How Hamas uses cryptocurrency to fund its operations

Hamas was able to exploit ‘financial gaps’ to move funds despite restrictions imposed by Washington and the West.

Experts in how Hamas is funded say it brings cryptocurrency into Gaza from Egypt. US authorities estimate that Iran remains the group's main financier, providing it with about $100mn a year.
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Experts in how Hamas is funded say it brings cryptocurrency into Gaza from Egypt. US authorities estimate that Iran remains the group's main financier, providing it with about $100mn a year.

How Hamas uses cryptocurrency to fund its operations

As the reverberations from Hamas’ attacks on Israeli civilian and military targets continue to dominate the international agenda, it has emerged that the group used cryptocurrencies to finance its unprecedented operation.

Four days after the Al-Aqsa Flood operation of 7 October, Israel announced that its cybersecurity police froze accounts belonging to the Palestinian movement. According to a statement from law enforcement by The Times of Israel, armed groups had been using these accounts since its fighters invaded Israeli positions adjacent to the Gaza Strip.

The statement came from Lahav 433, Israel’s equivalent of the United States Federal Bureau of Investigation. It said it was working alongside the Ministry of Defence and the Shin Bet internal security agency to shut down the cryptocurrency channels used by Hamas and allied groups.

The newspaper reported that Binance, the global cryptocurrency exchange, cooperated with Israel in locating and shutting the accounts, according to the statement from law enforcement. Lahav 433 also cooperated with British police to close a Barclays account involved in its campaign.

Cutting off cryptocurrency transfers came as the latest twist in longstanding and ongoing efforts from the US and Israel to stop the foreign funding of Hamas and its allies, Islamic Jihad and Lebanese Hezbollah.

According to The Wall Street Journal, each of those three organisations received "large volumes" of money through cryptocurrency transfers in the year running up to the 7 October attacks, when the operation is likely to have been planned.

According to The Wall Street Journal, each of those three organisations received "large volumes" of money through cryptocurrency transfers in the year running up to the 7 October attacks, when the operation is likely to have been planned.

The $41mn gap

The US newspaper estimated that Hamas received about $41mn in this period, with Islamic Jihad getting hold of $93mn. There was no amount for Hezbollah, known for its clashes with Israeli forces across the border with Lebanon. However, the report said Islamic Jihad has transferred $12mn in cryptocurrency to Hezbollah since 2021.

The WSJ's reporting relied on information from the Israeli government and analysis of the blockchain involved in the movement of cryptocurrency, the digital ledger that tracks such transactions.

The Associated Press reported that the Israeli government confiscated cryptocurrencies worth "millions of dollars" from accounts that receive or send money from and to Hezbollah and the Quds Force of the Iranian Revolutionary Guards. 

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Two Islamic Revolutionary Guard Corps (IRGC) armed military personnel pose for a photograph in front of an Iran flag.

The news agency reported in June that the operation involved Mossad – the Institute of Intelligence and Special Operations – alongside other agencies, including the Military Intelligence Office and the Israel Police.

Experts spoken to by the WSJ described those confiscations as the tip of the iceberg of what the groups are likely to have received. The newspaper said it was unclear how much that money would have been used to finance the Al-Aqsa Flood attacks. It quoted confirmation from the Israeli police that the three groups are requesting donations of cryptocurrencies through social media.

Last year, the US Treasury Department found that "gaps in financial crime controls" allow cryptocurrency to reach groups Washington classifies as terrorist and indicates that al-Qaeda and the Islamic State (IS) have benefited from such transfers.

The US Treasury Department found that "gaps in financial crime controls" allow cryptocurrency to reach groups Washington classifies as terrorist and indicates that al-Qaeda and the Islamic State (IS) have benefited from such transfers.

Meanwhile, the US Department of Justice is investigating anti-money laundering rules at Binance, the world's largest cryptocurrency exchange. A Binance spokesperson told the WSJ that the exchange's team was "working in real time and around the clock to support ongoing efforts" by the US and Israel to seize cryptocurrencies destined for the three groups, and others.

$100mn from Iran

Experts in how Hamas is funded say it brings cryptocurrency into Gaza from Egypt. US authorities estimate that Iran remains the group's main financier, providing it with about $100mn a year.

Hamas doesn't hide its use of cryptocurrencies to obtain funding. Its oldest announcement in this regard dates back to at least 2019, as its military wing, the Al-Qassam Brigades, used an account on the social networking application Telegram to request support in this way. Hamas has even published the address of its crypto wallet, and it is estimated to have received $30,000 into it that year.

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Hamas soon withdrew the wallet's address to protect its donors after US investigators tracked funding sources through the blockchains involved. Hamas has since activated tools to hide the source of donations. In April, it announced it would stop receiving donations via cryptocurrencies to protect donors.

India angle

Some of the funds have been linked with India. Business Today reported that an investigation by authorities there into a scam involving a cryptocurrency wallet revealed the illegal transfer of local currency worth about $36,000 to other wallets belonging to Al-Qassam. They operated in the West Bank in Giza, Egypt, and Ramallah.

The Indian magazine explained that the money moved among several wallets before landing with Al-Qassam. The Indian investigation coincided with another at Israel's National Bureau for Counter-Terror Financing.

Such scrutiny is likely to continue as the war continues. CoinDesk, a crypto market website, has quoted industry experts predicting that riskier digital currencies, such as Bitcoin, will come under pressure.

As sentiment on wider global financial markets tracks the sharp rise in tension and the outbreak of conflict in the Middle East, oil prices have risen, and stock prices have held their nerve, although share indices are likely to fall if the war spreads.

Haven assets have rallied modestly, with gold up by about 1%. Cryptocurrency prices are expected to remain volatile but within an overall downward trend.

The extra scrutiny on the role of digital money in funding Hamas and its allies is likely to bring more controls upon them, or at least calls for such action. This trend will only gain momentum as the Israelis – and the US – investigate this form of funding for armed groups.

However, the restrictions that may occur will likely remain far from the ones already applied to traditional currencies sponsored by central banks.

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