The Use of Cryptocurrencies to Finance Militant MovementsFebruary 9, 2019
The narrative behind the idea that cryptocurrencies, especially bitcoin are used in nefarious purposes is as old as their popularity in the mainstream media. The theories about its usefulness for criminals have been spread not just in news reports, but also in many fictitious works like TV shows, books, video games and especially the movie industry. Saying that bitcoin is a tool of criminals was something that many news discussions could easily contain, particularly in the wake of the Mt. Gox and other high-profile problems that bitcoin had in its development.
While the crypto community fiercely fought back against these stories and presented evidence to counter them, the air of sadness remains over these issues for many people. Now, however, a situation in the middle east, more particularly Palestine has once again drastically rekindled the issue. Here is the breakdown of what happened and what relevance does it hold over the crypto domain.
Whitestream is a blockchain analytics company from Israel. Recently, it identified a number of bitcoin wallets and their addresses that were mentioned on a Hamas digital channel where they requested to make a donation to the militant faction. Also, there were appeals for bitcoin donations that the organization made for the purpose of supporting, what Hamas labels – resistance.
One was issued at the end of January through a Telegram channel that is used by the spokesman for the organization military wing. Among the wallets, as Globes, the Israeli newspaper reported including a Coinbase account. Currently, Coinbase did not want to comment on the same wallet and Whitestream stated that the account conscious to attain transactions even two days after it was identified in the media and its existence is known to Coinbase.
Whitestream CEO and founder Itsik Levy said that the use of shared inputs shows that the transactions were signed by wallet addresses that are on the Coinbase system. Whitestream was able to identify the recipients of the fundraising camping, which is an Islamic organization that managed to acquire about $4,000 in BTC, which is slightly over one bitcoin token at current price rates.
A Way around Financial Blockade
According to Levy, Hamas is under pressure when it comes to its finance. It is receiving funds from the state of Qatar and the Israeli government. Whitestream has been aware of extremist organizations procuring funds using digital currencies, but this is the first time Hamas has been found engaged in the same process. Levy added that the modest funds currently procured do not signal a failing fundraising process.
Instead, he is saying that the organization just started the campaign and it is still active, even with the wallets on the Coinbase system. However, the company is not the only one that is included in the process of funds being transferred according to Whitestream. The organization also found this week that accounts on Binance have been used, along with a CoinPayments account. The latter belongs to a company that is incorporated legally in the Cayman Islands.
Both companies were not available for comments related to this issue. But the case presented by Whitestream is clear: an account on Coinbase sent bitcoin to one on Binance and one of the CoinPayments. The trail continues further and eventually leads to the one belonging to a prominent Hamas member. Here, like with activities trails on social media or in esports matches, following a particular thread is often hard until the first node is discovered. From there, a sequence usually reveals all actors.
There have been multiple reports, including one from 2018 that have been detailed in their description of the use of cryptocurrencies among the extremist organization, including those belonging to the jihadist spectrum. Whitestream noted that only two percent of the cryptocurrency activity can lead directly to criminal or terror-related activities.
A CoinDesk report from 2018 noted that only Gaza-based retail investors easily overcome the sum so far gathered by Hamas and its affiliated wallets. In other words, bitcoin is nothing new on the streets controlled by Hamas but it is not something that lines its coffers by any stretch of the imagination. Yet, the organization clearly has the infrastructure that can take on the donation in this cryptocurrency.
No additional calls for donation appeared on the Hamas Telegram group since February 2, but interestingly enough, Islamic State’s Gaza wing, who is a Hamas rival, managed to raise about $8,000 in bitcoin in cryptocurrency donations during March 2018. Experts believe that the same event actually inspired Hamas to do the same.
The problem is that the supporters of both fundraising processes offer conflicting reports to whom the money actually went, adding a level of insecurity about who actually organized these events. Some even believe that the fundraisings are a hoax that was created by scammers to take away money from extremist supporters. Having the knowledge of the way general phishing scams work, this sounds like a very plausible move, especially because the first fundraising receiving so little attention at the start of 2018.
Fears of Illegality
However, one chooses to look at it, the two militant movements gained very little from their fundraising. Even a sum of $10,000 is nothing compared to the general ways extremist organizations, especially those on the scale of Hamas, both attain and spend funds.
A sum of $100,000 would be a minuscule amount for any practical purpose during a longer period, having in mind that the organizations employ thousands very much like a parallel government. In that sense, it would be like providing a small city with $10,000 and expecting it to do something meaningful with it. Instead, the city would be able to use the sum to pay a dozen or so employees for a month.
The same applies to Hamas as well. Yet, there is little doubt that proponents of the idea that cryptocurrencies mean criminal activity will use this example to further underline their case. The problem for that narrative is the fact that the math simply does not add up to anything meaningful that provides insight into an endemic problem of the actual systems like bitcoin.