The Israeli government announced on Monday that it had approved the seizure of digital cryptocurrency worth tens of thousands of shekels reportedly earmarked for assisting the Islamist terrorist organization Hamas that rules the Gaza Strip. 

This is the third time in a year that Israeli authorities have seized cryptocurrencies reportedly used for financing terrorism. 

“We are taking all the possible measures to cut off the economic ‘oxygen supply’ to terror organizations,” Israeli Defense Minister Benny Gantz said. 

The crackdown by Israeli authorities included targeting some 30 digital wallets belonging to Al’Matchadun, a Gaza-based currency exchange business, which the Jewish state has blacklisted as a terrorist organization due to its affiliation with Hamas. The company has reportedly transferred tens of millions of dollar to the military arm of Hamas, according to the Israeli Defense Ministry. 

The Defense chief stressed that Israel would increase its crackdown on businesses that finance terrorism. 

“We continue to expand the tools to cope with terror and the companies that support it. I commend the organizations involved for their intelligence, operational, and legal cooperation. We will continue to take all the measures necessary to fight terror by any means and in any way,” vowed Gantz. 

Following the war between Hamas and Israel in May 2021, Gaza-based terrorist organizations like Hamas and Palestinian Islamic Jihad received an inflow of donations through cryptocurrency payments that circumvent traditional financial markets. The Israeli government consequently decided to expand its efforts in closing off financial sources linked to the terrorist groups. In July 2021, Jerusalem seized cryptocurrency Hamas-linked holdings worth $8 million. 

Despite some setbacks, Hamas is reportedly committed to continue using cryptocurrencies as an attractive source for financing its terrorist network and operations.

Muath Asmar, professor of financial markets at An-Najah National University in the West Bank, told the media outlet Al Monitor that cryptocurrencies were highly encrypted, making it difficult for Israeli authorities to track and prevent every attempt by Hamas to raise funds through digital platforms. Digital currencies also offer the advantage of anonymity for supporters of Hamas. 

Hamas reportedly uses digital currencies like Bitcoin to acquire commodities that are afterwards resold on Arab and international markets in exchange for cash. 

Hamas is not the only terrorist organization that uses cryptocurrencies. al Qaeda, ISIS and other radical groups are reportedly also financing some of their terrorist operations through the use of cryptocurrencies, according to a new report by Chainanalysis, a blockchain data platform based in Singapore. 

Al Qaeda reportedly raised digital-based funds through different Facebook groups and Telegram channels, according to the 2022 February Crypto Crime Report. 

However, Oriol Caudevilla, a Hong Kong-based co-leader of the CBDC and Blockchain Working Group at the Global Impact FinTech Forum (GIFT), stresses that the use of cryptocurrencies for illicit transactions is complex. 

“Whilst it is true that illicit transactions totaled $14 billion in 2021, up 79% from $7.8 billion the previous year, the rate of crypto-related crimes fell from 0.62% of all crypto transactions in 2020 to 0.15% in 2021, according to a report recently published by Chainalysis. But we need to look at the rate of crypto-related illicit activities, not at the total amounts involved,” Caudevilla said. 

The Chainalysis report nevertheless urges government agencies worldwide to step up its efforts against terrorist organizations that use cryptocurrencies to finance their operations. 

“Like other traditional transactional methods, it is also prone to misuse,” said Vikram Subburaj, CEO, Giottus Crypto Exchange. “One of the strong reasons why a progressive regulatory regime is necessary is to ensure all service providers are aware of their AML/CTF (anti-money laundering/counter-terrorism financing) risks and can enable systems to identify fraudulent transactions sooner.”

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