The US and Israel have stepped up efforts to limit the transfer of cryptocurrencies 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?
Following Hamas’ unprecedented attacks on Israeli territory on October 7, the role of digital currencies such as Bitcoin and Dogecoin, as well as crypto exchange platforms, in financing the radical Islamist movement is under increasing scrutiny.
On October 19, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) proposed new regulations identifying “Convertible Virtual Currency Mixing (CVC Mixing)” as a class of transactions with primary money laundering risk… to prevent their use by malicious actors , including Hamas [and] Palestinian Islamic Jihad.”
These online services, more colloquially known as “mixers” or “tumblers,” mix cryptocurrencies of illegal origin with other cryptocurrency funds. Therefore, “the risk of using crypto mixers to launder money or hide profits is quite high,” admits crypto industry news site Cointelegraph.
Bitcoin views via Facebook, Instagram and Telegram
After the October 7 attack, Israel’s Defense Ministry claimed it had seized Hamas-linked virtual wallets that had received $41 million (€39 million) between 2019 and 2023. For its part, the Palestinian Islamic Jihad group has raised $94 million in cryptocurrencies issued over the past few years, according to Elliptic, a British company that analyzes virtual currency transactions.
And that’s not all. Washington also decided on October 18 to sanction “Buy Cash,” a Gaza-based company accused of “facilitating” cryptocurrency transfers to Hamas and Palestinian Islamic Jihad.
“Hamas’ use of crypto first came to light in January 2019,” writes David Carlisle, co-founder of Elliptic, in a blog post published on October 11th. The Al-Qassam Brigades, the armed wing of Hamas, were caught red-handed organizing a call for Bitcoin donations via Facebook and Instagram.
Initially, these “Funding 2.0” initiatives only raised a few thousand dollars, but since then Hamas has increasingly used social networks as funding channels. And the Palestinian group, which has been officially classified as a terrorist organization by the EU and the US, is not alone in its actions. “The use of crypto in conjunction with social media platforms – Facebook, Instagram and I saw the recently mentioned Telegram – has become quite popular,” says Nicholas Ryder, a law professor and specialist in terrorist financing networks at Cardiff University.
The recent attention paid to funds transferred to Hamas in Bitcoin and other cryptocurrencies may create the impression that without this windfall, the Islamist movement would have been bankrupt, or at least would have had a much harder time financing its attacks on Israel.
Secondary means
“There is some exaggeration on this topic. It is relatively new, has a high reputation and is unknown to many people, so it naturally attracts attention. You can’t ignore it, but if you think about the pros and cons [using it for] “When it comes to raising or moving funds, crypto is not the best,” says Tom Keatinge, director of the Center for Financial Crime Research and Security Studies at the Royal United Service Institute, one of the UK’s leading security think tanks.
For example, Hamas, ranked by Forbes magazine in 2014 as “one of the richest terrorist groups in the world,” has an estimated annual budget of nearly $1 billion. The majority of the money comes from “expatriates or private donors in the Gulf region,” emphasizes the German news channel Deutsche Welle.
In this regard, the $41 million worth of cryptocurrencies confiscated by Israeli authorities seems like a drop in the ocean for Hamas. Additionally, these amounts should be treated with caution: it can be very difficult to segregate funds intended to finance terrorist activities from others in a virtual wallet, notes Chainalysis, an American blockchain analytics company, in a blog post.
“[It’s] It’s impossible to quantify how much money is transferred through 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 can largely be explained by the simplicity of a transaction, notes Keatinge: “It’s easy, and I can donate from my couch at home.” It’s also much faster, than opening a bank account and finding intermediaries willing to transfer the money. “All you need is a smartphone and/or laptop,” Ryder adds.
International authorities are also making increasing efforts to combat traditional financing channels for terrorism, which is why these groups are trying to compensate for this with new ways of raising money. “The more we put pressure on traditional forms of financing, the more they will find alternative ways like crypto.” And we are getting better at fighting traditional forms of financing. It’s like a balloon: if 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, the use of fake NGOs, a classic means of financing terrorist groups, can now have a cryptocurrency dimension. “You can reduce the top 10 to 15 percent and convert it to crypto and then transfer it to make it harder to trace,” Ryder explains.
However, these movements’ interest in such new funding methods is not as great as the current media hype would suggest, as they are ultimately not as anonymous as we have been led to believe. “It may seem that crypto is some kind of secret way to channel funds, but it has vulnerabilities. As soon as you start blockchain transactions, they are traceable. They’re not as secret as many people think,” says Keatinge.
In fact, all Bitcoin transactions pass through the blockchain, which is the digital equivalent of a ledger accessible to all. Admittedly, the names of the people transferring or receiving the funds do not appear, but it is possible to track every movement of the funds, and companies like Chainalysis and Elliptic are masters at tracing their origins.
Of course, there are ways to make these transactions more anonymous, but they come at the expense of simplicity and speed – the main advantages of using cryptocurrencies for terrorists and other criminals. Ultimately, it is still easier and more anonymous to deliver suitcases full of cash in person.
This article is a translation of the original into French.