Cryptocurrency under scrutiny after link to funding Hamas attack on Israel: ‘proliferation’ of illicit use

According to reports, Hamas used millions of dollars in cryptocurrencies to fund its activities, including acquiring weapons used in last week’s terrorist attack on Israel.

“I think criminals kind of understood this early on, and that’s why we’ve seen a huge spike in terms of illicit financial support,” said Elaine, senior director of the National Defense Foundation’s Center for Economic and Financial Power. Dezenski says. a Democratic supporter told FOX Business.

“It’s not just something you see in terrorist groups, and there are many examples of that, but it’s also being used to promote drugs and every type of illicit finance you can imagine,” she said.

“It’s also kind of ironic,” she added. “They are being exploited and appropriated by criminals faster than regulators know what these challenges are and how to address them.”

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At least 3,200 people have been killed, including at least 1,300 Israeli civilians and soldiers and 27 Americans, since Hamas fired thousands of missiles into Israel last week. The Palestinian Health Authority said at least 2,215 Palestinians were killed and more than 8,700 injured.

A report in the Wall Street Journal cites an investigation into Israeli government seizure orders and blockchain analysis reports showing that Hamas, Palestinian Islamic Jihad (PIJ), and Hezbollah receive large sums of money through cryptocurrencies. revealed. The Journal determined that Hamas received approximately $41 million in virtual currency from August 2021 to June 2023.

Fire and smoke rise after an Israeli airstrike in Gaza City, Saturday, October 7, 2023. The Gaza Strip’s militant Hamas rulers carried out an unprecedented multi-pronged attack on Israel at dawn Saturday, firing thousands of rockets. (AP Photo/Fatima Shubeir/AP Newsroom)

According to the report, PIJ also received $93 million during the same period.

Sen. Sherrod Brown (D-Ohio), chairman of the Senate Banking Committee, has vowed to investigate the role cryptocurrencies played in financing attacks on Israel, and Sen. Elizabeth Warren (D-Mass.) has vowed to A new effort has been launched to pass a bill imposing government sanctions. – Politico reported on money laundering rules regarding virtual currencies.

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U.S. officials have described how Iran has for years financed proxies around Israel, including Hamas, Hezbollah and more than a dozen other groups on the border, giving them weapons and money. He spoke in detail about what he has provided.

The US State Department has said in the past that Iran gives about $100 million a year to Palestinian militant groups, including Hamas. Dezensky said crypto funds would only strengthen an already strong funding base, and the lack of regulation around cryptocurrencies makes it difficult to keep them out of the hands of criminals. .

“There really is no equivalent set of regulations regarding anti-money laundering.” [of crypto]“It will be difficult to apply the same kind of framework that banks are applied to,” she argues, adding that banks are also not paying as much attention to “holes” in the process of exchanging cryptocurrencies for fiat. pointed out.

However, one of the bigger challenges lies in the fact that virtual currencies may pass through a “mixer” system as part of their functionality, which makes coins difficult to trace and reduces the transparency of digital currencies. It goes against the initially touted promise of improvement.

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“The challenge lies in the way coins move through these systems. For example, you can move cryptocurrencies through a mixer, which essentially splits the transaction into $10s and passes them through. … It’s broken into multiple smaller parts and it’s hard to track where those smaller bits go,” she explained.

Even if the coins are eventually reunited in further transactions, the cryptocurrencies are so encased within the system that they are “very difficult to undo.”

hamas gaza iran

Fighters of the Ez al-Din al-Qassam Brigades, an armed wing of the Palestinian Hamas movement, during an anti-Israel military show in Gaza City, July 20, 2022. (Photo credit: Majdi Fathi/NurPhoto, Getty Images/Getty Images)

“That’s what’s happening now,” she said. “The intelligent use of these mixers and other components within the system allows for the obfuscation of cryptoassets.”

Cryptocurrency wallets are said to track all owners and exchanges associated with their coins, and the promise of increased exchange transparency has apparently been replaced by a murky purpose, which is aimed at criminals. It was used in the early days of its use.

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“The reality is something different. That’s how these systems develop,” Dezensky lamented. “There are different ways to make these transactions opaque, which makes them even more difficult.”

Dezenski said the only way to address this issue is to determine what kind of relationship the U.S. wants with digital currencies going forward, and has already made “significant decisions” about the currency, including its use and regulation. If you avoid it and fall more fully into the official designation and structure, doing so would make it even more difficult, then there is a possibility of illegal use.


“Then the problem is that we’ve defined what kind of system we want and what guardrails we need to build around it. We also have a ‘stopgap,’ like who owns which components of the system. Towards something more effective.

“There’s a lot of work that the U.S. government needs to do, and I think the process is progressing, but it’s moving very slowly,” she concluded.

FOX Business’ Brooke Singman contributed to this report.

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