U.S. Treasury Debunks Narrative That Hamas Relied on Crypto to Fund Terrorism

Just after Hamas' terrorist attacks in Israel last year, crypto took blame for helping fund such brutal killing. While the prominent media reports were later bashed by cryptocurrency experts, the U.S. Department of the Treasury's top official on terrorism financing confirmed to lawmakers on Wednesday the situation was blown out of proportion.

While the Wall Street Journal in October had tied tens of millions of dollars in crypto payments to Hamas, Palestinian Islamic Jihad and others, citing a blog post by analytics firm Elliptic that was later edited, the account represented a misunderstanding of what assets actually fell into the hands of terrorists.

"We don't expect the number is very high," said Brian Nelson, the Treasury's undersecretary for terrorism and financial intelligence, in testimony before the House Financial Services Committee.

The Journal had largely revised the initial reporting after blockchain analytical firms Elliptic and Chainalysis offered data to refute it. Even after that reassessment, lawmakers such as Sens. Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass.) continued to use the data in arguments to support legislative efforts to saddle the crypto industry with strict rules in the name of national security.

Read More: U.S. Senate's Banking Chairman Says Panel to 'Crack Down' on Crypto's Terrorism Ties

"To be clear, Hamas is using crypto in relatively small amounts compared to what's been widely reported," Rep. Tom Emmer (R-Minn.) prompted Nelson at the Wednesday hearing.

"That's our assessment," Nelson answered, additionally clarifying that those groups have their eyes on other methods of support.

"We also assess that terrorists still prefer, frankly, to use traditional products and services," he said. The Treasury has targeted a number of businesses and regional financial firms with sanctions, accusing them of offering such aid.

Emmer asked the Treasury official to more formally correct the record about the relationship between digital assets and terrorism, noting "we have senators who are legislating on these false figures."

Despite Nelson's answers to Emmer, he'd said in his earlier, prepared remarks that the government is "focused on disrupting these groups’ ability to leverage digital assets."

"To root out illicit finance by players in virtual asset markets and forums, we need additional tools and resources," Nelson argued, saying he's eager to work with Congress on that.