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"There are quite a few digital currencies, as opposed to cash, that can be burned remotely or stopped."
In the past three months, since the bloody Hamas attack, a theory linking the crypto world with terror financing has been gaining momentum. And why not? After all, this is an exciting new world, with lines of code and hooded hackers.
A senior counterterrorism official recently said that "activity in crypto is significantly smaller than the volume of activity of terrorist organizations." So how does this statement square with the headlines about crypto terrorists? Let's dive into the facts.
In early October, the Wall Street Journal published an article describing a report by research firm Elliptic. According to this article, the company found tens of millions of dollars transferred to Hamas. This article led to a letter from dozens of senators headed by Elizabeth Warren, stating that cryptocurrencies are used to finance terrorism, relying on what is stated in this article. But two and a half weeks later, the Wall Street Journal corrected the story, and the research firm backtracked on the claims. The company, it turned out, made a series of methodological errors in the study, took into account the wallets of brokers and exchanges, which caused the amounts to be inflated.
Moreover, a week later, Chainalysis, the world's largest research firm in the field of digital currencies, issued its own report, examining Elliptic's methodology. In the report, after examining all the data, Chainalysis was able to locate only $450,400 in transfers to finance terrorism.
Moreover, another research firm, TRM, which also examined the money transfers to Hamas, found about $<>,<> in the transfers. A similar but slightly smaller sum was found by the Terror Financing Detection Group of the Companies Forum, in which the cyber company Sayfer participated.
Digital currencies. "The terrorists who do try to use them are caught, and their funds are confiscated"/ShutterStock
The terrorists are liquefying crypto
If so, the sums are not large, but the question is whether Israel is failing to stop these funds. Well, it seems less than one could imagine.
First, there are quite a few digital currencies, as opposed to cash, that can be burned remotely or stopped. For example, if a terrorist organization raised money using the popular stablecoin USDT, parent company Tether could remotely burn the coins. The company even did this several times, which led to terrorist organizations stopping raising money in this currency, weeks into the Iron Sword War.
Second, with crypto you can't buy on the street today. After all, the same terrorist on the edge has to buy weapons, food or equipment. Therefore, he must liquefy the crypto – that is, sell it through centralized exchanges and receive dollars or any other currency in return.
Here, too, due to the fact that digital currencies are a transparent system, it was possible to follow the cash route and issue orders to stock exchanges – which in quite a few cases were honored and the coins were confiscated.
And third, the community intervened. With the start of the war, companies, foundations and developers – members of the Israeli crypto community – organized an unprecedented operation to track and locate terror financing. Community members located addresses, mapped Telegram channels and exposed the terror financing infrastructure that the terrorist organizations tried to deploy.
In an interview with the former head of the Israel Money Laundering and Terror Financing Prohibition Authority, Dr. Shlomit Wegman Ratner, she revealed that never before has information reached international terror financing organizations so quickly from users, and never has disclosure turned into action so quickly, as was done during the Iron Sword era.
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Nir Hirshman Rob, CEO of the Forum of Crypto, Blockchain and Web3 Companies / Yael Tzur
Where does the Silver River flow?
In fact, when we look at the facts, and the facts alone, we find a few things: Digital currencies are traceable and are more transparent, in most cases, than bank accounts or cash. The terrorists who do try to use them are caught, and their funds are confiscated.
Most importantly, the quantity is not relatively large. You have to borrow $450,3 from them, with The New York Times revealing a half-billion-dollar investment fund and the National Counterterrorism Bureau preventing transfers worth NIS 7.3 billion.
In the end, it's not a question of whether crypto is to blame or not. To combat terror financing effectively, we must find where the river of money flows. And if we continue to stare in the wrong place and if we continue to blame crypto for the economic empowerment of terrorist organizations, we will not be able to focus on what really needs to be thwarted and we will find ourselves with many fantasies, but without a real block of the hundreds of millions flowing to kill us.
The writer is the CEO of the Forum of Crypto, Blockchain and Web<> Companies
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- Crypto
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- Terrorists
- Hamas
- war
- Iron Sword War
- Gaza War
- economics
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- Blockchain