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- 1 Terrorism finance has come into the limelight once again with the Hamas-Israel war.
- 2 Elliptic has pointed out that the use of crypto as terror funding may have been misinterpreted.
The debate around cryptocurrencies facilitating terrorism finance reignited with the recent attack of Hamas on Israel. Though the Jewish country countered the attack and managed to defend itself after damage, crypto assets found themselves under the continued attack with no help anytime soon. However, the recent analysis of crypto and blockchain investigating agencies might help digital assets to be proven innocent.
Recently Elliptic, a prominent blockchain investigation platform, published a blog post highlighting that the involvement of cryptocurrencies in terror funding is misrepresented. It noted the scale presented by which Hamas might be using the digital assets is much bigger than what the terrorist group is able to use successfully in reality.
Government agencies in the United States and Israel were actively hunting down the financial streams of the Gaza-based terrorist organization, Hamas. They have collectively found and seized multiple cryptocurrency wallets that allegedly belonged to the terrorist group.
According to Elliptic, Hamas started accumulating donations in Bitcoin (BTC) in 2019. It stopped raising crypto donations publicly in April in order to keep donors’ identities hidden.
However, these channels reactivated following the recent attack of Hamas on Israel on October 7, 2023. Elliptic found that in the recent efforts, the group managed to accumulate $21,000 in cryptocurrency donations. However, a majority of this fund has already been seized due to regulatory steps taken by the agencies.
Blaming Crypto Maybe Oversimplifying
Several initial reports indicated the use of crypto assets by terrorist groups and it was called out all around the space. The demands for suitable actions against cryptocurrencies increased in the days to come. But Elliptic and Chainalysis findings have a different perspective.
In the following days after Hamas’ attack on Israel, about a hundred lawmakers in the United States, including Senators and the House of Representatives from both parties, signed a letter alleging the potential use of crypto by terrorist organizations.
Senator Elizabeth Warren prominently pushed the letter which noted the claim that Hamas and other militant groups raised millions worth of funds through crypto, and it cited a report from the Wall Street Journal.
Elliptic found in its investigation that there was no evidence that could have proven the amount claimed in the report as the actual crypto funding was nowhere close to the said amount. It stated that the data was misinterpreted.
Another crypto analysis firm, Chainalysis, has put forward the argument that reports suggesting the terrorist organizations’ utilization of cryptocurrencies may be exaggerating the metrics and the analysis may have flaws.
In a blog post, Chainalysis acknowledged that while financing terrorism through cryptocurrencies constitutes a very minor fraction of the already small portion of illicit cryptocurrency transaction volume, certain terrorist groups do indeed raise, store, and transfer funds using digital currencies.
The firm also pointed out that historically, terrorist organizations have relied on and are likely to continue using traditional, fiat-based methods such as financial institutions, hawala, and shell companies as their primary means of financing.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
