The recent surge of attention surrounding the use of cryptocurrencies such as Bitcoin, Dogecoin and Ethereum to fund radical Islamic groups like Hamas and Palestinian Islamic Jihad has drawn the ire of the United States and Israel. As a result, the US Treasury’s Financial Crimes Enforcement Network (FinCEN) proposed new regulations in October 19 to combat the use of “Convertible Virtual Currency Mixing (CVC mixing)” as a means of laundering money and financing these groups.

The al-Qassam Brigades, the armed wing of Hamas, was caught in January 2019 using social media channels such as Facebook, Instagram and Telegram to solicit Bitcoin donations. According to the Israeli Defence Ministry, these virtual wallets linked to Hamas had received $41 million (€39 million) from 2013 to 2019.

The US also sanctioned the Gaza-based company “Buy Cash”, accusing it of facilitating cryptocurrency transfers to Hamas and Palestinian Islamic Jihad. Elliptic, a British firm that analyses virtual currency transactions, claims that the latter group has raised $94 million (€89 million) in cryptocurrency in recent years.

However, despite the attention that these numbers have drawn, they remain relatively small compared to the estimated $1 billion annual budget of Hamas, most of which is said to come from private donors in the Gulf region. This fact, combined with the difficulty of tracking the origin of funds in virtual wallets, makes it difficult to truly assess the impact of cryptocurrency financing on these organizations.

As noted by Tom Keatinge, director of the Centre for Financial Crime Research and Security Studies at the Royal United Service Institute, the true value of cryptocurrencies lies in the ease and speed of transactions, not necessarily the anonymity. While it is impossible to quantify how much money is transferred via crypto, it is becoming a more and more popular means of funding.

At the same time, authorities are targeting traditional terrorist financing channels, which could be driving these groups to seek alternative means. As Nicholas Ryder, professor of law and specialist in terrorist financing networks at Cardiff University, explains, “Using crypto in conjunction with social media platforms has become quite popular”. As such, it is likely that the use of crypto will continue to increase as authorities become better at combating traditional financing.