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Concerns Arise as Evidence Suggests Cryptocurrency Enables Hamas’ Terrorism Financing

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“Examining the intricate web of financial transactions, there is a pressing need to explore the potential link between cryptocurrencies and funding sources for Hamas, unraveling the complexities of modern terrorism financing.”

The US and Israel have recently intensified their efforts to limit cryptocurrency transfers to Hamas following the group’s brutal attacks on Israel on October 7. Bitcoin, Dogecoin, and Ethereum are being increasingly blamed as conduits of funding for Islamist groups, but the extent to which this is justified is still up for debate.

The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) recently proposed new regulations to combat the use of “Convertible Virtual Currency Mixing” (CVC mixing) by malicious actors such as Hamas and Palestinian Islamic Jihad. These online services, known as “mixers” or “tumblers”, mix cryptocurrency of illicit origin with other cryptocurrency funds, making it difficult to trace the source of the funds.

In the aftermath of the October 7 attack, the Israeli defense ministry claimed to have seized virtual wallets linked to Hamas that had received $41 million between 2019 and 2023. The Palestinian Islamic Jihad group has also raised $94 million in cryptocurrency in recent years. Additionally, Washington sanctioned a Gaza-based company accused of facilitating cryptocurrency transfers to Hamas and Palestinian Islamic Jihad.

Hamas’s use of cryptocurrency first came to light in 2019 when the group organized a call for Bitcoin donations via Facebook and Instagram. Since then, Hamas and other terrorist groups have increasingly used social media platforms as channels for funding. However, it is important to note that most of Hamas’s funding still comes from expatriates or private donors in the Gulf region.

While the recent attention on cryptocurrency funding for Hamas may give the impression that without this funding, the group would be bankrupt, experts argue that this is not the case. Hamas has an estimated annual budget of nearly $1 billion, and the amounts seized in cryptocurrencies are relatively small in comparison. Additionally, it can be challenging to separate funds intended for terrorist activities from other funds in a virtual wallet.

The rise of Bitcoin, Ethereum, and Dogecoin in the world of terrorism can be attributed to the simplicity and speed of making transactions. It is easier to make a donation from a smartphone or laptop than to open a bank account and find intermediaries for fund transfers. As international authorities crack down on traditional terrorist financing channels, terrorist groups are turning to new methods like cryptocurrency.

However, these new funding methods are not as anonymous as they may seem. While the names of those involved in transactions do not appear on the blockchain, which is the digital ledger for cryptocurrencies, it is still possible to trace the movement of funds. Companies specializing in blockchain analysis have become adept at tracing the origin of funds.

In conclusion, while cryptocurrency has become a more prominent funding method for terrorist groups, it is not the sole source of their funding. The amounts raised through cryptocurrency are relatively small compared to their overall budgets, and traditional financing methods still play a significant role. Additionally, cryptocurrency transactions are not as anonymous as believed, as they can be traced through the blockchain.

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