While the use of cryptocurrencies by Hamas and militant groups is significant, it pales in comparison to the amount of cryptocurrencies used by other illegal actors. Hamas, for example, has raised $41 million in cryptocurrencies over the past two years, and Palestinian Islamic Jihad has raised $91 million. According to a report last week in the Wall Street Journal Analyzes by companies on cryptocurrency tracing and seizures by the Israeli government were cited.
However, it is not clear how much of these funds actually reached these groups before they were confiscated. In fact, Hamas asked its donors to stop using cryptocurrencies in April 2023 due to the public nature of transactions on blockchains and the risk of prosecution. Chainalysis, a cryptocurrency tracking company that often works with government and law enforcement clients, even went that far publish a blog post yesterday he warned against false analyzes that overestimate the role of cryptocurrency in funding organizations such as Hamas and Palestinian Islamic Jihad.
In contrast, state-sponsored North Korean cybercriminals, Russian ransomware gangs and other criminal groups have pocketed billions of dollars by stealing cryptocurrencies or using the technology as a means to demand extortion payments from victims. According to Chainalysis, thieves stole $3.8 billion worth of crypto last year – much of it going to the North Korean regime – and ransomware hackers extorted almost $450 million in the first half of 2023 alone.
These criminals often use cryptocurrency mixing services and pour hundreds of millions of dollars into mixing services like ChipMixer and Sinbad.io. In fact, in recent years, U.S. law enforcement and the Treasury Department have aggressively sanctioned or shut down one mixing service after another, including Blender, TornadoCash and Bitzlato, often citing their use in laundering the profits of these North Korean and Russian hackers.
The new FinCEN rules would be less stringent than these sanctions, charges and arrests – a new regulatory process rather than a ban – but also far more comprehensive, says Jason Somensatto, Chainalysis’s head of public policy in North America. “The impact can be much broader,” says Somensatto. “You can say this is true all Mixing services that people interact with.”
As the Treasury Department doubles down on its push to stop crypto-based money laundering — and now points to Hamas as a new impetus for the crackdown — TRM Labs’ Redbord warns that U.S. regulators shouldn’t go too far in censoring services that do this . In some cases, they offer financial privacy to legitimate users. Because without a mixer, most cryptocurrency transactions are completely public in nature. “I think the challenge for regulators is how do we manage to deter illegal actors from using these platforms while still allowing regular users some level of privacy?” Redbord says. “I think the concern is that the baby might be thrown out with the bathwater.”