Cryptocurrency has played a role in previous conflicts in Afghanistan, Libya, Palestine, and Syria. In the Russia-Ukraine war both nations have used crypto currencies to avoid sanctions or to get donations. By February 2023, cryptocurrency donations for Ukraine had exceeded a staggering $70 million, one year into the Russian-Ukraine war. Interesting. Let’s look at how crypto is used times of conflict.
Recently, the Israeli law enforcement has joined forces with the world’s largest cryptocurrency exchange Binance in an operation aimed at freezing cryptocurrency accounts linked to the Palestinian militant organization, Hamas. This comes in the aftermath of a series of Hamas-orchestrated attacks against Israel in the last week.
The operation led by the cyber unit of Israel’s elite Lahav 433 police division, unfolded in close collaboration with the Ministry of Defense and intelligence agencies. Their mission: to pinpoint and freeze cryptocurrency accounts believed to be associated with Hamas, ultimately seizing the digital assets contained within. While the exact sum confiscated remains shrouded in secrecy, it has been affirmed that all seized funds will find their way into the Israeli national treasury. It’s not the first time Israel has focused on digital assets in the fight against terrorism. This endeavor follows a precedent set in 2021 when Israeli authorities previously seized around 190 Binance accounts with suspected ties to various militant groups. However, the role of cryptocurrency in conflict in not straightforward.
The U.S. Commodity Futures Trading Commission alleges that Binance officials have previously been complicit in crypto transactions and fund transfers executed by Hamas on their platform. Binance and its CEO have vehemently denied these allegations. It’s obviously complicated to run the world’s biggest crypto exchange and keeping track of an average of 2 billion transactions each day. Which cryptocurrency transaction may be a terrorist moving or laundering money? Binance’s proactive involvement in the Israeli operation has sparked some interest in the cryptocurrency community, and the overall message is that crypto is used by both good and bad players.
Israel’s cryptocurrency and web3 communities have launched “Crypto Aid Israel” in the face of the recent attacks by Hamas. This initiative has introduced a multi-signature wallet designed to receive donations in various cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), and stablecoins like USDT and USDC. The goal of raising funds is to provide essential necessities such as food, shelter, hygiene products, and medical supplies to Israeli civilians adversely affected by the conflict. Israeli banks and regulators have also stepped in as intermediaries, ensuring that these digital assets reach their intended recipients.
Fraudulent practices of donations are common. For example, the United Kingdom National Fraud reporting center has received 196 reports of bogus activities to raise funds for victims in the Russia-Ukraine war. I remember the terrible Tsunami in Thailand 2004 where Swedish people donated money to the relief effort and learned that a considerable amount of donations had disappeared in the hands of corruption. When I listened to an interview by one of the founders of the “Crypto Aid Israel” it was clear that they were proud to use blockchain technology to bolster transparency and accountability in managing donated funds.
Think about it. If every donated cryptocurrency is registered on the blockchain it’s difficult to hide questionable transactions or commit fraudulent activities with funds. Cryptocurrency clearly has a meaningful use case in the event of disaster or conflict.