Funding from Hamas-linked accounts rekindles debate about digital assets after the radical Islamist group attacked Israel. Criminal and terrorist organizations use cryptocurrencies to circumvent laws and sanctions.
(DW) Israel is one of the nine global nuclear powers and has one of the most advanced and interconnected air defense systems in the world. For years, Iron Dome has been very effective in repelling airstrikes by Hamas – the radical Islamic group that has ruled Gaza since 2007 and is classified as a terrorist organization by the European Union, the United States, Germany, Japan, Israel and others.
On October 7, 2023, however, Hamas managed to overcome this defense system, firing more than 2,000 rockets at Israel from the Gaza Strip. The attacks have so far left more than 1,400 dead in Israeli border towns and at a music festival, and Israel’s military retaliation has killed more than 2,600 in Gaza.
But how did Hamas manage to muster the resources for such a sophisticated attack against one of the best-prepared armies in the world? According to analysts, cryptocurrencies have played a significant role.
Hamas has millions in funding
As a terrorist organization, Hamas faces sanctions and does not participate in the international banking system. Global measures to combat terrorist financing track any attempt by the group to raise funds. Even so, reports show that Hamas has received considerable funding in the form of cryptocurrency in recent years.
Between August 2021 and June 2023, Hamas received 41 million dollars, according to Tel Aviv-based crypto-finance software and analysis company BitOK. Palestinian Islamic Jihad, whose militants joined Hamas for the attack, received another 93 million dollars in cryptocurrencies, according to London-based crypto sector research firm Elliptic.
The Al-Qassam Brigades, Hamas’ military wing, also received millions of dollars in cryptocurrency transfers, according to Elliptic’s analysis. These transfers came in the form of bitcoin, tether and other crypto assets, including dogecoin, a cryptocurrency that Elon Musk has expressed sympathy for, initially invented as a joke.
Some of these groups are even involved in cryptocurrency mining, according to Elliptic, which allows them to earn more money from the basic maintenance of digital money networks.
Cryptography makes it possible to circumvent sanctions
Under Hamas rule, Gaza faces severe economic isolation by several countries. Blockades by neighboring Israel and Egypt restrict the movement of goods and people.
Despite the restrictions, the American magazine Forbes named Hamas one of the richest terrorist groups in the world in 2014, when its annual turnover was estimated at up to 1 billion dollars. This amount comes from taxes and fees, as well as financial aid and donations. Much of Hamas’ funding comes from Palestinians abroad or private donors from the Gulf region.
Iran is considered one of Hamas’ most prominent financiers. According to the US State Department, the country provides Hamas and other Palestinian terrorist groups with around 100 million dollars a year. Qatar and Turkey have also supported Hamas financially.
Cryptocurrencies have made it easier for Hamas supporters to circumvent sanctions in areas considered hostile. In 2019, the Al-Qassam Brigades asked supporters on their Telegram channel to send them bitcoins.
“The reality of jihad is the expenditure of effort and energy, and money is the backbone of war,” Hamas wrote in that post, attaching a wallet address in which it received around 30,000 dollars in bitcoin that year.
Authorities investigate payments
In April 2023, Hamas informed Telegram that it would suspend fundraising through bitcoin, due to the “redoubled efforts of enemies against all who try to support the resistance through this currency”.
Cryptocurrencies are still far from being the biggest source of funding for terrorism, but there is also a growing focus on cutting off this channel for Hamas. Following the October 7 terrorist attacks, Israeli authorities announced that they had frozen several cryptocurrency accounts linked to Hamas and that the group had organized another fundraising call on social media.
“The Police Cyber Unit and the Ministry of Defense immediately took steps to locate and freeze these accounts, with the help of the Binance cryptocurrency platform, in order to direct the funds to the state treasury,” said a police statement.
Binance is the world’s largest cryptocurrency operator. But while it is cooperating with the Israeli authorities, it is also under investigation for the indirect but significant role it has played in financing terrorism.
In recent years, authorities have tried to seize cryptocurrencies held in dozens of Binance accounts linked to Hamas, according to reports in The Wall Street Journal. The US Department of Justice is also investigating the company for failing to prevent money laundering.
Complicity between operators and terrorists?
Internal Binance communications revealed in the court cases indicate that although the company does not directly seek out customers who commit crimes, it is aware of and tolerates this practice.
In an internal message, former head of compatibility Samuel Lim commented that terrorists usually send small amounts, as large amounts would constitute money laundering. “You can’t buy an AK 47 [rifle] for 600 dollars,” replied a colleague.
Binance did not respond to DW’s requests for comment.
The United Nations (UN) estimates that cryptocurrencies account for 20% of terrorist financing worldwide. And the recent seizure of Hamas accounts has reignited the debate about cryptocurrencies. Critics say they are the perfect financing tool for criminals, as payments can be difficult to trace, thus circumventing financial regulations.
“It is alarming, and should be a wake-up call to lawmakers and regulators, that Hamas-linked accounts have received millions of dollars in cryptocurrency,” wrote US Senator Elizabeth Warren on the X platform (formerly Twitter): “Cryptocurrency is the not-so-secret financial weapon that sustains terrorist organizations like Hamas, Chinese fentanyl networks, and North Korea’s missile program.”