A new front has emerged in Israel’s fight against the funding of Iran-backed militant groups from Hamas to Hezbollah: A fast-growing crypto network called Tron that until recently attracted far less scrutiny than Bitcoin. Quicker and cheaper than its larger rival, it has overtaken its rival as a platform for crypto transfers associated with groups designated as terror organizations by Israel, the United States, and other countries, according to interviews with seven financial crime experts and blockchain investigations specialists.
The shift has occurred partly because of the popularity of Tron stablecoin Tether, which enables users to send and receive dollar-denominated payments with relative anonymity. In developing countries where apps like PayPal and Apple Pay aren’t available (many in Africa, Asia, and the Middle East), Tether on Tron can be a cost-effective alternative for sending dollars to relatives or paying for goods and services. It’s also popular among terrorist groups because of the speed, low fees, and stability that the blockchain-based service offers, four of the people interviewed by Reuters said.
As a result, Israeli authorities have been targeting the Tron wallets of terrorists anew. In an analysis of crypto seizures announced by Israeli security services since 2021, Reuters found a sharp rise in attacks on wallets on the Tron network and a drop in Bitcoin wallets.
One of the critical challenges in disrupting the flow of funds to criminal groups is the difficulty of tracing the origins of digital transactions. The blockchain ledger that records the movement of cryptocurrency is public and immutable, meaning there is no way to tell whether a given transaction was sent to a militant group without much investigative work.
For example, the Israel Money Laundering and Terrorism Financing Prevention Authority has seized 143 Tron wallets in the past year that it believed were linked to a terror group or used for a severe crime, according to its seizure statements. But the NBCTF said it could not say how many of those were destined for Hamas, Hezbollah, and other groups it identified as supported by Tehran.
In addition, several wallets attributed to criminal groups appear to be linked to darknet markets that facilitate criminal activity, such as illicit drug sales and money laundering. A review of dozens of such darknet marketplaces monitored by TRM Labs, which provides anti-money laundering software and other solutions to businesses, showed that many were used for fundraising for terrorist groups and related activities in Syria.
This article is based on interviews conducted between January and March with individuals working for or with ties to the companies or research groups mentioned. Those individuals were asked to speak anonymously because of the sensitive nature of their work and the potential for harm to their careers or family lives if their identities were revealed. Reuters also reviewed documents and information provided by the companies and researchers. Several of these sources were in the United States, while others were in Syria or elsewhere outside the West.