Reports of significant sums of cryptocurrency being used to fund Palestinian operations in Israel may have been exaggerated, according to Chainalysis, a digital forensics company. In a blog post, Chainalysis challenged the notion that crypto financing for groups like Hamas had reached the levels reported in the media. While acknowledging the importance of preventing terrorist financing through cryptocurrency, Chainalysis also emphasized the need to understand how this funding operates.
Chainalysis says the funding is being exaggerated
Last week, The Wall Street Journal claimed that Palestinian Islamic Jihad received $93 million in cryptocurrency between August 2021 and June 2023, with Hamas receiving about $41 million during the same period. However, critics pointed out that the headlines could be misleading, as it wasn’t clear whether the funds reached the actual terrorists. They also noted that cryptocurrency financing, while significant, paled in comparison to state-funded support, particularly from Iran. It is worth mentioning that in April, Hamas announced the suspension of cryptocurrency fundraising due to the risk it posed to its collaborators.
This highlights an interesting point about the transparency of blockchain technology, which is not conducive to covert operations. Chainalysis asserted that due to the inherent transparency of blockchain technology and the public nature of fundraising campaigns related to terrorism, cryptocurrency may not be an effective means of financing terrorism on a large scale. The company also noted that Hamas, in particular, understands the challenges associated with using cryptocurrency for fundraising. The debate surrounding cryptocurrency’s role in funding terrorism has broader implications for U.S. policy on anti-money laundering controls.
Ongoing efforts to promote AML in the sector
Senators Elizabeth Warren and Roger Marshall cited The Wall Street Journal’s reporting on Hamas financing in an op-ed. Both senators support the Digital Asset Anti-Money Laundering Act, which aims to increase reporting requirements for cryptocurrency transactions to combat money laundering. Elizabeth Warren, in particular, is a vocal critic of cryptocurrency and has expressed a desire to form an “anti-crypto army.” Chainalysis suggested that the estimates provided by The Wall Street Journal may include all flows going to service providers suspected of being involved in terrorist financing.
However, this does not necessarily prove that the funds reached the wallets controlled by terrorists. Chainalysis is working to produce more accurate estimates of cryptocurrency flows to groups associated with attacks in Israel. The reports of large sums of cryptocurrency financing Palestinian operations in Israel may not be as substantial as initially portrayed. The use of cryptocurrency for such purposes is being scrutinized, but the transparency of blockchain technology makes it challenging for such transactions to remain hidden. The debate on this issue also has implications for U.S. policies related to anti-money laundering controls and cryptocurrency regulation.