(NewsNation) — U.S. Deputy Treasury Secretary Wally Adeyemo met with allies Friday about efforts to cut off international financial channels used to fund Hamas — including cryptocurrency firms — in response to the attack on Israel.
Adeyemo said the “vast majority” of financial institutions want to help root out terrorist financing; however, “there are those, especially (in) the digital asset space, who wish to innovate without regard to its consequences, including protecting against illicit finance.”
Last week, the U.S. announced sanctions against a group of 10 Hamas members and the Palestinian militant organization’s financial network, singling out people involved in its investment portfolio and a Gaza-based cryptocurrency exchange among other targets.
Secretary of State Antony Blinken said new U.S. sanctions are “directed at Hamas terrorists and their support network,” not at Palestinians.
“Our expectation is that financial institutions and digital asset companies and others in the virtual currency ecosystem take steps to prevent terrorists from being able to access resources,” Adeyemo added. “If they do not act to prevent illicit financial flows, the United States and our partners will.”
Iran is considered to be the principal financial and military sponsor of Hamas, but the Treasury Department highlighted that Hamas has relied on small-dollar donations, including through cryptocurrency.
The cryptocurrency tracking firm Elliptic said that “to the extent that Hamas has used crypto in the past, it is a relatively small and alternative source of funding” and has proved vulnerable to detection and disruption.
Adeyemo said the U.S. was taking action now to prevent the technology from being more widely used for illicit finance in the future.
Hamas initially thought it could flout Western surveillance and international sanctions by embracing digital assets.
In April, Hamas asked supporters to stop sending donations via Bitcoin.
However, in a press statement, it retreated, announcing it was suspending Bitcoin donations “to ensure the safety of donors and protect them from any harm.”
The terrorist organization’s crypto scheme backfired.
That’s because the open, transparent nature of the blockchain is also available to intelligence agencies, The Hill reported, “Allowing them to track transactions in real-time.”
Cryptocurrency wallet addresses are pseudonymous, meaning people can send and receive cryptocurrency without revealing their identity.
But U.S. Treasury officials said groups such as Hamas can be identified at the point where they try to convert cryptocurrencies into traditional currencies.
Officials said identifying these points, including outside the U.S., is a big part of their work.
“The story is illuminating for those who mistakenly believe that Bitcoin provides a safe space for criminals, money launderers and the financiers of terror,” The Hill reported.
The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) last week proposed increasing transparency around cryptocurrency “mixers” to combat the use of the tool by malicious actors, including Hamas.
The Hill and Reuters contributed to this report.
