Cryptocurrencies make up a small but significant portion of total terrorist financing. A 2021 study by analytics firm Elliptic found that wallets linked to the military wing of Hamas received $7.3 billion in cryptocurrency, including about $40,000 worth of Dogecoin-themed Dogecoin. A memecoin. . Elon Musk. These amounts are small compared to the $100 million Iran sends to Hamas and other Palestinian terrorist groups annually, or the $360 million in Qatari aid to Gaza, or the $300 million Hamas receives in corporate taxes and extortion. Calculated by Matthew Levitt. But small numbers can make the difference in an age of cheap, low-tech attacks. The New York Times estimated that the September 11, 2001 attacks cost al-Qaeda half a billion dollars and the United States $3.3 billion.
Governments are right to take cryptocurrencies seriously. They allow large sums of money to move anonymously around the world (although they leave no trace of the transaction) and are part of a larger terrorist financing network that is often used in conjunction with society. Media, Money Transfer and Prepaid Cards. Funding surges during the conflict, and the ban on bitcoin donations announced by Hamas in April may not be permanent. Australia's national financial crime agency this week called on Telegram to donate bitcoins to Hamas, according to a report by AFR.
The network is expanding. The US Treasury on Wednesday imposed sanctions on financial institutions and operators linked to Hamas, after Israel last week raided Hamas-linked cryptocurrency accounts and seized a Barclays Plc bank account apparently linked to Hamas. These include a cryptocurrency and money transfer company called Buy Cash in the Gaza Strip, as well as middlemen who use Sudanese companies to launder money and generate revenue. The Treasury announcement not only supports crypto equity fundraising, but also highlights the use of Buy Cash to transfer funds to affiliates.
It should strengthen the post-FTX push to tighten the rules governing the crypto industry, counter efforts by regulators to build a firewall around traditional money and protect consumers from new boom-bust cycles. Last week, Australia proposed expanding existing financial sector rules to cover cryptocurrency exchanges; US Senator Elizabeth Warren is seeking bipartisan support for the Biden administration's tough stance on cryptocurrencies. And FTX rival Binance has announced it will stop accepting new users in the UK to comply with the country's crypto marketing rules. Coinbase Global Inc. Cryptocurrency companies like Bitcoin will have a harder time getting the legal certainty they demand, although traders are excited by the prospect of Bitcoin exchange-traded funds.
A certain humility is required in this important struggle. The fight against the financing of terrorism is not a panacea and is a very complex problem. A mistake can prevent or delay real humanitarian aid in a crisis where the death toll is rising by the day. And even a successful seizure of funds can be a temporary victory. Chaina expert Andrew Fierman says that while blockchain transactions are being monitored and law enforcement agencies are generally caught, strategies to avoid detection are becoming more complex. At some point, Hamas uses tools to hide its identity by creating a new address for each cryptocurrency donor.
But it's a battle worth fighting. The sources of funding for terrorism are as numerous as the letters of the alphabet, from industry to gold to the zakat tax. Cryptocurrencies may not be as common as cash, but they are out there. Tracking terrorist money will inevitably lead to an increase in virtual tracking.
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This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.
Lionel Laurent is a Bloomberg columnist who writes about finance and the future of Europe. He was previously a journalist for Reuters and Forbes.
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