The Crypto War Behind the Israel-Palestine Conflict: Over a Hundred Million in Crypto Fundraising, Binance Caught in the Crossfire

Cryptocurrency Fundraising Exceeds $100 Million

On October 9, MarketAcross, CryptoJungle, and other leading Israeli blockchain companies launched the Crypto Aid Israel initiative.

According to the official website, Crypto Aid Israel will host a multi-signature wallet to collect donations in various forms of cryptocurrency, including BTC, ETH, USDT, USDC, etc. The wallet will be entrusted to respected local community members and will operate in a fully transparent manner. The donated cryptocurrency will be used to rebuild southern Israel, provide assistance to the families of victims and captives, and support soldiers and emergency responders.

As of the time of publication, on-chain data shows that Crypto Aid Israel has received over $90,000 in cryptocurrency.

At the same time, many Arab charitable organizations have listed cryptocurrency wallet addresses on social media to attract donations, reportedly raising thousands of dollars in cryptocurrency.

The conflict between Palestine and Israel has a long history. Since Hamas's surprise attack on Israel on October 7, Israel has suffered heavy losses, with over 1,200 people dead and more than 2,700 injured. In Israel's counterattacks, over 1,100 Palestinians have also died, and more than 300,000 people have been displaced.

Hamas and the Gaza Strip have long been sanctioned by Israel and the international community, leading to an economic downturn. Hamas is facing a severe economic crisis, and media reports indicate that cryptocurrency fundraising has played a significant role in enabling such a large-scale attack.

According to media reports, Hamas, the Palestinian Islamic Jihad (PIJ), and Hezbollah have raised over $130 million through cryptocurrency fundraising.

Among them, the digital currency wallets associated with the Palestinian Islamic Jihad received $93 million in cryptocurrency from August 2021 to June last year, while approximately $41 million flowed into wallets related to Hamas during the same period.

Due to the anonymity of cryptocurrencies, organizations like Hamas likely receive even more in cryptocurrency donations, and their history of fundraising through cryptocurrency can be traced back even further.

In January 2019, Hamas's military wing, the Izz ad-Din al-Qassam Brigades, announced fundraising through Bitcoin, at which time the Qassam Brigades' Telegram account had 180,000 followers. This initiative continued until April 2023 when the Qassam Brigades announced they would stop accepting Bitcoin donations.

Another terrorist organization, ITMC (Ibn Taymiyyah Media Center), began using cryptocurrency for fundraising even earlier. ITMC is a media department of a jihadist organization based in Gaza that operates in the Jerusalem area.

In 2016, ITMC launched the Jahezona (Arabic for "Equip Us") campaign for donations in Bitcoin, explicitly stating that the funds would be used to purchase weapons.

According to Chainanalysis, this campaign lasted for two years and received cryptocurrency worth tens of thousands of dollars through over 50 individual donations. The median donation amount was $164, with the largest single donation just under $2,500, and most donations falling between $100 and $250.

Additionally, these organizations also use cryptocurrency for fund transfers among themselves. According to analysis by Elliptic, since 2021, the Palestinian Islamic Jihad has transferred over $12 million in cryptocurrency to Hezbollah.

Matthew Price, head of business at Elliptic working with law enforcement, stated that using cryptocurrency "is much easier than smuggling cash across the Egyptian border."

Stopping Cryptocurrency Donations? Or a Smoke Screen

To cut off Hamas's cryptocurrency fundraising channels, Israel and the United States have utilized their technological advantages to strike back; however, the results seem less than ideal.

The largest publicly reported seizure of cryptocurrency assets occurred in 2021 when the Israeli government confiscated cryptocurrency from 84 wallets associated with Hamas, including Bitcoin, USDT, Ethereum, and Dogecoin, with a total value of $7.3 million. However, this is a drop in the bucket compared to Hamas's hundreds of millions in cryptocurrency fundraising.

To sever Hamas's cryptocurrency fundraising channels, the Israeli Ministry of Defense, Ministry of Justice, intelligence agencies, and law enforcement have been continuously involved in operations, with some blockchain technology companies, such as Chainanalysis and Elliptic, also participating.

In June of this year, the Israeli National Bureau for Counter Terror Financing announced the seizure of millions of dollars in cryptocurrency wallets. Israeli Defense Minister Yoav Gallant praised the collaboration between multiple government departments and new technologies at a meeting, stating, "In recent months, we have developed new capabilities in cooperation with the National Bureau for Counter Terror Financing, intelligence, and law enforcement entities, achieving significant accomplishments in this battle."

Gallant also announced that Israel has effectively cut off the flow of terrorist funds through cryptocurrency.

Gallant's assertion that the cryptocurrency fundraising channels for Hamas and other organizations have been severed is largely based on Hamas's military wing, the Qassam Brigades, announcing the cessation of Bitcoin donations in April this year.

However, in terms of results, Israel's judgment may be significantly flawed; Hamas's cryptocurrency channels may simply be more concealed, and it cannot be ruled out that Hamas's announcement to stop Bitcoin donations is merely a "smoke screen."

Cryptocurrencies like Bitcoin are adopted by organizations like Hamas due to their anonymity and ability to bypass banks for fund transfers, yet cryptocurrencies are also easily traceable due to the transparency of on-chain data.

Hamas stated in a declaration that the cessation of Bitcoin donations was due to concerns for the safety of donors and to avoid any harm to them.

In fact, it is not easy for Israeli authorities to track down donors, as Hamas has previously disclosed corresponding concealment measures.

When Hamas first launched its Bitcoin donation program in 2019, there was only one Bitcoin wallet address for receiving donations, making it easy for the Israeli government to track. Subsequently, Hamas changed its donation method, using technological means to generate a unique receiving address for each donor.

Additionally, Hamas has released tutorial videos online on how to bypass traditional financial systems to donate cryptocurrency, including how to create private wallets, use recommended wallet lists and exchanges, and use public Wi-Fi to avoid IP leaks.

Reports indicate that ITMC has also used mixers to evade tracking by Israel and others.

Chainanalysis stated in a 2020 report that Hamas's address generation infrastructure is much more complex, posing significant challenges for investigators tracking donations. In 2020 and beyond, more terrorist organizations may adopt cryptocurrency as a fundraising tool, allowing them to absorb more funds and enhance privacy.

Binance Caught in the Crossfire: Complicity vs. Cooperation

In the cryptocurrency war between Israel and Hamas, exchanges like Binance have also been drawn into the fray.

After the escalation of the Israel-Palestine conflict, Israeli police collaborated with Binance to freeze cryptocurrency accounts related to the Palestinian militant organization Hamas, with any seized funds flowing into the Israeli treasury.

Binance co-founder He Yi responded by stating that Hamas is a terrorist organization as defined by the United Nations, and any international organization must cooperate when asked to freeze accounts; no trading platform can refuse such law enforcement requests.

"Palestine has a governing authority, and Hamas is a local armed group that commits atrocities against civilians; that is the issue. Hamas does not equal Palestine. This freeze is aimed at Hamas, not at Palestine," He Yi stated.

Previously, Binance had been accused of enabling terrorist organizations to conduct cryptocurrency transactions.

In May 2023, Reuters reported that since 2021, Israel had seized about 190 cryptocurrency accounts on the Binance exchange, with two linked to ISIS and several dozen associated with Hamas-affiliated Palestinian companies.

Reuters claimed that Binance intentionally maintained weak anti-money laundering controls, stating that since 2017, Binance had processed over $10 billion in payments for criminals and companies seeking to evade U.S. sanctions.

Binance responded by stating that Reuters deliberately omitted key facts, asserting that Binance's policies and procedures comply with anti-money laundering and counter-terrorism financing requirements.

"A frequently overlooked fact is that once a transaction is verified on the blockchain, cryptocurrency exchanges cannot stop or reverse digital asset deposits. The true measure of an exchange's compliance is the steps it takes to identify suspicious deposits and respond to them. When we become aware of wrongdoing, we intervene and take appropriate action, including freezing funds and cooperating with law enforcement to support investigations," Binance stated.

For exchanges, the challenge lies in the fact that bad actors do not register accounts under their criminal enterprises' names, making it difficult to identify money laundering and terrorist financing.

In 2022, the Israeli Ministry of Defense also seized digital wallets associated with 30 companies linked to the exchange al-Mutahadun, accusing the latter of funding Hamas.

Undeniably, for exchanges like Binance, overly emphasizing anti-money laundering and counter-terrorism financing could harm their economic interests. In He Yi's response, Binance clearly hopes that the impact does not extend to all Palestinian users.

On October 11, He Yi reiterated, "Binance will not freeze or confiscate any assets of the public; international business entities need to follow international law enforcement principles, and the rules are set by the strong. In the face of international conventions, Binance is just a small player."

In the face of the rules set by the strong, Hamas's cryptocurrency fundraising channels may also become more difficult.

According to media reports, recent Israeli attacks on Palestinian telecommunications companies have destroyed much of the internet in the region, leaving Gaza almost without water and electricity.

It is worth discussing: without electricity and internet, how will Hamas's cryptocurrency assistance proceed? How will Arab charitable groups conduct cryptocurrency assistance for civilians trapped in Gaza?

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