Bitcoin may have lost its luster for many speculators chasing skyrocketing prices before the bubble burst, but some terrorists desperately want the cryptocurrency anyhow. Earlier this week, the terrorist organization Hamas-which controls the Gaza Strip-released a video urging supporters to send the group money in the form of bitcoins. Hamas’ military wing started the Bitcoin campaign back in January, but only raised a few thousand dollars. Undeterred, the group is doubling down on Bitcoin crowdfunding and getting more sophisticated in handling the technology.
The sleek Hamas video is in Arabic with English subtitles and recommends ways for acquiring and sending bitcoins while reducing the chance of being discovered. Hamas previously told donors to send all funds to a specific Bitcoin address, but the group’s website now generates unique addresses for each site visitor. This method will make it harder for authorities to identify and track donations, and shows that Hamas is more careful about cryptocurrency operational security. The group has climbed high up the crypto learning curve in just a few months. Hamas is not the first terrorist organization to raise funds through Bitcoin. Various jihadist groups have been experimenting with cryptocurrency campaigns the past few years, but Hamas apparently has learned from them and is teaching supporters how to use Bitcoin more securely.
Last year, for the first time, the U.S. Treasury Department added cryptocurrency wallet addresses to its sanctions blacklist. This was a groundbreaking move to show illicit actors that financial authorities will go after them even in the digital currency realm. However, the Hamas activity exemplifies how easy it is for terrorist groups to adapt to such efforts by using readily available software tools. Cryptocurrency addresses are unlike bank accounts where a regulated institution vets you before giving you access to the bank. In the crypto space, in many ways, you can be your own bank. No one can stop you from acquiring a Bitcoin address.
Despite Hamas’ one-upmanship by using uniquely generated addresses, the U.S. still can pressure the group-or at least pressure its potential Bitcoin donors. Hamas can easily give out addresses, but funding them will be risky for donors. For example, in the new video, Hamas recommends donors visit one of several well-known cryptocurrency exchange websites to purchase bitcoins, including some U.S. and European-based sites. However, doing so would create a paper trail because users would need to provide identification to open up accounts at these sites. If any Hamas transactions do get discovered by law enforcement or intelligence agencies, authorities could look for patterns to identify other addresses the group created. This is called blockchain analysis, named after the online ledger that records cryptocurrency transactions in a chain of blocks.
Cryptocurrency exchange websites should be aware of the risk of any customers participating in illicit funding campaigns. Even though the various Hamas addresses might not currently be on the sanctions list, funding Hamas in any way is still illegal. To stay out of U.S. sanctions enforcers’ crosshairs, exchanges will need to scrutinize their customers’ activity to flag any connections to known Hamas Bitcoin addresses. It is in the self-interest of exchanges to to keep terrorists away, so they can focus on growing their legitimate business activities.
Financial regulators around the world are trying to contain illicit funding in cryptocurrency markets. Jihadist groups thus far have not raised much money, but the Hamas campaign shows that no matter the price of Bitcoin, cryptocurrencies are a new and easily accessible way to diversify their funding portfolio. It is unlikely that terrorist cryptocurrency crowdfunding is going away soon.