In the wake of Hamas’ brutal surprise attack and massacre of Israeli civilians, policymakers are looking for the most effective ways to combat terrorist organizations. They can learn an important lesson from a recent incident with Hamas, which attempted to use Bitcoin to finance its operations.
Hamas thought it could blur Western surveillance and international sanctions by adopting the world’s leading digital presence. It was misconceived, and the story is eye-opening for those who mistakenly believed that Bitcoin provided a safe haven for criminals, money launderers, and terrorist financers.
Just last week, Israeli law enforcement successfully detected and froze multiple cryptocurrencies accounts Hamas uses it to collect donations. Israel then transferred the assets to its own treasury; war To “wipe Hamas off the face of the earth”.
The terrorist organization’s crypto plan has backfired badly, and this isn’t even the first time it’s backfired this year. In April, Hamas implored its supporters to stop sending donations, specifically via bitcoin. with a surprise press releaseannounced that it was suspending Bitcoin donations “to ensure the safety of donors and protect them from any harm.” terrorist network cited The logic behind this decision is to “intensify prosecutions and redouble hostile efforts against anyone who tries to support the resistance through this currency.”
So what happened? Isn’t Bitcoin ideal for money laundering? Isn’t it the currency of choice for terrorists and criminals around the world?
Leave the opposite. Hamas discovered too late that making illegal transactions in Bitcoin was a financial suicide mission. This is because the open and transparent nature of the blockchain is a panopticon for intelligence agencies, allowing them to track transactions in real time with a speed and precision unthinkable in the world of fiat money.
Unlike paper money or computer files, the bitcoin blockchain is permanent, transparent and immutable. This means that every network transaction, whether worth a few hundred or millions of dollars, is fossilized in the blockchain like a prehistoric bug in digital amber.
These fossilized transactions include any donations made to Hamas through this medium. All law enforcement needs to do is link a transaction to a wallet and a wallet to an ID; this is a task in which little difficulty is encountered in doing so in practice.
Therefore, according to a study by the analytics firm, illegal activities account for a very small fraction of transactions in the cryptocurrency space (about a quarter of one percent). Chain Analysis. That’s a particularly small amount compared to the 2 to 5 percent of fiat money transactions associated with money laundering and the like, according to United Nations data.
In other words, if you don’t like what some people are doing with Bitcoin, you’re going to hate the US dollar.
This is an important lesson that some lawmakers in Washington have yet to learn. And unfortunately, some are not open to learning facts that contradict their own prejudices.
You are. Elizabeth Warren (D-Mass.), who openly boasts of building an “anti-crypto army,” talks about cryptocurrency as if it were the blood money of terrorists. He disregards the numerous examples where Western intelligence has exploited the public nature of the blockchain to thwart illicit financing. This is not only the latest example with Hamas, but also 300 crypto accounts The Justice Department seized it to curtail funding for terrorist groups such as Al Qaeda and ISIS. You may also find the recent high-profile criminal prosecution of a Manhattan rapper and her husband illuminating. They were easily caught trying to launder billions of dollars in stolen bitcoin. It was again the transparency of the blockchain that revealed them.
Warren’s bill solves a problem no one else has. This would classify nearly all crypto industry participants, from wallet providers to miners to validators, as financial institutions and subject them to the Bank Secrecy Act’s onerous compliance regime. Under this bill, a teenager running a bitcoin mining rig in his basement could face the same compliance burden as JP Morgan Chase and Goldman Sachs.
But wallet providers, miners, and validators are not banks. They do not assume custody of assets. They should never collect or store sensitive personal financial information of individual users of an entity. They only provide infrastructure; open source software and computing power to help secure the network. Like Microsoft, which also provides many software and cybersecurity products to financial institutions, they are not financial institutions.
It would be impossible for the industry to comply with Warren’s requirements, and Warren knows it. The purpose of the bill is not to improve national security or stop money laundering, but to kill digital asset innovation.
Instead of participating in Warren’s charade, Congress should seriously examine how it can help federal law enforcement prevent actual illegal financing. The Financial Technology Protection Act, a bipartisan bill introduced by Senators Ted Budd (R-N.C.) and Kirsten Gillibrand (D-N.Y.), is a critical first step in this direction. Creates a working group to study and report on how terrorists are actually using new financial technologies to advance their missions and ways Congress and regulators can combat them. Congress can take its findings and create a regulatory regime that addresses real risks, not imaginary risks.
This will help deter criminal activity such as money laundering while preserving the ethos of personal freedom that has long defined the digital asset industry.
Terrorists and criminals, from Hamas and Al Qaeda to the Silk Road’s first drug traffickers, have learned the hard way that Bitcoin is not ideal for illicit finance. Lawmakers across the country haven’t gotten the memo yet. That’s why we’re rolling this out today and asking them to adjust their policies accordingly.
Jason Les is the CEO of Riot Platforms, Inc., the largest publicly traded bitcoin mining organization in North America by market cap. Brian Morgenstern is Riot’s head of public policy and served as a senior advisor and deputy assistant secretary at the Treasury Department from 2017 to 2020.
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