Binance Accused of Freezing Palestinian Crypto Assets

On August 26, Binance, a leading cryptocurrency exchange, was accused of freezing the crypto assets of Palestinian users following requests from Israeli authorities.

Ray Youssef, co-founder of Paxful and CEO of Noones P2P platform, highlighted these allegations, which have raised concerns about the independence of cryptocurrency exchanges and user privacy.

The Allegation

Youssef claimed that Binance had “seized funds from all Palestinians” at the request of the Israel Defense Forces (IDF). According to Youssef, Binance refused to return the seized funds and denied appeals from the affected users. Both Binance and Israeli officials have yet to comment on these allegations.

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The crux of the issue revolves around cryptocurrency wallets receiving funds from an organisation, the Dubai Exchange Company, which is classified as a terrorist entity by Israel. This Gaza-based group was designated as such by Israeli authorities in 2022.

Binance reportedly justified its actions based on a November 2023 letter from Paul Landes of Israel’s National Bureau for Counter-Terror Financing. This letter cited anti-terrorism laws to support the “temporary seizure of property belonging to a declared terrorist organisation,” which included the frozen cryptocurrency funds.

Concerns About Centralised Exchanges

Youssef expressed concerns that centralised exchanges like Binance may be turning into “government informants” rather than secure digital asset custodians. He alleged that Binance had shared user information from the Middle East and North Africa (MENA) region with the IDF without proper legal procedures, which, if true, represents a significant breach of user trust.

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Youssef’s statement, “Not your keys, not your coins. We are all Palestinians now,” highlights growing fears about centralisation in the cryptocurrency space and the potential for governmental overreach in a sector traditionally seen as decentralised and autonomous.

Broader Context of Cryptocurrency Seizures

This situation is part of a broader trend where cryptocurrency seizures are linked to geopolitical conflicts. For example, in October 2023, Israeli authorities froze cryptocurrency accounts allegedly used by Hamas for fundraising, with Binance reportedly aiding in this action. In April 2023, Israeli authorities also seized 190 Binance accounts connected to Hamas and ISIS.

Similarly, Tether, another major player in the crypto industry, froze 32 crypto addresses believed to be associated with terrorist activities in Israel and Ukraine in 2023. This action led to the seizure of $873,118 worth of USDT in collaboration with Israel’s National Bureau for Counter-Terror Financing.