The use of cryptocurrencies by Hamas and militant groups, while significant, pales in comparison to the amount of cryptocurrencies used by other illicit actors. Hamas, for example, raised $41 million in cryptocurrency over the past two years, and Palestinian Islamic Jihad raised $91 million. According to a report last week in the Wall Street Journal which cited analysis by cryptocurrency tracking companies and seizures by the Israeli government.
However, it is unclear how much of those funds actually reached these groups before being confiscated. In fact, Hamas asked its donors to stop using cryptocurrencies in April 2023, due to the public nature of transactions on blockchains and the risk of processing. Cryptocurrency tracking company Chainalysis, which frequently works with government and law enforcement clients, even went so far as to publish a blog post yesterday warning against erroneous analyzes that overestimate the role of cryptocurrencies in financing entities such as Hamas and Palestinian Islamic Jihad.
By contrast, North Korean state-sponsored cybercriminals, Russian ransomware gangs, and other criminal groups have pocketed billions of dollars by stealing cryptocurrency or using technology as a means to demand extortion payments. to the victims. Thieves stole $3.8 billion in cryptocurrency last year (much of which went to the North Korean regime) and ransomware hackers extorted nearly $450 million in the first half of 2023 alone, according to Chainalysis .
Those criminals often use cryptocurrency mixing services, funneling hundreds of millions of dollars into mixing services like ChipMixer and Sinbad.io. In fact, US authorities and the Treasury Department have aggressively sanctioned or shut down one blender service after another in recent years, including Blender, TornadoCash and Bitzlato, often citing their use to launder the profits of those North Korean and Russian hackers.
FinCEN's new rules would be less severe than those sanctions, indictments and arrests (a new regulatory process rather than a ban), but also much broader in scope, says Jason Somensatto, head of public policy at Chainalysis in North America. "The impact can be much broader," says Somensatto. โYou can say that this applies to all mix services with which people interact.โ
As the Treasury redoubles its efforts to curb cryptocurrency-based money laundering (and now points to Hamas as a new impetus for that crackdown), TRM Labs' Redbord warns that US regulators should not go too far in censoring services that do so. do. in some cases, offering financial privacy to legitimate users. After all, without mixers, most cryptocurrency transactions are entirely public in nature. "I think the challenge for regulators is: How do we prevent illicit actors from using these platforms while still allowing regular users to allow some degree of privacy?" Redbord says. "I think the concern is that this might mean throwing the baby out with the bathwater."
