In the ongoing conflict between Israel and Hamas, cryptocurrency has emerged as a pivotal battleground, experts assert. Over recent days, Israeli and US authorities have escalated their efforts to track illicit funds routed through digital currencies, intensifying the financial squeeze on Hamas.
Ari Redbord, the Global Policy Head at TRM Labs, a specialist in crypto tracking, noted a conspicuous reduction in crypto transfer activity within pro-Hamas support networks. "We are observing a significant downturn in activity since the conflict's onset," Redbord disclosed, attributing this trend to Israel's assertive and successful efforts in dismantling these fundraising channels.
In response to a cross-border assault by Hamas militants, which culminated in a substantial rocket barrage on October 7, resulting in over 1,400 casualties and 222 hostages, according to Israeli authorities, Israel launched retaliatory strikes on Gaza. The Hamas-run health ministry reports that these strikes have now claimed over 6,500 lives in Gaza.
Cryptocurrency is prized for its swift and unregulated nature, offering a means to transfer funds that eludes the oversight of central banks, rendering it less traceable than conventional bank transfers. Yet, this clandestine realm of decentralized blockchain-based digital units has earned notoriety for its association with illicit transactions due to its sub-rosa allure.
Just two weeks ago, Israeli law enforcement disclosed the identification and freezing of accounts affiliated with Hamas, which sought to solicit donations via social platforms using Binance, the world's largest cryptocurrency exchange. A spokeswoman for Binance affirmed the exchange's adherence to internationally recognized sanctions protocols, promptly blocking a limited number of accounts associated with illicit funds.
Redbord, previously a senior advisor to the US government, pointed out that Hamas adopted cryptocurrency no later than 2019, leveraging platforms like the Telegram messaging network and even their own website to seek funding. However, in April, Hamas decided to cease accepting Bitcoin due to heightened global scrutiny of the premier digital currency.
Presently, crypto fundraising is coordinated through a network of support groups aligned with Hamas. TRM Labs has vigilantly monitored virtual crypto wallets linked to these support groups since the conflict's commencement, and their findings indicate that significantly smaller sums are being transacted.
For instance, just two weeks after the onset of attacks, the Gaza Now support group received under $6,000 in one of its crypto wallets, a notable decrease from the total of $800,000 accumulated since the wallet's inception in August 2021.
Nonetheless, authorities are cognizant that digital assets constitute a minor component of a multifaceted funding landscape. The US State Department estimates that Iran channels approximately $100 million annually to Palestinian groups, including Hamas.
"Cryptocurrency is a relatively small fragment of the larger financial mosaic for Hamas," asserted Redbord. "They are looking to Iran; they're... imposing taxes on the Palestinians; they have a network of charities, and a diaspora of supporters who are sending donations not in cryptocurrencies. But crypto does play a role."
Despite its relative proportion, digital currencies remain a significant revenue stream for Hamas and its allied factions. According to Israeli analytics and software firm BitOK, crypto addresses flagged by Israel as linked to Hamas received approximately $41 million between August 2020 and July 2023. Additionally, addresses associated with Islamic Jihad received in excess of $154 million between October 2022 and September 2023, with some still active.
Within the industry, there are actors who, either knowingly or unknowingly, permit the exploitation of the crypto ecosystem. "Certain cryptoasset businesses are deliberately or inadvertently enabling misuse of the crypto ecosystem," cautioned Joby Carpenter, an industry expert. "This trend is amplified when exchanges are situated in lightly or unregulated jurisdictions."
