities better track purchases that might otherwise remain obscure.
“Blockchain can provide a lot of information that isn’t necessarily available traditionally,” said Fierman.
