Authors: Tom Wilson and Elizabeth Howcroft
Translator: Aiying
Israel discovers cryptocurrency network Tron on new anti-terrorism battlefield
In the new battlefield of global counter-terrorism, Israel faces an unexpected challenge: a rapidly emerging cryptocurrency network called "Tron." This network has become a new channel for the flow of funds for radical organizations supported by Iran, such as Hamas and Hezbollah.
According to trading experts' analysis, the Tron network has gradually become the preferred method of transfer for terrorist organizations due to its fast transaction speed and low fees, surpassing the once popular choice, Bitcoin.
The latest data from Israeli security agencies shows that they are gradually increasing their crackdown on Tron wallets, while reducing their focus on Bitcoin wallets. The reason behind this shift is obvious: terrorist organizations are increasingly favoring Tron.
Mriganka Pattnaik, CEO of Merkle Science, explained, "These organizations are increasingly favoring Tron because of its fast transactions, low fees, and stability." Merkle Science provides services to law enforcement agencies in multiple countries, including the United States, the United Kingdom, and Singapore.
On October 7th last year, Hamas carried out an attack on Israel, resulting in approximately 1,200 deaths. Subsequently, Israel's retaliatory actions in Gaza led to about 14,000 deaths. Following these events, Israel has increased its monitoring of Hamas' sources of funding.
In response to the accusations of Tron being used by terrorist organizations, Tron spokesperson Hayward Wong stated, "All technologies can be misused, just like the US dollar is sometimes used for money laundering. Tron cannot control who uses its technology and is not related to the organizations accused by Israel."
It is reported that most of the Tron funds seized by Israel this year are related to groups it considers terrorist organizations, including Hamas, Hezbollah in Lebanon, and the Palestinian Islamic Jihad. These organizations have been involved in attacks on Israel. In addition, Israel also seized Tron wallets associated with the currency exchange company "Dubai Co. For Exchange," which is related to Hamas.
Israel freezes 600 suspected cryptocurrency accounts related to Hamas in anti-terrorism operation
Following Hamas' attacks, Israel launched its largest anti-terrorism operation to date, freezing about 600 accounts related to "Dubai Co." Although the specific type of cryptocurrency used in these accounts has not been publicly disclosed, according to some account holders that I have spoken to, they used Tron cryptocurrency.
The account holders claim that they used cryptocurrency for commercial or personal financial needs and deny any connection to Hamas or the Islamic Jihad. One individual named Neo admitted that he may have engaged in financial transactions with individuals associated with Hamas.
Israeli authorities view "Dubai Co." as part of a terrorist organization and claim that the company provides substantial financial support to Hamas' military forces each year. I attempted to contact a representative of "Dubai Co." whose email address appeared in the seizure order, but have not received a response to date.
Since 2019, Hamas' military wing has been using cryptocurrency for fundraising. In April of this year, they announced that they would no longer use Bitcoin for fundraising, citing increased efforts to prevent their fundraising. However, their statement did not mention Tron.
I have attempted to confirm whether Hamas has indeed used Tron, but have not yet obtained conclusive evidence. The Israeli Counter-Terrorism Financing Bureau has also not responded to questions about how they identify Tron wallets involved and how they link these wallets to extremist groups. Hamas, Hezbollah, and the Islamic Jihad have similarly not responded to my inquiries.
Prior to Israel's announcement of the seizure of Tron wallets, I contacted six individuals named in the notice, all of whom denied any association with extremist groups. These individuals are from different regions, including Venezuela, Dubai, and Jenin in the West Bank.
Israel freezes funds linked to Iran-sponsored terrorist organizations, Tron cryptocurrency network under scrutiny
In June of this year, Israel announced the freezing of a batch of funds intended for use by terrorist organizations sponsored by Iran. Iran openly supports Hamas, Hezbollah, and the Islamic Jihad, considering these groups as a "resistance axis" against Israeli and American influence in the Middle East. However, Israel's announcement did not explicitly indicate whether the source of these funds directly came from Iran. The Iranian Foreign Ministry has not responded to questions about whether Iran uses Tron cryptocurrency to provide funds to these organizations.
A report last year revealed that Iranian companies conducted transactions of up to $8 billion through the Tron network, seen as a means for Iran to evade US sanctions. These transactions took place between 2018 and 2022.
In the cryptocurrency field, while transaction amounts and electronic wallet addresses can be traced on the blockchain, identifying the true identities behind the transactions remains a challenge. This is especially difficult for those not in law enforcement or the cryptocurrency trading field to determine the ultimate destination of the funds.
Experts I consulted pointed out that the cryptocurrency "Tether" on the Tron network is the mainstream medium of exchange. As the world's largest "stablecoin," Tether aims to maintain a 1:1 value with the US dollar, supported by a range of reserve assets. Tether's company stated that they actively track and freeze tokens "used for illegal purposes" and cooperate with law enforcement agencies.
According to CoinGecko's data, Tether is currently the third largest cryptocurrency by market capitalization, with a market value of $89 billion, an increase of about one-third from last year. While Tether may not be well-known outside the cryptocurrency community, it is the primary medium of exchange on the Tron network, currently hosting $48 billion in Tether. According to data from Tether's official website and data company Messari, the average daily transaction volume on Tron from April to June this year reached 9.1 million transactions, an increase of over 70% from the same period last year.
Tron's founder, Justin Sun, was sued by the US Securities and Exchange Commission in March of this year, accusing him of artificially inflating trading volumes and selling Tron tokens without registration. In response, Sun stated that the SEC's accusations are "baseless." Regarding these accusations, Sun's representative Deng Binbin suggested that I refer to a statement from Tron spokesperson Wang.
From Bitcoin to Tron: New trends in cryptocurrency financing for terrorist organizations
Since the emergence of Bitcoin in 2008, cryptocurrency has continuously attracted the attention of criminal elements. According to data from cryptocurrency tracking firm Chainalysis, the proportion of illegal transactions in all cryptocurrency transactions in 2022 has decreased to 0.2%, compared to 2% three years ago.
Israel's anti-terrorism operations demonstrate a trend change. In 2021, they froze 30 Bitcoin accounts, but in the following years, actions to freeze Bitcoin accounts have almost come to a standstill. In contrast, transactions on the Tron network have attracted more attention.
The Financial Action Task Force (FATF), a G7 organization based in Paris, recently issued a warning, pointing out that terrorist organizations are seeking to make their donors more anonymous, and transactions of Tether on Tron have become a focus due to its growing popularity.
Why this shift? Some experts suggest that as law enforcement agencies enhance their ability to track Bitcoin transactions, these organizations are turning to Tron.
Shlomit Wagman, a senior researcher at Harvard University who served as the head of Israel's Anti-Money Laundering and Counter-Terrorist Financing Authority from 2016 to 2022, pointed out that Tron initially did not attract much attention from blockchain analysis companies and was seen as a "neglected corner."
Analysis from the US investment firm VanEck shows that transaction fees on Tron are much lower than Bitcoin. Wagman added that radical organizations prefer to use stablecoins on Tron rather than the more volatile Bitcoin to "protect the value of their cryptocurrency."
So, today I want to introduce you to Tron—a cryptocurrency network that may be used for financing by terrorist organizations. Although Tron may not be well-known to the general public, this does not mean it does not exist. This is the story I want to share today.
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