Crypto Relief Aid Set-Up in War-Ridden Israel; Unocoin CEO Lists Ethical Implications

In the ongoing Israel-Gaza conflict, cryptocurrencies are once again becoming a source of wiring funds around the war-ridden regions. After Palestine-based militant group, the Hamas, struck Israel with missiles on October 6, there were hundreds of deaths and destruction. In order to collect some emergency funding for Israel, a bunch of crypto companies have established ‘Crypto Aid Israel’, that would let anybody in the world send money for use there. Since crypto transactions are instant and largely untraceable, its transfers in war-torn regions may have ethical and financial implications, Sathvik Vishwanath, the CEO of Unocoin crypto exchange told Gadgets 360.

CryptoJungle, 42Studio, MarketAcross, Collider Ventures, Blockchain B7, Efficient Frontier, Ironblocks, the Israel Blockchain Association, Bits of Gold, and CoinTelegraph have reportedly come together to form Crypto Aid Israel earlier this week. So far, the portal has managed to collect over $60,000 (roughly Rs. 50 lakh) via crypto assets.

“Our goal is to raise desperately needed funds for displaced citizens whose unbearable situation demands humanitarian aid,” the official page of Crypto Fund Israel reads.

So far, the funding is being allocated to the families of soldiers, first respondents, captured nationals as well as killed ones. Some parts of the proceeds are also being saved to re-construct the damaged parts of southern Israel.

Talking to Gadgets 360, Unocoin’s Vishwanath said the ethical implications of relying on cryptocurrency funds in geopolitically troubled countries is a complex and contentious issue.

“Crypto can provide financial services to those excluded from traditional banking systems, promoting financial inclusion and empowering marginalised communities. Crypto transactions can, however, hinder regulatory oversight and potentially enable illegal activities such as money laundering and tax evasion,” Vishwanath said.

Instances of crypto assets being used to buy weapons and facilitate other illegal activities were topics of grave concerns when the Russia-Ukraine war started in February last year. Several crypto exchanges had to tighten their policies and KYC needs at the time to ensure that Russian nationals and entities that were sanctioned by the US, the UK and other nations — did not get to engage with crypto assets.

In fact, in 2022, Israel itself had identified and confiscated 30 cryptocurrency wallets that were allegedly funding the Hamas group. These wallets were owned by an exchange firm named al-Mutahadun, which is based in the city of Gaza. Benny Gantz, the defence minister of Israel had approved the seizure of these accounts in March 2022.

Along with these ethical implications, crypto relief funds come with other baggage as well, Vishwanath noted.

“Cryptocurrencies are known for their price volatility, making them risky assets to rely on in times of economic crisis. Citizens could lose significant wealth if their favoured assets plummeted. The chances of abuse of crypto assets can also not be ruled out. In an unstable environment, the risk of abuse is higher because the government may use cryptocurrencies for personal gain or to avoid sanctions. Lack of understanding among the population can also lead to uninformed investments or fraud,” he said.

Essentially, geopolitically troubled countries may consider cryptocurrencies as a complementary financial tool, but full reliance on them is risky. Industry experts advise governments to diversify financial strategies and combine traditional finances with crypto assets.