The Israel-Gaza War Raises Questions on Funding Sources as Crypto Accounts Get Frozen

In a surprising turn of events, the Israel-Gaza conflict has unveiled an unconventional financial trail. Israeli authorities recently froze cryptocurrency accounts in an attempt to stem the financial flow to Hamas, sparking concerns over the use of digital assets in funding conflicts.

The recent attack by Hamas on Israeli territory not only shook the world but also triggered an investigation into the group’s financial backing. Israeli government data and a blockchain analytics report cited by the Wall Street Journal (WSJ) revealed that three prominent groups – Hamas, Palestinian Islamic Jihad (PIJ), and Hezbollah – received substantial amounts of money through cryptocurrency channels. The government took swift action, freezing crypto accounts identified as conduits for these donations.

According to crypto researcher Elliptic, PIJ reportedly received a staggering $93 million in cryptocurrency between August 2021 and June of the following year. Concurrently, BitOK reported that wallets associated with Hamas accumulated approximately $41 million during a similar time frame.

As of now, none of the three groups have issued a response to these allegations.

The WSJ disclosed that the U.S. had classified Hamas, PIJ, and Hezbollah as foreign terrorist organizations, leading to sanctions that restricted their access to the international banking system. In response, these groups turned to unregulated cryptocurrency to receive funds, exploiting its decentralized nature.

Despite the freeze on their crypto accounts, it remains unclear whether the funds directly contributed to the financing of the recent assault. The Israeli police have declared that the primary motive behind freezing these accounts is to halt the flow of money raised by Hamas through social media campaigns.

The police stated, “According to suspicions, with the outbreak of the war, Hamas’ terrorist organization initiated a fundraising campaign on social networks, urging the public to deposit cryptocurrencies into their accounts.” They went on to explain that the Police Cyber Unit and Ministry of Defense, with the assistance of the Binance crypto exchange, swiftly acted to locate and freeze these accounts, intending to redirect the funds to the state treasury.

However, the statement did not provide specific details on the number of accounts frozen or the total value of crypto seized.

Cryptocurrency, with its ability to bypass traditional banking systems, enables instant transfers between digital wallets. The preferred choice for transactions by groups like Hamas has been the stablecoin Tether, which is pegged to the U.S. dollar, mitigating the volatility associated with other tokens. In response to inquiries about the use of its tokens, Tether asserted its commitment to deterring terrorist involvement, including freezing wallets associated with such activities.

As the world grapples with the repercussions of the Israel-Gaza conflict, the role of cryptocurrency in funding such operations raises critical questions about the need for international regulations to curb illicit financial activities. The ongoing investigation sheds light on the evolving landscape where digital assets become tools for both legitimate transactions and, in some cases, funding activities that disrupt global peace.

What's your reaction?