ALEX BRUMMER: Crypto is propping up terrorist groups

The crypto industry's ability to remain in denial amid the October 7 'Black Sabbath' atrocities in Israel and the subsequent killing fields in Gaza knows no bounds.

One major player even described a recent £3.4 billion settlement between Binance and the US Department of Justice as a “silver lining” for crypto’s reputation.

Most people would be hard-pressed to find redeeming elements in a case in which Treasury Secretary Janet Yellen blasted Binance — which operates the world's largest cryptocurrency exchange — for “turning a blind eye to its legal obligations in the pursuit of profit.”

Yellen also attacked Binance for “intentional failures” that allowed “money to flow through the platform to terrorists, cybercriminals and child molesters.”

But in a display of twisted logic, crypto fans argue that the fact that US authorities have reached a settlement and not shut Binance down completely is an acknowledgment of the legitimacy of the entire digital money industry.

That ignores the fact that Binance admitted to money laundering for Hamas' murderous Al-Qassam Brigades in the same settlement.

Rather than demonstrating that crypto players are willing to clean up their act, it has shown how the use of computer-generated tokens and currencies has proven to be a boon for terrorist organizations looking to circumvent the strict money laundering restrictions placed on conventional financial institutions are imposed.

As any person or organization looking to open a banking or investment account knows, the disclosure requirements are intrusive and exhausting. Even the smallest coincidental discrepancy can lead to the closure of a bank account that has been active for years.

Ten years ago, HSBC came into trouble with US authorities for laundering money for Mexican drug cartels. Then in 2019, Standard Chartered paid a fine of almost £1 billion for breaching sanctions on Iran. If anything, as a result of such appalling behavior, compliance and enforcement in mainstream banking is overzealous.

Cryptocurrencies and their platforms have become the new frontier in the fight against financial crime. It wasn't meant to be like this. When the idea of ​​computer-generated currency first emerged after the Great Financial Crisis, it was seen as a breakthrough for finance and humanity.

Blockchain recording of transactions – a form of distributed ledgers – was seen as a way to provide transparency and the way forward when financial transfers take place online.

It didn't work that way. Bitcoin and its followers are every speculator's dream.

The computing power required to create crypto has put the country on the wrong side of zero carbon. But most worrying of all, it has provided criminal elements and terrorist groups with refuge from the authorities. The US Department of Justice's action against Binance last month shed light on an unregulated corner of the financial world.

Binance's controlling mind Changpeng Zhao pleaded guilty to money laundering and will pay a £40 million fine after his platform was colonized by Islamic State and Hamas. He was penalized a further £120 million by the Commodity Futures Trading Commission and has since stepped down as head of Binance.

Yellen saw the Binance case as a signal to the virtual currency industry that the US will no longer tolerate such behavior. Zhao wants to leave for the United Arab Emirates, but must remain in the US until February pending a sentencing hearing.

Fight: Treasury Secretary Janet Yellen

Instead of putting an end to the abuse, Binance's vile behavior, which has arguably cost thousands of innocent lives, has done nothing to end the crypto fiasco.

Tom Alexandrovich, head of Israel's cyber defense, said there has been a “super” increase in crypto financing for terrorism since the start of the conflict.

Crushing Bitcoin and other crypto funding for terrorism is like playing the carnival game 'Whack a Mole'. As soon as one platform is subjected to special measures, another pops up. A new fast-growing network called Tron is now being used to fund Iranian-backed groups, including the enemy on Israel's northern border, Hezbollah, and Hamas. Israel's Counter Terrorism Financing Agency froze 143 Tron wallets – a fancy name for accounts – between July 2021 and October 2023.

Tron, based in the British Virgin Islands, agrees it could be used for “questionable activities.”

But it also says it has no control over who uses the facilities and is NOT affiliated with groups identified by Israel as responsible for the October 7 attacks.

Yet two-thirds of Israel's seizures of 87 thrones this year are believed to involve Hezbollah, Hamas and Islamic Jihad.

All this has very little impact on market prices. Bitcoin has risen sharply in recent months. The geopolitical trauma has revitalized the country and cryptocurrencies remain the channel of choice for terrorists.

The collapse of the cryptocurrency exchange FTX – and the subsequent fraud case – coupled with the Binance scandal have done little to quell this evil.