stub The WSJ Got the Hamas Crypto Story Wrong – But It Made an Important Point - Securities.io
Connect with us

Thought Leaders

The WSJ Got the Hamas Crypto Story Wrong – But It Made an Important Point

mm

Published

 on

Hamas, it turns out, has not been raising millions of dollars in cryptocurrency to finance its terror operations, as the Wall Street Journal reported. In fact, the Journal, which initially said that Hamas and Palestinian Islamic Jihad (PIJ) had raised nearly $150 million in such funding, essentially retracted the story. Instead, the sum was closer to a half million dollars – a far more modest amount.

But the retraction only came after the article was the direct impetus for legislators to demand that the Biden administration “do something” to stop terror groups from utilizing crypto in this way. U.S. Deputy Treasury Secretary Wally Adeyemo also issued a stern warning to crypto exchanges that the government would “take action” if it caught exchanges facilitating such crypto transactions.

Some in the crypto community, often wary of government meddling, took the WSJ retraction as a sort of victory. Recent articles in the sector seemed to celebrate the idea that Hamas was getting its funding from somewhere other than crypto. One less reason to “accuse” crypto of nefarious activities.

Even one dollar is too much when it comes to financing terrorism

But isn't even one dollar too much when it comes to terrorism funding?

That, in essence, is the question the crypto industry now needs to grapple with.

Like any other inanimate object, crypto is a tool which can be used for good or bad. Terrorism, is bad. On October 7th, Hamas,  killed over 1,400 people on the deadliest day for Jews since the Holocaust, kidnapped over 230 hostages, and has continued to indiscriminately fire rockets and missiles at Israel from a seemingly never ending arsenal. As an Israeli, I am perhaps more exposed to the news stories about that dark day that are slowly emerging, and am constantly seeking shelter due to ongoing rocket attacks from Hamas on Israel.

No responsible person – regardless of their opinion on crypto – would want any kind of currency, crypto or otherwise, to go towards paying for this kind of terrorism. So when the WSJ story came out, it's understandable that legislators, and probably many other people, decided action was needed. As someone in the crypto sector, I agree that something must be done. But we should not wait around on legislation. While important, legislation is not enough. And given the slow and uneven track record of government regulation of crypto, at least in the United States, legislation may take too long and not take into account the nuances and innovative aspects of crypto.

The Crypto Community Must Self-Regulate

Meanwhile, we as a community should – and must – ensure that crypto stays out of the hands not just of terrorist organizations, but of all bad players, including those committing fraud, financing drugs or doing anything illegal. What that might entail requires thought – perhaps a compact among crypto platforms to reject suspicious transactions, or the establishment of a private investigative group that could check out the bona fides of those using platforms.

Among the groups already contributing to that effort is the Israel-based Lionsgate Network, which has dedicated its resources to hunting down and closing crypto wallets associated with terror funding. The group, which in “normal” times uses its technology to recover lost or stolen crypto funds, has recovered nearly $100 million in lost crypto and recovered over 80 million wallets – with some of its latest “recovered wallets” including those belonging to terror groups who seek to use them to pay for their nefarious actions.The fight against bad actors extends further, to garden variety thieves – with companies like Cyberspac3 promising to track down stolen funds and expose the culprits. Another company, Blockaid, which makes a security solution to root out nefarious wallets, recently raised $33 million. Even smaller players, like our company, which doesn’t have access to wallets, can do our part. We have restricted users from certain countries and have our own layer of know-your-customer protocols, to ensure an extra level of security so that nefarious players cannot use our service.

By taking matters into its own hands, the crypto industry can move faster on sifting out bad players. If successful, these efforts can also likely prevent the overreach of government regulators. Obviously, while we support governments trying to keep bad players out, we do worry about rules that could go too far, and harm financial innovation in general. So it's in the interest of the industry to regulate itself.

But it goes beyond that. Don't we believe in the goodness of crypto as a vehicle to promote freedom, to tear down barriers (financial and social), and to improve the lives of billions around the world? Surely we don't want these goals sullied by terrorists who will utilize our precious platforms for exactly the opposite. Crypto is indeed just a tool – and it's up to the vast majority of moral people who believe in the goodness of crypto to make sure that this tool is indeed used for good, and not for terror.

Dmitry Gooshchin is COO and co-founder at EndoTech.io, which develops and offers advanced AI-based algorithmic trading tools. He has a 20-year track record of scaling financial technology companies and has held senior executive positions at several fintech companies. He has a master's degree in astrophysics and also holds the title of Chess Grandmaster in correspondence chess.