The United States and Israel have stepped up efforts to limit cryptocurrency transfers to Hamas since the group’s brutal attacks on Israel on October 7. Bitcoin, Dogecoin and Ethereum are increasingly accused of being funding channels for Islamist groups, but to what extent is this justified?
After Hamas attacks on Israeli territory on October 7 on an unprecedented scale, the role of digital currencies like Bitcoin and Dogecoin and crypto exchange platforms to finance the radical Islamist movement are increasingly under scrutiny.
On October 19, the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) proposal for new regulations identifying “convertible virtual currency mixing (CVC mixing) as a class of transactions of particular money laundering concern…to combat its use by malicious actors, including Hamas (and) Palestinian Islamic Jihad“.
These online services, more commonly called “mixers” or “tumblers”, mix cryptocurrency of illicit origin with other cryptocurrency funds. As such, “the risk of using crypto mixers to launder money or hide income is quite considerable,” the crypto industry news site acknowledges. Cointelegraph.
Calls for Bitcoin via Facebook, Instagram and Telegram
Following the October 7 attack, the Israeli Defense Ministry claimed to have seized virtual wallets linked to Hamas that had received $41 million (39 million euros) between 2013 and 2019. The Jihad group Palestinian Islamic, for its part, raised 94 million dollars. million (89 million euros) of cryptocurrencies in recent years, according to Ellipticala British company that analyzes virtual currency transactions.
And that’s not all. Washington also decided on October 18 to “Buy cash” sanction, a Gaza-based company accused of “facilitating” cryptocurrency transfers to Hamas and Palestinian Islamic Jihad.
“Hamas’ use of cryptography was first revealed in January 2019,” writes David Carlisle, co-founder of Elliptic, in an article. blog post published October 11. The al-Qassam Brigades, the armed wing of Hamas, were caught red-handed while organizing a call for Bitcoin donations via Facebook And Instagram.
At first, these “financing 2.0” initiatives only raised a few thousand dollars, but since then, Hamas has increasingly used social networks as a financing channel. And the Palestinian group officially listed as a terrorist organization by the EU and the United States is not the only one taking action. “The use of cryptography in conjunction with social media platforms – Facebook, Instagram and the recently mentioned Telegram – has become very popular,” says Nicholas Ryder, a law professor and expert on terrorism financing networks at the Cardiff University.
The recent attention paid to funds transferred to Hamas in Bitcoin and other cryptocurrencies may give the impression that without this windfall, the Islamist movement would be bankrupt or would, at least, have had a much more difficult time financing its attacks against Hamas. Israel.
“There is a certain degree of hyperbole about this topic. It is relatively new, has cachet and is unknown to many people, so of course it attracts attention. You can’t ignore it, but If you think about the pros and cons of (using it to) raise or move funds, crypto is not the best solution,” says Tom Keatinge, director of the Center for Financial Crime Research and Security Studies at Royal United Service Institute, one of the UK’s leading security think tanks.
For example, Hamas, which Forbes magazine classified in 2014 as “one of the richest terrorist groups in the world”, has an annual budget estimated at nearly a billion dollars. Most of the money comes from “expatriates or private donors from the Gulf region”, underlines the German news channel. Deutsche Welle.
In this regard, the $41 million in cryptocurrencies seized by Israeli authorities may appear as a drop in the ocean for Hamas. In addition, these amounts should be taken with a grain of salt: it can be very difficult to separate funds intended to finance terrorist activities from others in a virtual wallet, notes Chainalysis, an American blockchain analysis company, in a report. blog post.
“(It’s) impossible to quantify how much money is transferred via crypto, but it has become an increasingly important method of financing,” says Ryder.
The rise of Bitcoin, Ethereum and Dogecoin in the world of terrorism is explained above all by the simplicity of making a transaction, notes Keatinge: “It’s easy, and I can donate from my couch at Me”. It’s also much quicker than having to open a bank account and find intermediaries willing to transfer the funds. “You just need a smartphone and/or laptop,” Ryder adds.
International authorities are also putting more effort into tackling traditional channels of financing terrorism, so these groups are trying to compensate with new ways of raising money. “The more we put pressure on traditional means of financing, the more they will find alternative means like cryptography. And we are increasingly able to fight against traditional means of financing. It’s like a balloon: when you squeeze one part, the other part gets bigger,” says Keatinge.
Not so anonymous
Hamas, Al-Qaeda and Hezbollah also do not hesitate to combine the best of both worlds. For example, there may now be a cryptocurrency dimension to the use of fake NGOs, a classic means of financing terrorist groups. “They can cut down the top 10 to 15 percent and convert it to crypto and then transfer it to make it harder to trace,” Ryder says.
However, the interest of these movements in these new methods of financing is not as strong as the current media noise might lead us to believe, because they are ultimately not as anonymous as we are led to believe. “It may seem like crypto is some sort of secret way to funnel funds, but it has a vulnerability. As soon as you start blockchain transactions, they’re traceable. They’re not as secret as many people think,” explains Keatinge.
Indeed, all Bitcoin transactions pass through the blockchain, which is the digital equivalent of a ledger accessible to all. Although the names of those who transfer or receive the funds do not appear, it is possible to track each movement of funds, and companies like Chainalysis and Elliptic have become masters at tracing their origins.
Of course, there are ways to make these transactions more anonymous, but this comes at the cost of ease and speed – the main benefits of using cryptocurrencies for terrorists and other criminals. In the end, it is still simpler and more anonymous to hand-deliver suitcases full of cash.
This article is a translation of original in French.