Hamas just learned a brutal lesson about bitcoin. Can senators also learn it?

Hamas’ brutal attacks and massacres of Israeli civilians have left policymakers searching for the most effective way to combat the terrorist organization. They can draw important lessons from recent events in which Hamas attempted to use Bitcoin to fund its operations.

Hamas believed that by leveraging some of the world’s largest digital assets, it could evade Western surveillance and international sanctions. That is a false belief, and this story is enlightening for those who mistakenly believe that Bitcoin provides a safe haven for criminals, money launderers, and terrorist financiers.

Just last week, Israeli law enforcement successfully identified and frozen several cryptocurrencies. account It was said to have been used by Hamas to solicit donations. Israel then funneled the assets into its own treasury, the same treasury that funds Israel. war The goal is to wipe Hamas “off the face of the earth.”

The terrorist organization’s code plan backfired badly, but it wasn’t the first time it backfired this year. In April, Hamas specifically implored his supporters to stop sending donations in Bitcoin.Surprisingly press statement, announced that it would suspend Bitcoin donations “to ensure the safety of our donors and protect them from any harm.”terrorist network quoted The logic behind this decision is to “intensify prosecutions and redouble the hostile efforts against those who seek to support the resistance movement through this currency.”

what happened? Isn’t Bitcoin perfect for money laundering? Isn’t it the currency of choice for terrorists and criminals around the world?

Quite the opposite. Hamas realized too late that conducting illegal Bitcoin transactions was economic suicide. That’s because the open and transparent nature of blockchain is a panopticon for intelligence agencies, allowing them to track transactions in real time with speed and precision unimaginable in the fiat world.

Unlike paper money or computer files, the Bitcoin blockchain is permanent, transparent, and immutable. This means that each network transaction, whether its value is a few cents or millions of dollars, is fossilized on the blockchain like a prehistoric worm in digital amber. Masu.

These fossilized transactions include every donation to Hamas ever made through this medium. All law enforcement had to do was link transactions to wallets, and wallets to IDs, which was almost a difficult task in practice.

This is why, according to a study by an analytics firm, only a quarter of 1 percent of transactions in the cryptocurrency space are illegal. chain analysis. This amount is particularly small compared to the 2% to 5% of fiat transactions that are attributable to money laundering, according to United Nations data.

In other words, if you don’t like what certain people are doing with Bitcoin, you won’t like the US dollar either.

This is an important lesson that some lawmakers in Washington have yet to learn. And unfortunately, some of them are unwilling to learn facts that contradict their preconceptions.

Sen. Elizabeth Warren (D-Mass.) has openly boasted about forming an “anti-crypto army” and talks about cryptocurrencies as if they were the blood money of terrorists. She continues to ignore the countless examples of Western intelligence agencies using the public nature of blockchain to thwart illicit finance. This includes not only the latest examples regarding Hamas; 300 cryptocurrency accounts The Justice Department aimed to curb funding to terrorist organizations such as al-Qaeda and ISIS. She may also shed light on the recent high-profile criminal prosecution of the Manhattan rapper and her husband. They were easily caught when trying to launder billions of dollars With stolen Bitcoin. Again, it was blockchain transparency that exposed them.

Warren’s bill solves a problem that no one has solved yet. This would classify nearly all participants in the cryptocurrency industry, from wallet providers to miners and validators, as financial institutions and subject them to the Bank Secrecy Act’s onerous compliance regime. Under the bill, a teenager who runs a Bitcoin mining rig in his basement could be subject to compliance obligations similar to those at JPMorgan Chase and Goldman Sachs.

However, wallet providers, miners, and validators are not banks. They do not manage assets. You should not collect or store sensitive personal financial information of individual users of your assets. They simply provide the infrastructure, the open source software and computing power to protect the network. Like Microsoft, which supplies many software and cybersecurity products to financial institutions, they are not financial institutions.

It’s impossible for the industry to comply with Warren’s demands, and she knows it. The point of her bill is not to improve national security or stop money laundering, but to kill innovation in digital assets.

Rather than participate in Warren’s farce, Congress should seriously consider ways to help federal law enforcement crack down on actual illicit finance. The Financial Technology Protection Act, a bipartisan bill introduced by Sen. Ted Budd (RN.C.) and Sen. Kirsten Gillibrand (DN.Y.), is an important step in that direction. . Establish a working group to study and report on how terrorists are actually using new financial technologies to further their missions and how Congress and regulators can combat them. Congress could take its findings and create a regulatory regime that addresses real rather than imagined risks.

This helps deter criminal activities such as money laundering while preserving the spirit of individual freedom that has long defined the digital asset industry.

Terrorists and criminals, from Hamas and Al Qaeda to the early Silk Road drug traffickers, have learned the hard way that Bitcoin is not ideal for illicit finance. Lawmakers across the country have not yet received the memo. So we are distributing it today and asking that policy decisions be adjusted accordingly.

Jason Les is the CEO of Riot Platforms, the largest publicly traded Bitcoin mining company in North America by market capitalization. Brian Morgenstern is Riot’s director of public policy and served as senior advisor and deputy assistant secretary at the Treasury Department from 2017 to 2020.

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