US politicians want a legal investigation into the role of Binance and Tether in terror financing. The importance of cryptocurrencies in financing terrorism is increasingly becoming a political issue.

Binance and Hamas

US Senator Cynthia Lummis, known for her crypto-liberal stance, and Congressman French Hill are now calling on the US Treasury Department in an open letter to consider criminal charges against Binance.

"We write to you with the shocking reports that unregulated, centralized crypto-intermediaries based outside the United States have facilitated significant illicit financial activities over the past two years, including providing significant terror financing for Hamas' malicious attack on Israel," the letter reads.

According to the letter, the exchange Binance would serve as access for crypto payments to Hamas: "Based on this alarming information and the horrific, unwarranted attack on Israel, we urge the Department of Justice to make a decision to indict Binance, and to quickly conclude your investigation into the ongoing illegal activities involving Tether."

The Department of Justice should therefore investigate "To what extent Binance and Tether provided material support and resources to support terrorism through violations of applicable sanctions laws and the Bank Secrecy Act," said Lummis and Hill.

Earlier, in a joint letter to the Treasury Department published Oct. 17, U.S. politicians classified cryptocurrencies as a "threat to national security".

According to Lummis, however, the crypto sector should not come under general suspicion. The senator for the state of Wyoming speaks of "a small handful of bad actors".

How much money has flowed through crypto donations remains unclear. The Wall Street Journal reported on US$150 million that Palestinian terror organizations would have brought in since 2021.

Elliptic contradicts reports

It cited figures from blockchain analytics firm Elliptic. However, Elliptic released a statement this week saying the figures were misrepresented. Chainalysis also speaks of a "misinterpretation".

The main reason is that it adds up the money flowing to service providers. But only a fraction of this money goes to terrorists. Moreover, the activities are traceable - and that would often lead to dismantling.

Indeed, after the attack on Israel, wallets attributed to Hamas were blocked by Israeli security authorities. So it seems that the argument serves primarily as a political message.