The battle against funding for Iran-backed militant groups in Israel has taken a new turn. This is closely related to the rising prominence of a fast-growing cryptocurrency network, Tron.
This development marks a departure from the conventional use of Bitcoin as Tron gains traction for facilitating crypto transfers associated with designated terror organizations.
Hamas and Hezbollah are the top Iran-backed militant groups making use of Tron for illicit fund transfers and terrorist funding.
Analysis of Seizures
An analysis of crypto seizures by Israeli security services since 2021 reveals a significant increase in the use of Tron wallets. This revelation marked a shift from previous trends where Bitcoin was predominantly seized.
Israel’s National Bureau for Counter-Terror Financing froze 143 Tron wallets between July 2021 and October 2023.
These wallets are believed to be linked to designated terrorist organizations or severe terror crimes. Notably, almost two-thirds of Israel’s Tron seizures occurred in 2023, including wallets associated with Hezbollah and Palestinian Islamic Jihad.
The British Virgin Islands-registered platform, Tron, emphasizes that technologies, including theirs, can be used for questionable activities but asserts that they have no control over users. They deny any direct link to the groups identified by Israel.
Several Tron wallets, including those associated with Hezbollah and Islamic Jihad, have been seized in connection with these events. The research indicates that the cryptocurrency Tether plays a dominant role across the Tron network.
Tether, being the world’s largest stablecoin, is actively involved in tracing and freezing tokens used for illicit purposes, coordinating with law enforcement.
Experts suggest that Tron’s lower transaction fees compared to Bitcoin and its use of stablecoins contribute to its attractiveness for militant groups seeking to preserve the value of their crypto holdings.
Regulatory and Legal Issues
Tron and its founder, Justin Sun, have faced legal challenges, with the U.S. Securities and Exchange Commission filing charges against Sun in March. Sun has contested the charges. Also, Israel has been aware of the shift to Tron for some time.
In 2021, the country’s National Bureau for Counter-Terror Financing (NBCTF) began freezing Tron wallets that it believed were connected to militant groups. Since then, the NBCTF has frozen hundreds of Tron wallets.
In addition to freezing wallets, Israel is also working to develop new technologies to track the movement of funds on Tron.
The timing coincides with heightened scrutiny of militant financing, particularly in the aftermath of attacks by groups like Hamas. The country is also working with other countries to share information about Tron-based militant financing.
Bitcoin seizures in Israel have been comparatively scarce lately, with Tron gaining attention for its perceived advantages, possibly due to a historical blind spot in blockchain analysis.
The Financial Action Task Force has warned of terrorist organizations seeking donor anonymity through the growing popularity of Tether transfers on Tron.
