The Accusation and the Israeli Anti-Terrorism Law
On August 26, accusations emerged that Binance, one of the world’s leading cryptocurrency exchanges, froze the crypto assets of Palestinian users at the behest of Israeli authorities. Revealed by Ray Youssef, who is the co-founder of Paxful and the CEO of Noones P2P platform, this incident caused much debate about the independence of cryptocurrency exchanges and the user privacy rights.
Youssef, in a statement on X (formerly known as Twitter), claimed that Binance “seized funds from all Palestinians” following a request from the Israel Defense Forces (IDF). He further alleged that Binance refused to return the funds and dismissed appeals from the affected users. As of now, neither Binance nor Israeli authorities have publicly addressed these serious allegations.
The controversy centers around claims that cryptocurrency wallets, including those belonging to Palestinians, were linked to transactions involving the Dubai Exchange Company, a Gaza-based organization labeled as a terrorist entity by Israeli authorities in 2022. In response to Palestinian users’ appeals, Binance reportedly cited a November 2023 letter from Paul Landes of Israel’s National Bureau for Counter-Terror Financing. This Hebrew document justified the “temporary seizure of property belonging to a declared terrorist organization,” including cryptocurrency assets.
“We Are All Palestinians Now”: Youssef’s Concerns About Crypto Seizures
Bbc elYious expressed concerns that centralized cryptocurrency exchanges such as Binance are changing to those “government snitches” actors instead of those that are secure platforms for digital asset storage. He blamed Binance for passing sensitive information about users in the Middle East and North Africa (MENA) region to the IDF (presumably without legal procedures), which indeed, if true, would result in a very serious breach of trust.
Amid a chilling warning to the crypto community, Youssef told, “The keys are not at your place; likewise, the coins are not yours.” We are all Palestinians. Hence, the fear mounts that this centralization of authority among the big exchanges can, after all, bring more government intervention that may detract the decentralized and autonomous nature of cryptocurrencies that many holders duly cherish.
A Pattern of Crypto Seizures in Geopolitical Conflicts
This case is part of a wider phenomenon of cryptocurrency entanglements with geopolitical conflicts. In October 2023, Israeli authorities allegedly locked the fundraising cryptocurrency accounts of Hamas, adding to the news that Binance made a contribution to the deactivation of their accounts. Similarly, in April 2023, Israeli authorities shut down on 190 Binance accounts traced to Hamas and ISIS.
Likewise, other actors in the crypto realm went with actions of a similar kind. In 2023, Tether, a stablecoin issuing company, froze 32 known crypto addresses reportedly linked to the terrorism activities in Israel and Ukraine. This joining of forces with Israel’s NBCTF resulted in the seizure of the amount of $873,118 worth of USDT being ‘scalded out.’
This pattern of seizures rising puts a serious question mark over the future of cryptocurrency as a really decentralized financial system, especially in those areas that are going through political and military conflicts.
