The Global Eye and The Science of Where Magazine in dialogue with Sauradeep Bag, associate fellow at the Observer Research Foundation. His focus spans across technology, economic development, and public policy. Currently, Sauradeep’s primary areas of focus are fintech and emerging technologies.
How are conflicts financed in the age of cryptocurrencies?
The financing of conflicts has taken on a new and complex dimension. The rapid technological advances and transformative scientific achievements have disrupted not only our way of life but also criminal activities. The shift to a digital economy has presented both positive improvements, such as faster transactions and a unified global payment system, and new challenges that modern society must confront. Criminals have adapted their methods and techniques to exploit the digital realm.
One alarming trend in recent years is the increasing use of cryptocurrency to finance terrorism. Terrorist organisations have adopted an integrated approach, leveraging social media, messaging platforms, and cryptocurrencies for international fundraising. They disseminate detailed instructions on cryptocurrency transactions through social networks and messenger channels, attracting potential donors from around the world. The pseudonymous nature of cryptocurrency wallet addresses allows users to send and receive funds without revealing their identities, making it an attractive option for those involved in illicit activities.
The blockchain technology that underpins cryptocurrencies operates digitally and transcends borders, providing a means of conducting transactions across the globe. While crypto is subject to less specific regulation than traditional finance, new rules are being introduced in some regions to address potential risks.
The Financial Action Task Force (FATF), a global body responsible for combating money laundering and terrorist financing, has expressed concerns about cryptocurrencies becoming a safe haven for criminal and terrorist financial transactions. While blockchain technology provides a public record of transactions, it is still possible for blockchain analytics firms to track fund flows. However, to link these flows to individuals or groups, researchers often rely on additional information not recorded on the blockchain.
While cryptocurrencies have become a part of the illicit financing landscape, including terrorist financing, it’s important to note that this is just one facet of the problem. Criminals and militant groups use various methods to move money, including cash, banks, shell companies, and informal financial networks. Crypto is a relatively small portion, and according to the United Nations, only a fraction of terrorist financing is currently associated with cryptocurrency.
However, the landscape is evolving, and the potential for cryptocurrency to play a larger role in financing conflicts is a growing concern. Crypto crime, which includes scams, ransomware, and theft, reached a record $20.1 billion in 2022.
Can you explain to our readers how the use of cryptocurrencies is linked to the ongoing conflicts between Russia and Ukraine and between Israel and Hamas ?
Cryptocurrencies have played a pivotal role in the conflict in Ukraine, with over $212 million in crypto donations channelled to support pro-Ukrainian efforts. Notably, $80 million of this funding was directed straight to the Ukrainian government. These contributions have been instrumental in addressing various war-related requirements, ranging from essential protective gear to crucial medical supplies.
Identifying the funding sources for recent Hamas attacks has highlighted the significance of cryptocurrencies. Investigations have revealed a sizable cryptocurrency inflow to organisations involved in the Israel-Palestinian conflict, including as Hamas, the Palestinian Islamic Jihad, and Hezbollah.
The Al-Qassam Brigades (AQB), the military wing of Hamas, started using cryptocurrencies for fundraising in January 2019. In order to assist their militant operations, they started a social media campaign. The first Bitcoin donations were small, amounting to just a few thousand dollars over a short period of time. They posted infographics about Bitcoin and a contribution address to social media, where they quickly received over $900 within a day, however, the source of this was still unknown. The majority of donations were modest, but some were greater. In less than a week, they had publicised another Bitcoin address and accumulated more than $2,500 in Bitcoin.
In the summer of 2021, as hostilities with Israel grew more intense, AQB experienced a huge uptick in cryptocurrency donations, receiving more over $73,000 in Bitcoin in a matter of days. In AQB’s wallets by July 2021, there were digital assets valued approximately $7.7 million, including Bitcoin, the stablecoin Tether, and additional coins like Ether, Tron, and Dogecoin.
The Israel-Palestine conflict is intricate, encompassing issues of territory, culture, religion, politics, nationality, and history. The use of cryptocurrencies by groups in the region complicates the problem of terrorism financing, necessitating constant efforts to manage this changing environment.
(riproduzione autorizzata citando le fonti – The Global Eye e The Science of Where Magazine)