Binance, a leading global cryptocurrency exchange, is at the center of controversy following allegations that it confiscated cryptocurrency funds from Palestinian users at the request of Israeli authorities. Ray Youssef, co-founder of Paxful and CEO of Noones P2P platform, brought this issue to light in a post on X, claiming that Binance acted under directives from the Israel Defense Forces (IDF).
According to Youssef’s disclosure on August 26, Binance allegedly seized all funds from Palestinian users following a request from the IDF. Youssef’s assertion is based on several sources, including a document from Israeli authorities that Binance reportedly passed on to affected users. He further suggested that this action might extend to users in other countries such as Lebanon and Syria in the future.
Quote from Youssef’s Post: “All Palestinians are affected and judging by the way things are going all Lebanese and Syrians will get the same treatment. Not your keys, not your coins.”
Youssef mentioned that Palestinian users who appealed to Binance to restore access to their funds received a response referencing a letter from Paul Landes, head of Israel’s National Bureau for Counter Terror Financing. The letter, dated November 2023 and written in Hebrew, outlines that under anti-terrorism laws, the Minister of Defense may order the temporary seizure of properties, including cryptocurrency funds, believed to be owned by a declared terrorist organization.
Content of the Israeli Letter: “Cryptographic currencies that have been transferred by a declared terrorist organization constitute property of a declared terrorist organization and cryptocurrency wallets to which it has been transferred.”
Binance’s Official Stance
In response to inquiries, Binance clarified that the restrictions were imposed only on certain accounts linked to illicit activities and not on all Palestinian users. The exchange emphasized its commitment to complying with international sanctions legislation, similar to other financial institutions.
Binance’s Statement to Cointelegraph: “There have been some incorrect statements around this. Only a small number of user accounts, linked to illicit funds, were blocked from transacting.”
Despite the controversy, data from SimilarWeb suggests that Palestine constitutes a minor market for Binance, with a traffic share of approximately 0.05% over the past year. However, traffic from Palestine to Binance has reportedly surged by more than 80% since August 2023, indicating a growing interest in cryptocurrency within the region.
The incident raises significant questions about the intersection of cryptocurrency operations and international regulatory frameworks, particularly concerning how exchanges respond to national security concerns while balancing user rights. The actions taken by Binance highlight the challenges that crypto exchanges face in navigating complex geopolitical landscapes.
The controversy surrounding Binance’s actions could have broader implications for the cryptocurrency industry, particularly regarding how crypto exchanges manage compliance and user trust in politically sensitive environments. As regulatory scrutiny of cryptocurrency practices increases globally, exchanges may need to develop more transparent and consistent policies to handle similar situations in the future.
The situation involving Binance and Palestinian crypto funds underscores the complex dynamics at play within the global cryptocurrency market, where regulatory demands, user rights, and international politics converge. As the industry continues to evolve, crypto exchanges will likely face increased pressure to address these challenges in a manner that respects both legal obligations and the trust of their users.
