The Israeli government faces mounting public pressure as the aftermath of a harrowing incursion by Hamas militants unfolds.
The violent breach of a border fence last Saturday, which appears to have drawn financial support from the realm of crypto, resulted in the tragic loss of hundreds of lives among Israeli citizens.
I was in Israel during the December 2017 conflict — the US officially recognised Jerusalem as the capital city of Israel on 6 December.
Picture taken by author in December 2017 in Israel
The tension then and now might be different, but it was palpable. Militants were seen carrying guns around tourists, even going as far as to board our bus.
Although we were safe, but at that point in time, nothing was guaranteed.
Attacks are not only physical but virtual as well.
This can be seen when hacktivist groups, including the well-known Russian hackers, Killnet, setting their sights on various Israeli organisations by launching an attack on the Israeli government website recently.
An examination of Israeli government seizure orders and reports from blockchain analytics has unveiled a concerning pattern: Hamas, in collaboration with Palestinian Islamic Jihad (PIJ) and Hezbollah, received substantial sums of digital currency leading up to the attack.
This revelation stems from an investigation detailed in The Wall Street Journal (WSJ), utilising data furnished by forensics firm Elliptic and Tel Aviv-based software company BitOK.
The report indicates that digital wallets linked to PIJ accumulated as much as $93 million in crypto between August 2021 and June 2023, according to analyses conducted by Elliptic.
Similarly, BitOK’s findings suggest that wallets associated with Hamas received approximately $41 million during a comparable timeframe.
Notably, it had been reported in June, that the militant wing of Hamas, the Izz ad-Din al-Qassam Brigades, had amassed up to $100,000 in Bitcoin (BTC) donations since the beginning of 2021, with a notable surge in contributions during May when Israel and Hamas were engaged in rocket exchanges.
In June, crypto funds were reportedly confiscated from Binance, with suspicions pointing to their association with Hezbollah.
The precise amount of digital currency linked to the group remains uncertain.
A spokesperson from Binance affirmed the company’s proactive commitment to work incessantly and in real-time to contribute to ongoing endeavours that deter terrorist entities from gaining access to crypto.
Crypto often serves as a covert means of financial support for groups and nations excluded from the United States (US)-controlled global financial system.
Despite their designation as foreign terrorist organisations and being subjected to sanctions, Hamas, PIJ, and Hezbollah have successfully gathered donations and acquired weaponry.
Israeli Defense Minister Yoav Gallant expressed his concerns:
“This is not an easy task.”
It remains uncertain whether cryptocurrency directly financed the assault, but its adoption enabled these groups to circumvent traditional banking systems by swiftly transferring tokens between digital wallets.
The US Treasury Department has said that there are gaps in financial crime controls at crypto exchanges that allow terrorist groups including Hamas, Islamic State, and al Qaeda to misuse them.
Ironically, the Israeli crypto and Web3 communities have united under the banner of Crypto Aid Israel which is dedicated to providing essential humanitarian assistance to Israeli citizens who find themselves displaced and in need during these turbulent times.
Why crypto then? Because crypto allows users to bypass the traditional banking system by instantly transferring tokens to a digital wallet via decentralised blockchains, meaning there is no single person or group that has control over the transaction.
If I were to fund warfare, I would not send money physically or via bank transfer since the likelihood of being caught is sky high. So crypto is the answer here.
Israeli authorities have taken steps to freeze crypto accounts employed by Hamas for soliciting donations on social media platforms.
Nonetheless, determining the exact quantity of crypto seized remains a challenging endeavour.
Hamas has been actively seeking cryptocurrency-based donations since at least 2019, utilising its Telegram channel to appeal to supporters for bitcoin contributions.
Subsequently, the group has turned to payment processors to generate crypto addresses, obscuring its true crypto wallet and making it considerably more difficult for investigators to trace transactions.
It is noteworthy that, while crypto plays a role in their funding, it is not the primary source of financial support for Hamas and affiliated groups such as Palestinian Islamic Jihad and Hezbollah, with Iran representing the predominant funding source, amounting to approximately $100 million annually, as recognised by the US government.
Ari Redbord, head of legal and government affairs of blockchain intelligence firm TRM Labs, pointed out:
“Crypto is a very small part of Hamas’ fundraising strategy. It’s mostly state-sponsored. There’s a focus on it because you are trying to cut off financing by any means. But it’s a relatively small part of the picture.”
However, according to researchers specialising in the examination of Hamas’ financial mechanisms, crypto continues to be a paramount resource employed by the group to facilitate fundraising efforts.
This extends to the acquisition of funds from within Gaza and even across the border in Egypt.