Cryptocurrency’s role in geopolitics is complex and often evokes concern, especially in the current world order. The Russia-Ukraine conflict highlighted the intricate relationship between cryptocurrency and global affairs, while the Israel-Palestine conflict has sparked questions about the financial mechanisms behind contentious actions. Cryptocurrencies have played a central role in the Ukraine war, with over $212 million in donations flowing into pro-Ukrainian efforts, including $80 million directly to the Ukrainian government.
The rapid and decentralised nature of cryptocurrencies has supported various war-related needs. Cryptocurrencies have been identified as a significant source of funding for groups involved in the Israel-Palestinian conflict, including Hamas, Palestinian Islamic Jihad, and Hezbollah.
The Palestinian Islamic Jihad received a significant amount of cryptocurrency funding between August 2021 and June 2023, while Hamas secured a total of 41 million in funding between the same dates. In January 2019, Hamas, through its military arm, the Al-Qassam Brigades (AQB), began using cryptocurrency for fundraising through a social media campaign. Initially, Bitcoin donations were modest, but they quickly received around $900 within a day, with most donations being small.
In less than a week, they posted an additional Bitcoin address, accumulating over $2,500 worth of Bitcoin. This shift towards crypto assets may have been driven by the group’s search for alternative fundraising avenues, particularly in response to previous counter-terrorism financing measures targeting traditional banking and money remittance sectors. Social media’s cost-effectiveness in Bitcoin crowdfunding led to AQB’s summer 2021 surge in crypto donations, accumulating over $73,000.
Israel discovered 84 crypto wallets controlled by the AQB, leading to the seizure of funds. Hamas announced in April 2023 to halt crypto donations, recognizing the vulnerability of using cryptocurrencies to fund terrorist activities. Crypto transactions received by the Palestinian Islamic Jihad (PIJ) also dwindled, suggesting that groups involved in the Palestinian-Israeli conflict had abandoned cryptocurrency as a fundraising tool. The AQB also saw millions of dollars in cryptocurrency transfers, including Bitcoin, the stablecoin tether, and Dogecoin.
Funding for these groups has come from multiple sources, including private donors in the Gulf region, with Iran being a prominent financial backer. Qatar and Türkiyé have also supported Hamas financially. The adoption of cryptocurrency by these organizations adds complexity to the challenge of terrorism financing, necessitating ongoing efforts to address this evolving landscape. An Indian crypto heist in 2022 revealed a startling connection to Hamas, involving the questionable transfer of cryptocurrencies valued at approximately INR 30 lakhs, all originating from a cryptocurrency wallet in India.
Investigators discovered wallets linked to the AQB, which had previously been under Israel’s scrutiny. Israel swiftly frozen the cryptocurrency accounts tied to Hamas and directed funds towards the state treasury. Despite cryptocurrencies being a popular fundraising channel for Hamas, the group recently stopped accepting Bitcoin donations.
The intersection of cryptocurrencies and global conflicts highlights the dual nature of this innovative financial landscape. On one hand, the Ukraine conflict showcased the agility of crypto in enabling emergency fundraising and promoting the potential of decentralised finance. However, pro-Russian entities are also utilizing crypto for potentially harmful purposes. The Israel-Palestine conflict is multifaceted, with deep-seated issues related to nationality, politics, territory, culture, and religion.