The horrific events of last month again raise some troubling questions: Do cryptocurrencies have a terrorist fundraising problem? They are their networks In fact Being exploited by terrorists to wreak global havoc? If so, what should I do better??
On the other hand, perhaps the problem is one of perception (more appearance than reality) because, after all, public blockchains are transparent and traceable. If so, how can the industry improve a mediocre reputation?
Cryptocurrencies like bitcoin (btc) have been associated with illicit activities almost since their inception. This image has been difficult to change, even as analytical groups like Chainalysis say that “terrorist financing is a very small portion of the already crypto-crime-report-introduction/” target=”_blank” rel=”noopener nofollow”>very small portion of the volume of cryptocurrency transactions that is illicit.”
But in early October, the world became aware of Hamas’s incursion into southern Israel, and shortly after, the Israeli police announced that there had been technology/israel-freezes-crypto-accounts-seeking-hamas-donations-police-say-2023-10-10/” target=”_blank” rel=”noopener nofollow”>frozen Cryptocurrency accounts used by Hamas as part of its ongoing efforts to locate “cryptocurrency financial infrastructure used by terrorist entities to finance their activities.”
A week later, a group of 28 US senators and 76 congressional representatives – led by Senator Elizabeth Warren – sent a letter to senior Biden administration officials asking what steps are being taken “to address the use of cryptocurrency by terrorist organizations.”
So once again, the industry finds itself on the defensive as governments, policymakers and even asset managers wonder: are cryptocurrency networks once again being exploited by the worst of the worst?
“Out of proportion to the facts”
“If any terrorist organization is using cryptocurrency to raise funds, then I would say that is a problem,” Cody Carbone, vice president of policy at the Chamber of Digital Commerce, told Cointelegraph. But recent reports, including crypto-b9134b7a” target=”_blank” rel=”noopener nofollow”>appearing in The Wall Street Journal and later cited in the Warren coalition letter, were inaccurate. Carbone said:
“I believe the numbers used by the WSJ and Senator Warren’s coalition are either biased or completely incorrect. According to Chainalysis, of the approximately $82 million in cryptocurrency received by the address published by the WSJ, around $450,000 in funds were transferred from the known terrorist-affiliated wallet.
Kristin Smith, CEO of the Blockchain Association, told Cointelegraph: “We consider the hysteria around links between cryptocurrencies and Hamas to be out of proportion to the facts.” Like Carbone, Smith said any funding to terrorist organizations “is too much,” but she also questioned why the focus of some lawmakers and policymakers was so narrow.
“Why not ask the (Biden) administration for details on ALL Hamas funding sources? “We want to have the full picture, which would put the role of digital assets in proper perspective.”
You often hear this argument from industry supporters. The contribution of cryptocurrencies to the coffers of terrorists (whether those groups are based in North Korea, Iran, Lebanon or Gaza) is trivial compared to the volumes raised through fiat currencies using more convenient means of transfer. traditional.
“Terrorist organizations have historically used and will likely continue to use traditional fiat-based methods, such as financial institutions, hawalasand shell companies as their main financing vehicles”, saying Chainalysis in a blog from October 18.
“The reality is that this (cryptocurrencies) is just a small piece of the broader puzzle of terrorist financing,” Ari Redbord, global head of policy and government affairs at TRM Labs, told Cointelegraph. What about the States? nation like Iran? Or global megadonors? Or Hamas raking in millions by taxing Gaza residents? “Cryptocurrencies play a tiny role in all of this.”
There is also an irony at play here. Raising illicit funds through public blockchains like bitcoin or ethereum is actually a boon for law enforcement. Modern analytical techniques employed by specialized companies such as Chainalysis, Elliptic and others often make it easier to identify and seize funds destined for designated terrorist groups.
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“What’s missing from the conversation is that our ability to track and trace on open blockchain is much better than anything we can do with fiat,” Redbord said. Tracing illicit funds through shell companies or stolen art is much more problematic. In comparison, “blockchain enables tracking.”
“Previous efforts by law enforcement and private industry (…) have been successful in detecting Hamas terrorist financing activity on the blockchain, leveraging the transparency of crypto assets to freeze and confiscate related funds” said David Carlisle of Elliptic. crypto-and-what-may-be-coming” target=”_blank” rel=”noopener nofollow”>wrote in a blog from October 11.
In fact, Hamas said in April that it would give up cryptocurrency-related fundraising and would no longer receive funds through bitcoin, “citing an increase in ‘hostile’ activity against donors.” bitcoin-fundraising-2023-04-28/” target=”_blank” rel=”noopener nofollow”>reported Reuters.
“The industry needs to be more alert”
But even a relatively small amount of cryptocurrency use by Hamas, Palestinian Islamic Jihad (PIJ) and others. seems to be enough to stir the waters.
“There is an opportunity to address this issue constructively,” Carbone told Cointelegraph, “but I fear that some anti-crypto policymakers in Washington are using the crisis to push their agenda and significantly restrict the use of cryptocurrencies in the US.” . or eradicate them completely.
How can the record be set at that time? “More education and more data,” Carbone responded. “More education on how blockchain technology is a terrible tool for terrorists due to its public nature, but also identifying weak points.”
Some measures need to be taken. The industry still needs to better deal with the dangerous use of mixers and cups that can hide wallet addresses from law enforcement agencies by developing better cybersecurity controls and operational risk procedures, Carbone said. “Everyone in the industry needs to be more vigilant. “We also need more data to identify the severity of the problem.”
There are signs that some of these things are already happening, Redbord added. Binance has recently been crypto-b9134b7a” target=”_blank” rel=”noopener nofollow”>labor with Israeli authorities to freeze the crypto accounts of several groups designated as terrorists, including PIJ and Hamas, for example.
It also wouldn’t hurt to be more assertive in the court of public opinion.
“We believe cryptocurrencies are here forever,” Smith said. “The technology is neutral, the protocols are open and can be used by anyone, just like the Internet. As time goes on, given its ability to reduce financial barriers, protect constitutional rights to privacy, and ultimately provide an opportunity for users to take back the power of Big tech and its monopoly over our digital lives, the value of cryptocurrencies to humanity will become oneself. -evident.”
Is cryptocurrency law reform in the US dead for now?
But the conflagration in the Middle East may have already torpedoed the prospects for comprehensive crypto reform legislation in the United States, at least for now.
Analyst Mark Palmer of Berenberg Capital Markets was one of the first to warn about the potential impact of political headwinds from the conflict between Israel and Hamas on crypto reform efforts in the US. More recently, Palmer told Cointelegraph:
“Coinbase is likely to face an uphill battle in its effort to pressure Congress in hopes of drafting legislation that would provide regulatory clarity around the question of whether crypto tokens are securities or not, especially now that Recent media reports have highlighted how Hamas used cryptocurrencies as a means of raising funds in recent years before its attack on Israel.”
Palmer wasn’t too surprised to find crypto opponents redoubling their efforts now to crack down on them in Washington, DC. What is more alarming, however, is that “the reports appear to have encouraged more lawmakers to join that effort.”
In other words, momentum could be building against the industry. “None of this is helpful to Coinbase’s cause as it seeks to better position itself in the US, and now the potential for new legislation that could undermine the company’s prospects appears to be growing,” Palmer said.
Is it too early to say that reform legislation in the United States is dead upon arrival?
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“I’m not dead,” Carbone said. “But we are running out of time. Forget speaker chaos; We are approaching the end of the year, the government needs to receive funding again next month and there are other priorities. And then it is an election year.”
Carbone says there is still a possibility of stablecoin legislation, but even that will likely have to be “changed to a non-crypto bill (safer banking, credit card legislation) or combined with an illicit finance bill.” .(…) The problem is becoming more partisan.”
Ultimately, it is the voters who will decide, Smith concluded. “Industry creators should continue to create applications that have tangible and widespread value to society. Ultimately, policymakers serve their voters. The more voters want to use this technology, the better chance we have of protecting it.”
