Note: Views presented in this article represents the perspective and opinions of the author and do not necessarily represent Coinlive or of its official policies.

The classic question of whether the egg or the chicken came first has perplexed many, including me, and there is not a definitive answer.

However, the intersection of cryptocurrency and warfare is a topic that offers more clarity.

Throughout human history, conflicts and wars have been a constant presence.

It is not something that you or I can control.

In this historical context, cryptocurrency has emerged as a new tool that plays a role in the narratives of warfare, including ongoing conflicts like the Israel-Hamas war, Russian-Ukraine war, and so on.

The critical question arises: Are individuals who contribute their cryptocurrency doing so with benevolent intentions?

Cryptocurrency indeed provides an efficient means of supporting refugees and humanitarian causes, but it also raises concerns about its potential exploitation for sanctions evasion.

It is essential to recognise that cryptocurrency itself maintains a neutral stance, lacking inherent moral alignment.

The ethical distinction hinges on the intentions of the parties employing cryptocurrency, which can encompass both benevolent and malevolent objectives.

Crypto, In The Face Of War, Poses More Harm

I am sure many like me are standing on a crossroad of indecisiveness — crypto provides much-needed humanitarian aid but can also be a tool for funding life-endangering equipment; a double-edged sword if you will.

But we cannot keep being on the fence, especially when lives are lost everyday.

Sure, in the form of donations, it is a much-needed relief but how much do we know about where our crypto donations go to or what they are really used for?

And despite the efforts to establish crypto aid in the form of Crypto Aid Israel, there are many echoing that "crypto is the future of terror financing."

Israeli Authorities Step Up To Freeze Crypto Accounts

Earlier this week, Israeli authorities took action by freezing a Barclays bank account believed to be associated with Hamas fundraising and also blocked several cryptocurrency accounts used for collecting donations.

Specific details regarding the number of frozen accounts or the total asset value were not disclosed.

Tom Robinson, co-founder of blockchain research firm Elliptic, pointed out that Hamas has been relatively successful in using cryptocurrency for financing their activities.

Notably, Hamas had announced its withdrawal from cryptocurrency this year following a series of financial losses.

Cryptocurrency's transparent ledger system allows for the traceability of such transactions.

According to research by blockchain analysts at TRM Labs, fundraising through cryptocurrencies has historically increased in the aftermath of conflicts involving Hamas.

For instance, after the hostilities in May 2021, crypto addresses linked to Hamas received over $400,000.

However, in the wake of the recent violence, TRM Labs noted that major support groups associated with Hamas had transferred only a few thousand dollars through cryptocurrency.

Between December 2021 and April of this year, Israel reported the seizure of almost 190 crypto accounts allegedly linked to Hamas.

As to a possible reason why the donation volume is low, TRM said:

"One likely reason for the low donation volume is that Israeli authorities are targeting them immediately."

Berenberg Capital Markets' lead analyst Mark Palmer pointed out:

“While Hamas announced last April that it would no longer use crypto for fundraising due to the ability of authorities to track its movement on blockchain ledgers, we believe the recent headlines are likely to make clarity around the question of crypto's legal status even more elusive."

Furthermore, the cyber division of Israel's police force, known as Lahav 433, announced the seizure of cryptocurrency accounts associated with Hamas on 10 October.

The Israeli Police stated that Hamas had been utilising these accounts for fundraising via social media in the aftermath of recent attacks.

Lahav 433 is collaborating with various intelligence agencies, including the Defense Ministry and Shin Bet, to curtail the use of cryptocurrency channels by terrorist groups.

Binance, Tether, Coinbase, And The Likes, Takes Action

Subsequently, on 16 October, Tether disclosed that it had frozen funds held in 32 cryptocurrency addresses linked to terrorism in both Israel and Ukraine.

Tether further reported its collaboration with Israel's National Bureau for Counter Terror Financing in this endeavour.

Notably, a recent report from TRM Labs highlights that USDT on the TRON blockchain is the preferred method of choice for terrorist financiers.

Binance has also taken a proactive stance by freezing all accounts associated with Hamas.

In their blog post on 17 October, Coinbase outlined its proactive stance in combatting the flow of crypto funds to terrorist organisations, including Hamas.

Coinbase underscores the critical importance of preventing all forms of currency, cryptocurrencies included, from supporting terrorist entities such as Hamas.

To address this imperative, Coinbase maintains a robust compliance programme, encompassing Know Your Customer (KYC) checks, sanctions screening, reporting suspicious activities, and close cooperation with law enforcement agencies.

Furthermore, Coinbase leverages blockchain analytics technology to track, report, and forestall potential instances of terrorist financing.

Senator Elizabeth Warren's Stance

When it comes to one of the crypto naysayers, how can we forget Senator Elizabeth Warren?

I for one cannot help but associate her image with a knight going on a crusade against the likes of crypto.

The potential connection to Hamas has reinvigorated Senator Elizabeth's push for legislation aimed at imposing new anti-money laundering regulations on cryptocurrencies.

This initiative is increasingly garnering bipartisan support, despite efforts from digital asset firms to oppose it.

Senator Elizabeth pointed out:

“The danger of crypto-financed terrorism is real and should be an urgent priority for Congress. There's a growing bipartisan coalition of senators who are committed to passing this bill and fighting back against terrorism worldwide by choking off the financing."

Senate Banking Chair Sherrod Brown (D-Ohio), a prominent critic of the cryptocurrency industry, has pledged to use his committee's authority to scrutinise the role of crypto in the recent conflict involving Israel.

His decision to delve into the issue of crypto financing could significantly support Senator Elizabeth's cause, marking a departure from his previous stance that downplayed the necessity of such legislation.

Her proposed bill seeks to extend existing financial crime regulations that apply to traditional financial institutions to entities operating in the digital asset sphere.

Senator Roger Marshall of Kansas, Senator Elizabeth's lead Republican on the bill, echoed:

"The abuse of crypto by terrorist organisations should serve as a wake-up call to Congress to crack down on digital assets and money laundering that we now know is helping bankroll the horrific massacres in Israel."

Crypto's Role in Terror Financing

Cryptocurrency's potential to facilitate financial misconduct stems from its ability to allow individuals to conduct transactions outside the traditional banking system with a measure of pseudonymity, often utilising decentralised platforms.

On the flip side, advocates of cryptocurrencies contend that they contribute to transparency due to the frequent recording of transactions on publicly accessible ledgers.

However, I might be overly optimistic to believe that we can entirely prevent the utilisation of cryptocurrency for funding terrorism and conflicts, especially when considering that other traditional means such as fiat currency persist.

Indeed, cryptocurrency is exploited for financing terrorism, but it is merely one tool among many., as we all know.

In essence, it prompts us to explore whether the unique attributes of cryptocurrency make it an easier or more efficient choice for illicit financial activities.