The Israel-Hamas conflict in Gaza has brought to the forefront an issue that has been simmering for nearly a decade: the funding networks for terrorism.
Now, U.S. and other Western government watchdogs, legislators, and others have refocused on the problem. And especially on terrorists’ use of digital money – or cryptocurrency – that can be flashed around the world without the scrutiny of banks or regulators.
It’s easy to overstate the importance of cryptocurrency. Violent nonstate groups receive far more money through other formal and informal financial systems than from using bitcoin and other digital money, terror-finance experts say. But it’s still a concern, and the larger problem is a strategic one.
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Anti-terrorism is a cat-and-mouse game. The Oct. 7 Hamas attack put a focus on the use of cryptocurrency by terrorist groups. Now, the United States shows signs of cracking down. Will the vigilance last?
Just as Israeli and other intelligence agencies disregarded signs of a military buildup in Gaza, finance watchdogs were preoccupied with other matters. They missed the chance to squeeze Hamas’ and other groups’ funding before these groups could act. (Hamas has been designated a terrorist organization by the U.S. State Department since 1997.)
“We have taken our eyes off the ball on terrorism issues,” says Louise Shelley, director of the Terrorism, Transnational Crime and Corruption Center at George Mason University. “I know it from the most reputable sources that the government is not collecting the data that it needs to be on either cryptocurrency or the use of credit cards, which is an essential way that Hamas is being funded at the moment.”
Actions in recent weeks suggest this may change. The U.S. Treasury, for example, reached a $3.4 billion settlement with the cryptocurrency exchange Binance over its lack of safeguards.