This Tuesday, Oct. 10, the Wall Street Journal put out a report claiming that Hamas and other Palestinian terrorist groups were using crypto to finance their operations. “Hamas Militants Behind Israel Attack Raised Millions in Crypto” read the headline.

The piece, based on analysis from blockchain forensics groups, claimed that, between August 2021 and June this year, Hamas had raised $41 million in crypto and that law enforcement was struggling to contain the flows.

The inference was clear. Crypto is subterfuge and shadowy, and not to be trusted at a time of war. The piece noted “gaps in financial crime controls” at exchanges that facilitated the payments. Binance was cited by intelligence agencies in Israel and the U.S. as one platform where suspicious transactions might have occurred.

So how worried should we be about terrorist financing via crypto?

We spoke with Yaya Fanusie, a former CIA staffer who has been tracking crypto financing of terrorism since 2016. He is now director of policy for anti-money laundering (AML) and cyber risk at the Crypto Council for Innovation, a San Francisco group that promotes the use of decentralized technology.

Fanusie argued that crypto is far from a golden ticket for groups wanting to raise money secretly. In fact, it may be the exact opposite. The public nature of public blockchains, exchanges and wallet addresses opens up terrorist financing to scrutiny.

“It's a double-edged sword. The terrorist group may get some donations from a donor who is, you know, dumb enough to fund your public wallet. But that’s going to raise the risk of that person being caught and coming under the radar of security,” he said. In fact, Hamas said in April that it was suspending its bitcoin (BTC) donation campaigns for exactly this reason.

“Reading between the lines, they’re saying ‘look, we've been raising this, we've been getting donations, but what it's doing is bringing attention to us when these wallets are being publicized. It's allowing Intel security law enforcement to actually go after and find who our supporters are and learn about the network,” Fanusie added.

When Fanusie first started tracking crypto financing for terrorism in 2016, Hamas raised about $600 that year. But, after some success in 2019 and 2020, the flow of crypto donations has started to slow.

Fanusie noted two other nuances that may have been lost on readers of the WSJ. One, it’s not clear if that money raised in crypto actually went into the attack on Israel last weekend, though that was the inference.

“The Wall Street Journal report does not say ‘Hamas used $40 million for this attack. That's not there. We can't determine that. But of course, if that's coming out on Tuesday, that's the implication,” Fanusie said.

And two, it’s not clear if the millions raised actually reached terrorists at all. The funds may have been seized by law enforcement along the way.

“There were these attempts to raise this money, but law enforcement may have been able to go to these exchanges, stop them and close them,” Fanusie said.

Fanusie also played down the idea that privacy coins and mixing services might offer effective workarounds to using systems that broadcast transactions publicly, like the Bitcoin network. Privacy coins such as monero (XMR) don’t have enough liquidity for the purpose and mixing services are problematic too. Last year, the U.S. sanctioned Tornado Cash, an Ethereum mixer used by Lazarus, a North Korean hacking group, showing how far the arm of the law can stretch.

The WSJ report raises issues that have long been debated in crypto circles. Is crypto a tool for increased privacy or increased transparency in transactions, financial or otherwise? To critics of crypto, it is a subterfuge system best snuffed out and contained.

To advocates, it improves accountability and keeps actors honest, because they have to show their dealings to the world.

The public has generally failed to get its head around this paradox and reports like the WSJ’s hardly help to educate on the nuance. Fanusie, in fact, sounds relatively optimistic that improved AML and know-your-customer (KYC) procedures will help allay terrorist concerns going forward.

“The industry is taking illicit finance even more seriously. There are incentives to strengthen AML,” he said “And I think we’re going to see a push within the ecosystem to see that. Which is good.”