In the aftermath of a recent Hamas attack on Israel, several media outlets have speculated about the role of cryptocurrencies in funding terrorist activity. However, according to blockchain analysis firm Chainalysis, the reality may be more nuanced.

In a blog post published on May 19th, Chainalysis argues that while some terrorists use cryptocurrencies, the funds raised are often wildly exaggerated. The post specifically references recent estimates that over $80 million worth of crypto was funneled to Hamas. Chainalysis contends that, in reality, only around $450,000 in crypto funds likely originated from terror-affiliated wallets.

Chainalysis explains that faulty analytics are often to blame for inflated estimates

Some reports have included totals that are already known amounts from all crypto funds sent to certain service providers, even if those funds were unrelated to terrorism. So, while a service provider may have processed $80 million in crypto overall, it most likely did not fund terrorism.

The blockchain analysis firm does acknowledge the role of service providers in enabling terrorism financing. While the raw volume may be small, service providers do facilitate the movement of terror-linked funds. As such, Chainalysis argues that sanctions and law enforcement operations targeting these facilitators are warranted.

While the nuances are complex, Chainalysis states unequivocally that cryptocurrencies account for only a “very small portion” of funds raised by terrorist organizations. Traditional methods like bank transfers and cash remain more common. Nonetheless, the firm concludes that as cryptocurrencies continue to grow, regulators and law enforcement must stay vigilant against their potential abuse by terrorist groups.

Featured Image Credit: From the Chainalysis Website. Thank you!

Radek Zielinski

Radek Zielinski is an experienced technology and financial journalist with a passion for cybersecurity and futurology.