Cryptocurrency: The New Face of Terror-Financing in the Israel-Hamas Conflict
A challenge for Intelligence Agencies and Regulators, worldwide.
Cryptocurrency: Carriers or Couriers of Terror-financing
Last Saturday morning, an eerie echo of history resonated as Hamas launched a multi-pronged surprise attack on Israel, reminiscent of the Yom Kippur War of 1973 that had erupted precisely 50 years ago. Israel's swift counterattack on the Gaza Strip did not surprise many, but one question loomed large: how was the massive arsenal funding undetected by the keen eyes of Israeli intelligence agencies and those of its stalwart ally, the USA?
The answer may lie in the emerging world of cryptocurrencies.
Digital Shadows in the Conflict
In a recent revelation, the cyber arm of the Israeli Police announced the freezing of several accounts on the cryptocurrency exchange, Binance, which they believe were used by Hamas to raise funds. While direct links to the weekend's assault remain uncertain, Israel's assertive action against the crypto accounts is telling.
Historically, financial transactions, especially those supporting illicit activities, left a trail. Traditional banking systems, governed by international norms and treaties, made it challenging for outlawed entities to operate seamlessly. But with the rise of digital currencies, the landscape of financial transactions, especially those of a dubious nature, has evolved.
Hamas, blacklisted as a terrorist group by the US and EU, is reportedly one of the most sophisticated users of crypto-enabled terror financing. To bypass international banking sanctions, the group, predominantly funded by Iran, has embraced the anonymity that cryptocurrencies offer. This strategy has borne fruit; Hamas publicised their crypto fundraising in 2019 but could manage to raise merely $30,000 in bitcoin in one year. However, from 2021 to 2023, an astonishing $41 million was deposited into crypto wallets associated with Hamas, presumably from all over the world.
Other groups, like the Palestinian Islamic Jihad (PIJ) and Hezbollah, have also tapped into this new resource, accumulating and transferring vast sums without significant interference.
The Changing Face of Surveillance
The increasing reliance on cryptocurrencies by such groups underscores the technology's double-edged nature. While it offers privacy and decentralisation, it also aids in masking terror financing and other illicit activities. However, this seeming anonymity is being challenged. Recent advancements in blockchain-tracking technology, coupled with platform-mandated ID checks, are making it marginally easier for authorities to trace and seize unlawful funds.
Yet, the scale of undetected transactions, as demonstrated by the recent Israel-Hamas conflict, indicates that regulatory bodies worldwide have their work cut out for them.
A Global Shift in Crypto Regulation
In an interesting turn of events, two seemingly unrelated incidents might change the global perspective on cryptocurrencies. While Hamas leveraged cryptos for its operations, another significant event unfolded in the USA – the ongoing trial of Sam Bankman-Fried (SBF) related to the sudden crash FTX, a company that had a multi-billion dollar valuation barely months ago. The testimonies, especially those of his former girlfriend and employee, Caroline Ellison, the star prosecution witness have brought to light the darker facets of the crypto world.
Impact for India
Such revelations are bound to set off alarm bells for regulators globally, including in India. Cryptocurrencies, initially seen as the future of financial transactions, might now be viewed through a more cautious and perhaps, sceptical lens.
In conclusion, the intricate dance between technology, finance, and geopolitics continues. As nations grapple with the new challenges posed by cryptocurrencies, one thing is clear: the rules of the game are changing, and the world must adapt quickly.
