Jihadists are at it again, trying to raise money through Bitcoin. And this time, their efforts may be getting some traction.
Last week, the military wing of Hamas, known as the al-Qassam Brigades, called on supporters to send Bitcoin to the group. The U.S. designated Hamas as a terrorist group in 1997 and has shut down charities for funding the organization. Since 2007, the jihadist organization has governed the Gaza Strip. It has been under financial strain in recent years, however, largely due to sanctions applied to the group by Palestinian Authority President Mahmoud Abbas, but also because of diminishing support from Iran, neighboring Egypt closing off smuggling tunnels, and economic pressure from the U.S., Europe, Israel, and some Arab countries.
Soon after announcing its intention to crowdfund through Bitcoin, the al-Qassam Brigades posted infographics about Bitcoin on social media and provided a Bitcoin address to which donors could send funds. Within a day, the Hamas digital wallet received roughly $900, although it can not be verified if all funds came from external parties. Most donations were less than $100, although a few were larger. Then, days later, the group posted an additional Bitcoin address. In less than a week, its wallets received over $2,500 worth of Bitcoin.
A few thousand dollars may seem relatively small, but to receive that amount so quickly is noteworthy, especially if the donations continue at that pace. Back in 2016, I analyzed the first publicly-verifiable terrorist Bitcoin funding campaign by an obscure jihadist group also based in the Gaza Strip. That effort only raised about $600 after more than a month of social media campaigning. But the Hamas Bitcoin campaign probably is benefiting from the group being a much better known entity.
Social media is more crucial to Hamas outreach now after its television station came close to discontinuing broadcasts in December 2018 due to airstrikes by the Israeli Defense Forces and struggles to finance its operations. But it costs nothing to post Bitcoin crowdfunding requests on social media channels.
Many cryptocurrency media outlets are quick to emphasize that Bitcoin is less popular than cash or other conventional payment methods by terrorist groups (multiple outlets have misconstrued my Congressional testimony on this subject), but they miss how jihadist groups continue to experiment with token funding, while they proceed up a learning curve. In fact, days after the al-Qassam Brigades’ announcement, reports surfaced that other Palestinian militant groups have launched Bitcoin campaigns.
Hamas appears to understand that many of its supporters are new to cryptocurrencies. The group posted a “How to Buy Bitcoins” video as part of its campaign. The video, using Arabic captions, walks supporters through navigating a cryptocurrency exchange website and purchasing bitcoins to send the group. This shows a certain savviness by the campaign organizers, who are aware of the onboarding help needed to lower the barrier to Bitcoin funding. This tutorial probably also accounts for the quick response in donations.
Some may point out that Hamas asking for Bitcoin and encouraging donors to use a cryptocurrency exchange website are examples of poor operational security. It is well known that Bitcoin transactions are public and can be tracked and analyzed. Also, most cryptocurrency exchange websites require some form of customer identification, giving financial authorities a possible digital “paper trail” to follow back to the donor’s identity or location. These could be considered rookie mistakes since there exist other cryptocurrencies that are harder to trace and some decentralized exchanges that allow for more anonymous token acquisition.
However, this approach is not necessarily naive and should not be dismissed. Although law enforcement is concerned about criminals using so-called privacy coins to evade detection, Bitcoin remains the dominant cryptocurrency for cyber crime. More anonymous coins are more difficult to buy and decentralized exchanges have lower trading volumes and are complicated to navigate. Just as criminal hackers continue to deploy ransomware attacks using Bitcoin because they know choosing Bitcoin increases their chance of receiving funds quickly, Hamas is going with what is easiest and accessible for its supporters.
A year ago, there were multiple cases of jihadist groups running cryptocurrency crowdfunding campaigns. At the time, the U.S. Treasury Department had no clear means of punishing such behavior. But Treasury is now adding digital currency wallets to its Specially Designated National (SDN) sanctions list. In fact, Treasury designatedtwo Iranian ransomware wallets in November 2018, the first time Bitcoin addresses were put on the SDN list.
Treasury should designate the al-Qassam Brigades’ digital currency wallet as soon as possible. Although designating a wallet does not shut it down or make it technically impossible for people to send it funds, it will encourage cryptocurrency exchanges worldwide to flag the address and report any corresponding transactions on their platforms, if they want to stay out of U.S. sanctions’ crosshairs.
Treasury also is going to have to address jurisdictions that may have loopholes which protect terrorists or criminals from U.S. sanctions pressure. Cryptocurrency exchanges in countries that do not categorize Hamas as terrorist group may not generally be compelled to flag transactions with the al-Qassam Brigades’ wallet. However, if such exchanges keep fiat currency accounts at a conventional bank, the U.S. could pressure that bank to freeze the account.
There is a small, but vocal segment within the crypto space that will criticize U.S. sanctions pressure against cryptocurrency exchanges. These critics often champion cryptocurrency’s “censorship resistance” and argue that the unfettered ability to send funds of any amount to anyone, anywhere, anonymously is a requisite for freedom. But this is naive.
Unlimited personal freedom has never existed in the societies that have have produced the greatest amount of civil liberty known to humankind. If the crypto space wants to promote liberty, it must keep in mind that great freedom, if it is to be maintained, will always come with great responsibility.
Yaya J. Fanusie, a former CIA analyst, is an adjunct fellow at the Foundation for Defense of Democracies, a nonpartisan national security think tank in Washington DC.