Binance, one of the world’s largest cryptocurrency exchanges, is facing significant backlash after it reportedly seized all funds held by Palestinian users at the request of the Israel Defense Forces (IDF). The funds, which were frozen and subsequently withheld, have become the centre of a heated controversy, with affected users appealing for their return only to be met with rejection.
The seizures were carried out under the authority granted by the Israeli Minister of Defence, citing Section 61(a) of the Law on Combating Terrorism, 556-2016. This legal framework allows for the temporary seizure of property, including cryptocurrency, that is believed to be linked to terrorist activities. The IDF’s request to Binance was made on the basis of this law, following intelligence reports that suggested certain cryptocurrency wallets associated with Palestinian users were connected to terrorist organisations.
The administrative seizure order, identified as T56/23, was signed by the Minister of Defence on November 1, 2023. According to the official communication, the decision was based on reliable intelligence indicating that funds from a cryptocurrency wallet registered to a Palestinian user had been transferred by a terrorist organisation. Specifically, the intelligence pointed to the Dubai Exchange Company in Gaza, which has been designated as a terrorist organisation since March 7, 2022. As per the anti-terrorism law, any property or funds transferred by such an organisation is considered to be associated with terrorism and is subject to seizure.
The legal justification for the seizures rests on the interpretation of cryptocurrency as property used to commit or facilitate serious terrorist offences. In the case of these Palestinian wallets, the law permits the Minister of Defence to order their seizure in preparation for eventual confiscation. The decision to deny appeals for the return of the funds was based on the consistency of the intelligence with the legal requirements for seizure, leaving affected users with little recourse other than to challenge the decision in the administrative court.
The response from the Palestinian cryptocurrency community has been one of frustration and anger. Many users have expressed their concerns over the lack of transparency and the swift nature of the seizures. For those who relied on their Binance wallets for financial transactions, the loss of access to their funds has been devastating. Despite repeated appeals, Binance has stood firm, adhering to the directives issued by Israeli authorities and maintaining that their actions are in compliance with international laws on counterterrorism.
In the face of mounting criticism, Binance has remained largely silent, offering little public explanation beyond the legal obligations they are required to follow. This silence has done little to quell the discontent among those affected, who argue that they have been unfairly targeted based on their nationality rather than any proven involvement in terrorism. For many, the move by Binance has reinforced concerns about the vulnerabilities of relying on centralised exchanges, where funds can be frozen or seized without warning.
Amid the fallout, alternatives to Binance are being explored by those seeking to safeguard their assets. NoonesApp, a decentralised finance (DeFi) platform, has emerged as one such alternative, promising that user funds are secure and not subject to the same legal pressures that can affect centralised exchanges. The platform has seen an uptick in interest from users concerned about the safety of their cryptocurrency in the wake of the Binance seizures.
This incident has also raised broader questions about the role of cryptocurrency exchanges in global finance and the ethical implications of complying with government orders that target specific populations. While Binance’s actions may be legally justified, the ethical debate surrounding the seizure of funds from an entire group of people based on nationality or location is far from settled. The controversy has shone a spotlight on the balance between compliance with anti-terrorism laws and the protection of individual rights, a balance that is proving increasingly difficult to maintain in the digital age.
As the situation develops, it remains to be seen how Binance will navigate the growing criticism and what steps, if any, will be taken to address the concerns of the Palestinian users who have lost access to their funds. For now, the exchange’s decision to align with the IDF’s request has placed it at the centre of a complex and highly charged issue that extends far beyond the world of cryptocurrency. The repercussions of this decision are likely to be felt across the industry, as users and regulators alike grapple with the implications of such actions in an increasingly interconnected and regulated financial landscape.
