Does Crypto Finance Hamas and Other Terrorists?

Does crypto finance Hamas and other terrorists?

In the last few weeks, we’ve heard a lot of back-and-forth on this question without ever really getting a definite conclusion.

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It all started with a report in the Wall Street Journal in early October claiming that Palestinian groups had received about $130 million in crypto to finance their war in Israel.

Shortly after, 100-plus U.S. lawmakers, led by Sen. Elizabeth Warren (D-MA), signed a letter to President Biden raising concerns about crypto’s role in financing terrorism. (Warren is leading efforts to pass a digital assets anti-money laundering act.)

After that, blockchain forensics groups, such as Chainalysis and Elliptic, said the numbers reported by the WSJ were likely “overstated.” (The research the WSJ initially cited was provided by Elliptic.) The estimates, Chainalysis wrote, included funds “not explicitly related to terrorism financing.”

Experts like Chainalysis argue that blockchains help reveal illicit funding flows, which is why Hamas actually disavowed crypto fundraising back in April. Its supporters were getting wrapped up precisely because they used public cryptocurrency networks, like Crystal, allowing intelligence agencies to track them.

The crypto community, led by commentator Nic Carter, has called for the WSJ to disavow its original report, lest it poison the wider debate about crypto regulation. But the WSJ has refused to do so.

And, in fact, this weekend it showed why the question of crypto financing of terrorism is so complicated.

The new report, based on findings from Israel’s National Bureau for Counter-Terror Financing, shows that Hamas has moved on from using bitcoin, instead preferring the tether stablecoin and the Tron blockchain.

Per the report:“The use of crypto by the Gaza money exchanges was more sophisticated than Hamas’s earlier fundraising efforts in bitcoin. Digital wallets connected to the companies moved funds overwhelmingly in the form of the stablecoin tether on a blockchain system called Tron, which has heightened user privacy.

To obscure the money trail, the exchanges often changed the wallet addresses they used…