Hamas, which has been locked in a cycle of violence with Israel since it took over Gaza in 2007, started a new wave of terrorism concerns in October 2023, after a sudden rocket attack.
Months down the line, we had Bitcoin and crypto in general being blamed as one of the major sources of terror financing in the conflict.
However, very recently, a US Treasury official has thrown water over these allegations and has proven that contrary to what the world believed, militants still rely on traditional means of transferring money.
Crypto had a minor part to play in the ongoing issues, and most crypto activities were greatly exaggerated.
On February 14, Brian Nelson, the Undersecretary of the Treasury for Terrorism and Financial Intelligence, gave a testimony before the House Financial Services Committee.
He said that the figures presented in a Wall Street Journal article from October, which claimed that terrorist organizations had received millions of dollars in crypto payments, were false.
He clarified that rather than the real amount of money the groups received or used, the estimates were based on the overall amount of crypto in the wallets connected to them.
According to him, the majority of the cryptocurrency in those wallets is believed to belong to other users who aren't terrorists, according to the Treasury.
"Frankly, we still believe that terrorists would rather use conventional products and services," Nelson stated, noting that the Treasury has not observed a notable rise in the use of crypto by terrorist groups.
According to the Wall Street Journal's report, which was based on information from the blockchain analytics company Elliptic, claimed that $93 million and $41 million respectively, were sent to Palestinian Islamic Jihad and Hamas between August 2021 and June 2023.
Elliptic, however, commented on the WSJ publication and stated that the published report misunderstood things, and there was "no evidence to suggest that crypto fundraising has raised anything close to this amount,"
According to Elliptic, the Journal misread the data in its report, and the figures showed the total amount of crypto transactions that were made in the wallets, rather than the net inflows or outflows.
Elliptic also argued that the Journal didn't account for the volatility of crypto prices and the possibility of transfers between the same wallets.
More than 100 US lawmakers, led by Senator Elizabeth Warren, also used the Journal's report to launch a political agenda, demanding tighter regulation of the cryptocurrency sector.
Warren and the others argued that crypto enabled illegal activities like money laundering and terrorism financing and that it posed a threat to national security. However, the crypto industry defended itself, claiming that the regulation will force the crypto sector offshore, and slow innovation down.
Representative Tom Emmer questioned Nelson at the committee hearing over the quantity of crypto that the terrorist organizations were able to get and use.
Nelson stated that the groups are using crypto in very minor sums compared to what has been reported and that the Treasury does not expect the figure to be particularly large.
Nelson was also questioned by Emmer on whether the Treasury should update the public record about crypto and terrorist funding since certain senators are relying on inaccurate information to support their agendas.
According to Nelson, the Treasury is keeping an eye on the issue and collaborating with other organizations and partners to stop criminals from abusing crypto.
In addition, he stated that he had requested "extra tools and resources" from Congress to "root out" the criminals in the crypto market.
He stated that the Treasury is dedicated to making sure that the US stays at the forefront of innovation and security in the crypto industry, but he did not define what type of tools or resources he was looking for.
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