“If you leave this panel with one thing about Palestine,” Fadi Elsalameen instructed the attendees of the Bitcoin April 2022 conference in Miami, “I want you to replace in your minds the ‘Free Palestine’ slogan with ‘Bitcoin Palestine.’”

[su_dropcap style="simple" size="4"]E[/su_dropcap]lsalameen is a senior fellow at the American Security Project and a protégé of Bitcoin maximalist Alex Gladstein of the Human Rights Foundation. Elsalameen, Gladstein and other proponents of Bitcoin claim that the blockchain technology of cryptocurrencies can provide economic independence and empowerment to Palestinians. They argue that Bitcoin, the oldest and most widely held among thousands of cryptocurrencies, could be used to subvert Israeli sanctions and financial control of the money supply, give an occupied and isolated people a means to transact financially with the outside world and allow individual Palestinians a means to save in cyberspace. In Gaza, a Palestinian told Gladstein, Bitcoin is like a “checkpoint that’s always open.”

At the heart of Bitcoin’s appeal is the urgent and necessary pursuit of Palestinian financial independence. After all, the strangulation of the Palestinian economy has gone hand in hand with Israel’s ongoing oppression and colonization of the Palestinian people. Political economist Tariq Dana explains that after the occupation of the West Bank and Gaza in 1967, “Israel replaced all Arab and local banks with its own financial system. The Bank of Israel became the supreme authority in charge of all monetary arrangements and imposed the Israeli currency as legal tender in the OPT [Occupied Palestinian Territories].”[1] The 1994 “Protocol on Economic Relations” (the Paris Protocol)—part of the so-called peace process initiated by the Oslo Accords—established the Palestine Monetary Authority (PMA) as a central bank. The PMA, however, was not given the power to issue its own currency, set interest rates and manage the money supply. The Israeli state also maintains the authority to impose taxes on Palestinian workers and import duties on trade flowing into the Occupied Territories. The revenue drawn from these taxes and duties is theoretically transferred from Israel to the Palestinian Authority each month but is repeatedly withheld and subject to Israel’s political and military whims.

The necessity of economic and fiscal independence for the Palestinian national struggle is indisputable. For Palestinians to attain self-determination, they must be able to build a functioning economy. Crypto’s adherents argue that the decentralization of digital currencies, and the privacy mechanisms built into their technology, shield them from control by any state authority. These qualities, it is argued, could provide Palestinians with a new means of financial resistance and independence, allowing them to raise funds globally and conduct internal transactions without interference from the Israeli state. What this independence means concretely ranges from large-scale possibilities, such as Hamas skirting sanctions to raise funds in bitcoin, to more mundane benefits, such as freelancers receiving international payments for their work.

But to what extent individual Palestinians see cryptocurrencies as a means to achieve financial independence is questionable. Since local crypto transactions in Gaza and the West Bank do not connect directly to banks or major crypto exchanges, it remains unclear how many Palestinians have engaged with crypto at all. In fact, most crypto proponents admit that the use of Bitcoin and other cryptocurrencies is limited to small numbers of tech freelancers.

Nevertheless, discussions among Palestinians about the utility and viability of cryptocurrencies have begun to emerge. Most recently, Al-Shabaka hosted a roundtable discussion between political economists Tariq Dana and Ibrahim Shikaki. Dana argues that cryptocurrencies, and Bitcoin in particular, could play a positive role in developing “new economic and financial means of resistance.”[2] Decentralized cryptocurrencies, he continues, can help Palestinians get around the barriers of Israel’s control of financial institutions and activities. Shikaki is more skeptical, pointing out that cryptocurrencies are speculative assets, not viable currencies. Yet both Dana and Shikaki are hopeful that the technology that powers cryptocurrencies—decentralized blockchain databases—could provide useful tools to facilitate the growth of a global Palestinian solidarity movement.

Within the global cryptocurrency community, murmurings that digital currencies can be wielded as anti-colonial tools or provide an escape valve from oppression are growing.

Within the global cryptocurrency community, murmurings that digital currencies can be wielded as anti-colonial tools or provide an escape valve from oppression are growing. It is perhaps a convenient pivot of the narrative at a time when conversations about cryptocurrency—their wild volatility, inbuilt inequalities, environmental consequences and associations with criminal activity—have turned increasingly negative. Alex Gladstein, for example, has penned a series of lengthy articles in Bitcoin Magazine, offering the cryptocurrency as the solution to every variety of global injustice. In his article “Can Bitcoin be Palestine’s Currency of Freedom?” Gladstein berates the left for not throwing in with the Bitcoin revolution:

[3]

“Perhaps,” he ponders, “the world’s largest open-source money project can help, where everything else has failed.” But even assuming that the lofty claims of crypto enthusiasts are inspired by the best intentions for Palestine, there is a yawning chasm between the far-reaching promises made by Gladstein and others and the actual technological capabilities of cryptocurrencies. Further, the economic analysis used to justify crypto-based solutions misunderstands the roots of the problem. Gladstein claims that “money lies at the very root of [Palestinians’] struggles.” But in fact, the monetary relationship between Israel and the Palestinians reflects a more fundamental political asymmetry of power. Israeli policy has long sought to prevent the emergence of a viable Palestinian state or movement. The sabotaging of the Palestinian economy is an outgrowth of this political reality, which cannot be skirted via cyberspace.

At best, the faux-humanitarian promises made by crypto’s cheerleaders to the Palestinian movement naively peddle an unattainable escape from deeper geopolitical ills. At worst, it cynically uses Palestinians’ experiences of persecution and domination to advance an external agenda—one that benefits crypto millionaires but only offers Palestinians dangerous economic and political risks.

Crypto’s Track Record

The track record of crypto entrepreneurs in places that suffer under the boot of imperial and economic oppression should give supporters of Palestine pause. Thousands of crypto-millionaires have swarmed Puerto Rico, for instance, taking advantage of tax incentives and beach resorts, buying up properties and experimenting with energy-intensive crypto projects on an island plagued by power shortages. Meanwhile, blockchain startups have partnered with non-governmental organizations in the Pacific Islands to produce complicated technical programs for aid and development, but which are often incompatible with local infrastructure or governance. For example, Oxfam’s Unblocked Cash project in Vanuatu found itself at odds with the population’s limited technological literacy, as well as the Vanuatu Reserve Bank’s crypto prohibition.

Most infamously, El Salvador, the first country in the world to accept bitcoin as legal tender, is heavily invested in a now-crashing asset that was originally pitched as a means to help a struggling economy.

Most infamously, El Salvador, the first country in the world to accept bitcoin as legal tender, is heavily invested in a now-crashing asset that was originally pitched as a means to help a struggling economy. Jack Mallers, the founder of Strike, a cryptocurrency “digital wallet” company, played a key role in introducing Bitcoin to El Salvador. At last summer’s Bitcoin conference, an emotional Mallers shared his experiences visiting an impoverished El Salvador and meeting with unbanked Salvadorans. “It was sad,” he reported. “There just wasn’t a lot of hope. I gave talks, I talked to kids. I told them, ‘Man, we’ve got this. Bitcoin’s here, we’ve got this.’”[4] One year later, very few Salvadorans use Bitcoin, but the government’s investments in Bitcoin have thus far lost tens of millions of dollars’ worth of public funds. For a country with relatively high public debt, investment in such a volatile asset could further strain the state’s budget and leave the country vulnerable to defaulting on its debt obligations.

Olivier Jutel, a researcher and lecturer at the University of Otago, has written about how “the developing world has emerged as a key testing ground for blockchain governance solutions.”[5] Jutel explains, “blockchain undermines the developing world state’s ability to control its own resources,” and seeks to “shape developing world governance systems for data production and platform dependence.”[6]

Putting the Cart Before the Horse

To make the case for Bitcoin in Palestine, Gladstein relies heavily on the work of political economist and scholar Sara Roy, who has studied and analyzed the Palestinian economy for over 35 years. Gladstein discusses Roy’s widely accepted framework of “de-development” in her description of the “deliberate, systematic and progressive dismemberment” of the Palestinian economy by the Israeli state.[7]

I spoke to Roy about Gladstein’s article. She strenuously disagreed with the notion that “cryptocurrency is somehow impervious to the political reality in which Palestinians and Israelis reside” or that it could “give dispossessed Palestinians parity with empowered Israelis, eliminating the gross asymmetries of power between them and granting Palestinians economic sovereignty.”[8]

Roy’s economic analysis is not confined to questions of currency. Rather she describes the political imperatives of colonial power to confiscate land, expel and replace the Palestinian population, then dominate and pacify those that remain. Economic domination aims to stunt the development of an autonomous capitalist class that can invest in local businesses and employ Palestinian labor. Instead, in Roy’s analysis, the Palestinian economy has been transformed “into an auxiliary of the state of Israel” through the “erosion of its own internal economic base and its resulting dependency on Israel.”

As Roy explained, “the issue for the majority of Palestinians is not primarily a lack of control over their money, but their inability to generate money because their economy has been devastated."

An independent Palestinian economy will not arise magically out of a sovereign currency, digital or otherwise. It can only come about through the capacity to produce and trade goods and services, which has been systematically undermined through the destruction of physical infrastructure and the elimination of a geographical basis on which Palestinian capital accumulation could effectively take place. As Roy explained, “the issue for the majority of Palestinians is not primarily a lack of control over their money, but their inability to generate money because their economy has been devastated… The fundamental issue is the devastation of the economy, the impoverishment of Palestinians and the disablement of people in their ability to work and to generate income.”

In 2007, Israel imposed a closure of Gaza’s border crossings, preventing the transfer of raw materials for industry and—in the first three years of the blockade—resulting in the closing or reduced capacity of about 90 percent of factories. In Gaza today, the unemployment rate is upward of 50 percent. Politically and economically separated from the West Bank, blockaded by the Israeli government and financially squeezed through Israeli withholding of Palestinian tax revenue, the economy of Gaza has all but collapsed.

The Israel Defense Forces (IDF) assault on Gaza in May 2021 again decimated physical infrastructure and debilitated productive sectors, leaving the economy of Gaza in even more dire straits. The IDF’s targets included clinics, banks, educational facilities, cultivated fields and factories. Gaza’s power grid was attacked, reducing the electricity supply to three to four hours a day and impairing the functioning of the water and sewage systems. As Israeli journalist Amira Hass wrote at the time: “Due to the lack of power, three main desalination plants providing services for more than 400,000 people have suspended operations, and more than 100,000 cubic meters of untreated or partially treated wastewater are being discharged to the sea daily. In total, about 800,00 people now have no regular access to water.”[9] According to Hamas’ information office, the estimated material damage amounted to about a quarter of a billion dollars. The long-term consequences of impaired electricity, water, banking and agriculture will, of course, be even greater.

The situation in the West Bank—physically fragmented, economically squeezed and impoverished—is only moderately better. According to a report by the United Nations Conference on Trade and Development, the cumulative economic opportunity cost of Israeli closure policies and military operations in the West Bank since the Second Intifada began in 2000 is estimated at $57.7 billion—some $2.9 billion per annum on average. The unemployment rate in the West Bank is lower than in Gaza, but at 18 percent, it remains high by any standard. In large part, the relatively lower rate reflects the number of jobs Palestinians in the West Bank hold within Israel and the settlements. Without these jobs, the report estimates that the unemployment rate could sit 16 percentage points higher. This dependency on employment in Israel not only undermines the development of an independent Palestinian economy, but also leaves those Palestinians vulnerable to the Israeli state’s security whims.

Given the level of economic distress, it is unlikely that many Palestinians will use cryptocurrencies. Most do not have the resources to do so. In a best-case scenario, some individuals from the Palestinian middle class—nearly non-existent in Gaza and small and struggling in the West Bank—could benefit from receiving international payments or remittances in bitcoin. But given the wild volatility in the value of cryptocurrencies, it will more likely harm those taking on the risk. This year, bitcoin lost half its value from mid-November to mid-May. Since then, it has plummeted even further.

Beyond the impact of using cryptocurrencies on the small number of Palestinians who do take the risk of investing, the systemic power asymmetries of Palestinian society at large cannot be skirted or equalized in cyberspace. Indeed last summer, when Hamas attempted to raise finances through bitcoin and other digital currencies, the Israeli state responded by seizing their cryptocurrency wallets. Hamas had raised over $7 million worth of crypto assets. The Israeli National Bureau for Counter Terror Financing traced 84 digital wallets and their private keys believed to be controlled by Hamas and transferred their contents out of the wallets. If they can seize crypto assets from Hamas, they can certainly do the same to Palestinian investors.

A Technological Mismatch

The seizing of Hamas’ crypto wallets raises another question: Does the technology behind cryptocurrencies stack up? Perhaps the most compelling argument to embrace cryptocurrency in Palestine is the possibility that Palestinian individuals and organizations could bypass Israel’s devastating sanctions and economic controls. This strategy is exactly what Hamas attempted last summer by raising money through donations of mostly bitcoin and tether tokens. Neither Gladstein nor others in the crypto community are willing to say that they support Hamas in doing so because it further implicates blockchain technology as a conduit for skirting illegality.

Molly White, a vocal critic of cryptocurrencies, is a software engineer and creator of the Web3 Is Going Just Great website. She explained to me: “Crypto folks choose the argument that best fits their narrative at a given point.”[10] In the case of Russia, for instance, many crypto proponents celebrated when Russian oligarchs were thwarted from using crypto to bypass sanctions or raise new money, seeing it as an example of cryptocurrencies as “legitimate money.” On the other hand, “if they’re talking about oppressive sanctions that we don’t like, then those ones we’ll be able to bypass. How could both of those things be true at the same time?”

Whether it is Hamas, local community organizations or Palestinian investors trying to raise funds from abroad, the roadblocks will be similar. The first challenge is converting any cryptocurrency raised into fiat money—traditional government-backed currency—a significant barrier since major cryptocurrency exchanges do not operate in Palestine. Second, as White put it, raising money outside the purview of the state at any significant scale becomes harder and harder. “The more money that’s changing hands, the more that governments have an interest in seeing what’s going on there.” Indeed, Israel’s seizure of several millions of dollars’ worth of crypto assets last summer supports White’s assertion.

Whether it is Hamas, local community organizations or Palestinian investors trying to raise funds from abroad, the roadblocks will be similar. The first challenge is converting any cryptocurrency raised into fiat money—traditional government-backed currency—a significant barrier since major cryptocurrency exchanges do not operate in Palestine.

There is, in fact, no technological runaround to the state. Proponents of crypto like to extol contradictory virtues of blockchain technology, claiming that it is both extremely private and secure but also public and transparent. The transparency is built into the fact that everyone can see the chain of financial transactions going from place A to place B. Privacy is introduced in the ability of individuals or organizations to maintain private electronic wallets, such that you don’t know who owns the wallets in place A or place B.

But the logistics of keeping that privacy in place is enormously difficult. There are complicated ways to protect your wallet from being easily traceable, but as White put it, traceability “gets easier the more money you have and the more power that you have.” For large governments, for instance, “that have the resources and motivation to figure who someone is, it’s substantially easier to figure that out,” she explained. Many new software companies have popped up to provide tracing technology and are selling their services to governments, the FBI and other powerful interests. The US government, for instance, has multimillion dollar contracts with Chainalysis, a cryptocurrency surveillance company. “Maybe it looks really private to you,” White said, “but it doesn’t look really private to the state.”

Distributing aid from organizations that are not on Israel’s growing terror watch list still runs up against overwhelming challenges. First are problems of technological and financial infrastructure. Cryptocurrencies require widespread internet and reliable electricity. Access to both is regularly withheld and purposefully destabilized by Israel. If organizations manage to operate despite those obstacles, they will still need to convert their funds to fiat currencies to buy food, clothing, building materials and other goods that people need. Thus when Oxfam partnered with blockchain startups to roll out its Unblocked Cash project in Vanuatu, their system proved of limited value and ultimately relied on the physical transfer of cash to vendors who accepted crypto payments.

Lastly, the more limited promise of easier transmission of remittances from Palestinians in the diaspora is also flawed. First are the barriers to sending remittances, which in most instances require a bank account and identification, as well as often high fees. Then the wildly fluctuating value of bitcoin and other digital assets means that what might start as $100 worth of bitcoin could result in $50 by the time it is withdrawn, provided the recipient finds a way to convert the bitcoin to cash.

Innovation or Desperation?

When I spoke to Sara Roy, she worried that the move toward cryptocurrencies was an option “born of desperation, not innovation.” Are we asking Palestinians, already vulnerable physically and economically, “to enter yet another realm with no protection or safety net?” The narrative that crypto can provide a means of liberation in Palestine is abstract and ahistorical at best—removed from any meaningful political understanding of how colonial domination works—and dangerously risky to Palestinians at worst.

The realm of cryptocurrencies has reinforced and deepened existing economic inequalities. The top 10,000 bitcoin investors hold about a third of cryptocurrency in circulation, an almost 100-fold increase in inequality compared to the dollar economy. But it also reinforces political asymmetries, such that a well-resourced state like Israel has the technological and military means for surveillance and control.

A popular saying among Bitcoin advocates is that if you “fix the money, you fix the world.” Not so, Roy responded, “when the world is trying to erase you. True freedom and independence, financial and otherwise does not lie in cyberspace. It lies in lived space.” If there is an easy shortcut to Palestinian liberation, we should take it. Every day under the boot of Israeli domination more lives are lost, harmed and impoverished. But ultimately, there is no replacement for a political resolution to end the colonization of Palestinians. It is a movement we must support in real life, not on a digital blockchain.

[Hadas Thier is the author of A People’s Guide to Capitalism: An Introduction to Marxist Economics.]

Endnotes

[1] Tariq Dana, “Dominate and Pacify: Contextualizing the Political Economy of the Occupied Palestinian Territories Since 1967,” in Alaa Tartir, Tariq Dana and Timothy Seidel, eds., Political Economy of Palestine Critical, Interdisciplinary, and Decolonial Perspectives (Palgrave Macmillan, 2021) p. 29.

[2] Tariq Dana and Ibrahim Shikaki, “Cryptocurrencies and Palestinian Resistance: An Al-Shabaka Debate,” Al-Shabaka, May 23, 2022.

[3] Alex Gladstein, “Can Bitcoin be Palestine’s Currency of Freedom?” Bitcoin Magazine, July 22, 2021.

[4] Quoted in Hadas Thier, "Cryptocurrency Will Not Liberate Us," Dollars & Sense, January/February 2022.

[5] Olivier Jutel, “Blockchain Imperialism in the Pacific,” Big Data & Society (February 2021) p. 2.

[6] Ibid., p. 3.

[7] Sara Roy, Failing Peace: Gaza and the Palestinian-Israeli Conflict. (London: Pluto Press, 2006) p. 33.

[8] Interview with Sara Roy, May 9, 2022.

[9] Amira Hass, “Gaza’s Destruction: An Unbearable Humanitarian and Financial Toll,” Haaretz, May 20, 2021.

[10] Interview with Molly White, April 30, 2022.