From Aid to Arms: The Duality of Cryptocurrencies in the Israel-Hamas Conflict
Abigail Darwish | 29 November 2024
Summary
State and non-state actors are increasingly leveraging cryptocurrencies during times of war.
Aside from developmental applications, such as humanitarian aid, the digital platform has also been a means of financing non-state militias in the Middle East, namely Hamas and Palestinian Islamic Jihad.
Cryptocurrencies are a grey area in global security, offering both opportunities for support and solidarity when enabling the financing of conflict. This ambiguity complicates efforts to regulate their use in wartime.
Since 2009, the rise of cryptocurrencies has not only reshaped the global financial landscape but brought significant challenges to global security. Owing to crypto’s level of anonymity, rapid speed of international transfers, and its borderless, decentralised structure, it has become a versatile tool concerning modern warfare, employed for both constructive and destructive purposes by state and non-state actors alike, as evidenced in the ongoing Russia-Ukraine conflict.
This dynamic is similarly apparent in the Israel-Gaza War where crypto has been utilised for various purposes, ranging from humanitarian aid to ideological campaigns and most pressingly, the financing of armed militia groups. For example, following the recent success of a pro-Palestine digital currency, YAFA, a pro-Israel cryptocurrency, Go Israel, has been launched as an ‘ideological counterweight’ to ‘blockchain activism’ and to express support for the country amidst the war. In addition to its use for international solidarity, however, crypto has been a means of funding militia networks, notably Hamas and Palestinian Islamic Jihad (PIJ). As of 2021, Israel’s National Bureau for Counter Terror Financing (NBCTF) has frequently thwarted the use of cryptocurrency by Gaza-based organisations, seizing 190 Binance accounts worth ‘tens of millions of dollars in volume’, controlled by entities ‘affiliated’ with Hamas. Likewise, according to crypto analytics at Tel Aviv-based firm, BitOK, an estimated $41 million had been raised by Hamas between 2021 and 2023.
The funds acquired by Hamas constitute a broader use of crypto in funding non-state activities. In the last five years, there have been numerous instances of crypto abuse in the region. Around 2020, crypto became a ‘method of large-scale transfers’ between Iran and its hawala networks across Gaza, Lebanon, Syria and Turkey. Crypto has continued to be used as a means of distributing funds, of which Hamas receives up to $100 million annually. In modern warfare, cryptocurrency provides a unique platform through which the international community can deliver humanitarian aid, demonstrating national solidarity, alongside facilitating conflict through non-state actor activities. The ongoing Israel-Gaza War aptly captures this emerging global security grey area as the applications of crypto can clearly be leveraged as devices for security and prosperity during war, alongside facilitators of warfare.
Source: Microsoft Designer
Forecast
Short-term
It is very likely that cryptocurrencies will continue to feature in modern warfare, supporting both state and non-state actors in times of war.
It is also likely that the digital currency will continue to be used for ideological, or nationalistic-driven purposes.
Long-Term
It is quite likely that, with the increasing use of cryptocurrencies for conflictual purposes during wartime, international bodies such as the United Nations will move to regulate the digital currency, as other institutions such as the European Union have done.