CBDCs Can Stop Aid Falling Into Terrorist Hands

Central bank digital currencies, like the digital shekel, can be programmed to stop money reaching the wrong people, says Orbs' co-founder.

AccessTimeIconAug 4, 2021 at 3:35 p.m. UTC
Updated Sep 14, 2021 at 1:35 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

Years ago, when I first discovered blockchain, I believed Bitcoin would be the panacea to international aid tracking – that is, making sure that donor money is spent in the way it was intended. Though cryptocurrencies are developing quickly, I now find it hard to believe that bitcoin or ethereum will be effective international aid relief in our near-term future. However, I find new hope with central bank digital currencies (CBDC). 

CBDCs could actually provide a perfect solution for tracking and monitoring international aid funds. In fact, the Bank of Israel’s recent announcement about the potential issuance of a digital shekel could be a game changer for countries looking to track aid funds to the region, specifically to Gaza. 

Netta Korin is now a co-founder at Orbs as well as the Hexa Foundation. Previously, she worked on Wall Street and held senior advisor positions in the Israeli Prime Minister's Office. CoinDesk's Crypto State: Middle East virtual event is August 11.

Blockchain could be used to track aid funds in order to ensure the funds arrive at their desired destination. Gaza’s current circumstances are an example of illicit use of funds, because according to estimates, Hamas has siphoned $1.25 billion in international humanitarian aid funds to finance terror activity against Israel. 

Happily, it seems that the donor countries have come to realize that their funds are being misused by Hamas and are therefore looking for ways to ensure that this no longer occurs. Orbs has been developing a blockchain-based solution to provide full transparency for managing the budget of any project by tracking funds and monitoring all know-your-customer (KYC) processes in order to guarantee that aid funds reach only the whitelisted recipients. 

Any solution to solve aid tracking must consist of two core elements: the tracking mechanism (including identification measures) and the funds-transfer mechanism. In our multiple years of working toward this solution, we have seen that perhaps the most significant hurdle is integrating the two. That is understandable, as full control over fund transfers is not only difficult to implement, but is also dependent on third parties and exogenous constraints. Thus, the greatest challenge is providing a fully digital payment platform that is widely accepted by all third parties and implemented. 

Because funding organizations vary in terms of vision and being tech savvy, and because there are usually constraints such as infrastructure in the supported country or varying degrees of trust in the local banking system, there needs to be flexibility for organizations to optimize tracking potential according to the conditions at hand. 

In effect, there are three potential levels of implementation to a blockchain-based aid tracking solution, differentiated by their varying degree of control over the fund transfers, which is determined by the level of integration between both mechanisms. Let us explore them:


Funds are transferred over an external platform that is not integrated with the solution. This requires users to report transactions and have them properly approved before they are transferred. Only the transfers are manually updated as executed. In essence, this in effect is running a parallel accounting system, but on the blockchain. While at first this method might not seem that different from existing solutions, it is in fact an enormous improvement compared to the way things currently work. First, because it is immutable. Second and as important, because at least in theory, all transactions are reported and approved in real time and are transparent to funding parties, as opposed to only the project management units.


Funds are transferred over an external platform that is fully integrated using application programming interfaces (APIs) to the tracking mechanism. While the tracking mechanism is not in full control of fund transfers, the feedback is fully automated, thus minimizing user intervention for a more reliable reporting. This method provides a substantial upgrade in terms of the platform’s automation and reliability, but it is much more complicated to implement. The integration with third-party platforms such as banks and SWIFT is the main weakness here, as we (the developers) must depend on their cooperation for it to function properly. In that aspect, this method is the only one of the three where implementation is not entirely in our hands.


All funds are transferred over the platform, i.e. they are fully digitized and seamlessly integrated with the tracking mechanism. This method allows full control over funds transfer in real time, providing maximum transparency. The challenge is having a blockchain-based funds-transfer platform that is approved by the most conservative entities (governments, banks, etc.), which makes a CBDC the perfect solution, because governments are more likely to trust a government-issued currency than bitcoin or ether.

As we can see, CBDC provides the best, most seamless method for preventing misuse of aid funds. It is worth noting, however, that no matter which method is chosen, each option provides one of the most important features for any budget-monitoring solution, which currently is missing in the international community – immutability. That means that each transaction and all its relevant metadata are forever documented for present and future audits, without the ability to erase or edit it once it was carried out. Just a little something to keep in mind for anyone who signs a transaction. 

Assuming that the Bank of Israel continues its momentum with the digital shekel, it would have a major impact on the efficacy of a funds track and trace solution for Gaza. First, the Israeli shekel is already a currency in Gaza, along with the U.S. dollar. Therefore, the transition to a digital shekel would be flawless, eliminating potential frictions caused by the transition to a different currency. 

In addition, because the platform will be permissioned and as all entities onboarding the platform are KYCed, most – if not all – privacy matters are inherently covered on the platform. Furthermore, this implementation will accelerate the migration to digital wallets in Gaza, not only to those who onboard the platform, but also to the rest of the population, thus driving the modernization of the local economy, empowering individuals and, one would hope, depriving Hamas of funds


Deploying this existing platform using a digital shekel would mean that every penny donated would be accounted for. In the case of Gaza, incoming international aid funds would be converted to digital shekels by the Bank of Israel and redirected to individuals’ designated digital accounts, with each family receiving $100, or the equivalent in digital shekels, as planned. With 100,000 supported families, the migration toward a full digital economy would be imminent, driving more (identified) services providers to accept the new digital form of payment, thus eliminating cash. 

To rebuild Gaza, infrastructure projects will need tracking, as well. In this case, the “rules of engagement” are predetermined by the funding organizations and are enforced by code that cannot be overridden (for example, funds are dispersed only if they meet, say, KYC checks). The funds are managed by each project’s management unit, with the key difference being that transfers are tracked step by step and fully controlled; i.e. they cannot be carried out unless certain conditions are met (e.g. proper KYC, a job was successfully completed, etc.), and they are capped (pending recipients, project milestones or any other prerequisite). Most importantly, funding organizations always get the real-time full picture of the project’s progress to make sure that funds reach their destination – humanitarian aid to Gazans rather than rebuilding Hamas’s terror infrastructure. 

Recently, the Israeli Ministry of Defense published a seizure order for Hamas-attributed digital wallets. According to an estimate from Elliptic, a crypto analytics firm, these wallets received nearly $7.7 million. While these are not aid funds per se, it still shows that the international community must be on guard against nefarious actors looking to exploit technology – including blockchain. Aid agencies must focus and understand the opportunities and threats of new technologies. As we all know, technology can advance good as well as evil. 

Unfortunately, many accept that a significant portion of financial aid does not arrive at the intended destination and ends up instead as elite capture or even worse, as terror funding. There does seem to be a change in demand for accountability, as donors are not willing to accept the pilfering of funds anymore

Up until now, a crucial element was missing in order to provide a perfect and seamless process for countries or institutions to implement. CBDC was the missing piece. It could be a breakthrough in efficient global giving. I certainly hope that Israel, and other countries, will realize the potential CBDCs have to affect global giving, and implement a solution that guarantees that aid no longer goes astray.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.