Investigations based on Israeli government seizure orders and blockchain analytics have uncovered concerning findings regarding the financing of militant groups. According to The Wall Street Journal, Hamas, along with other groups like Palestinian Islamic Jihad (PIJ) and Hezbollah, received millions of dollars in cryptocurrency leading up to an attack on Israel.
The funds received by Hamas and PIJ
Reports indicate that crypto wallets associated with PIJ received a staggering $93 million in cryptocurrency between August 2021 and June 2023. Similarly, wallets linked to Hamas received an estimated $41 million in cryptocurrency. The use of blockchain analysis by crypto researcher Elliptic and the report from BitOK shed light on these transactions.
Challenges posed by cryptocurrency transactions
Despite being designated as foreign terrorist organizations and subject to sanctions, Hamas, PIJ, and Hezbollah have managed to raise funds and acquire weapons. Cryptocurrency transactions provide a means for instant and anonymous transfers between digital wallets, making it difficult for authorities to trace and regulate. This tactic has been exploited by various terrorist groups in the past, including Islamic State and al Qaeda.
“Cryptocurrency transactions enable instant and anonymous transfers of tokens between digital wallets, making it difficult for authorities to trace and regulate.”
To address this issue, Israeli authorities have taken action by freezing cryptocurrency accounts used by Hamas for soliciting donations on social media platforms. However, the exact amount of cryptocurrency seized has not been disclosed. It is worth noting that Hamas has been actively seeking cryptocurrency funds since at least 2019 and has utilized various methods to obscure the true source of their funds.
Cryptocurrency poses unique challenges for authorities as it offers a discreet and efficient means of transferring funds. Physical currency smuggling is more easily detectable and risky, whereas cryptocurrency transactions are difficult to track and trace.
The concerns surrounding DeFi services
The U.S. Department of the Treasury issued a report in April highlighting the failure of many decentralized finance (DeFi) services to implement anti-money laundering and countering the financing of terrorism (AML/CFT) obligations. Some DeFi services operate outside existing AML/CFT regulations, while certain jurisdictions lack robust controls in the realm of DeFi.
