Mohammed R. Mhawish
The National / November 29, 2022
With Israel limiting trade and access, a growing number of residents are turning to cryptocurrencies to make a living — despite the risks.
The blockade of Gaza has not only shut Palestinians off from physical international markets, but also financial ones.
The Palestinian Monetary Authority in Ramallah cannot issue banknotes and Palestinians across the West Bank and Gaza are heavily reliant on handouts and international aid as a financial lifeline.
However, the decentralized, online and apolitical nature of cryptocurrencies has opened a path for Gazans seeking to invest internationally.
This is despite the jolt the sector has experienced with the collapse of crypto exchange FTX, which was headed by founder Sam Bankman-Fried.
FTX’s filing for bankruptcy on November 11 has cast a shadow over the wider cryptocurrency sector, undermining confidence.
Unlike traditional currency trading, cryptocurrencies like Bitcoin use block-chain — in effect, a decentralized register of trades — to allow peer-to-peer exchanges of the coins with no regulatory oversight or third parties.
Palestinian “financial subordination to Israeli finance regulations” has been ongoing since before the 1990s, says Tariq Dana, an assistant professor of political economy and conflict and a policy adviser for Al-Shabaka, The Palestinian Policy Network.
“Israel has long had huge power in politics, the economy and financial software,” Dr Dana says.
“From a critical perspective, installing an online, practical and secure financial system under Israel’s control is almost impossible.”
But he adds that an increasing number of Palestinians have turned to cryptocurrencies like Bitcoin as an alternative to traditional financial routes.
The anonymous nature of Bitcoin means it is hard to gauge how many Gazans are investing in cryptocurrencies, but anecdotal evidence suggests numbers have grown rapidly over recent years.
“I believe the decentralized bank status of crypto is encouraging enough for us [Palestinians] to have an income through a safe and freelance platform,” says Kareem, a resident of Gaza who trades in Bitcoin.
“I have been in the industry for almost three years and I feel it [removes] the Israeli limitations on our livelihoods.”
However, the turbulent market is also highly risky.
Since the start of 2022, Bitcoin has lost almost 75 per cent of its value, from over $238,000 per coin to just $63,300. This has wiped away the savings and fortunes of many investors.
Haitham Zuhair, a Palestinian businessman, Bitcoin investor and analyst currently based in Dubai, says investors in cryptocurrencies need to monitor the political, economic and military factors that influence the market worldwide.
“Even with the good advantage of crypto, risks of loss are still omnipresent,” he says.
“I am certain the drop in Bitcoin price has cost many traders in Gaza so much, because their initial investments and capital are not as high as one would think.
“Education and experience are essential to persist with crypto as a space of online income and a symbolic tool of economic steadfastness in Palestine. It only takes one wrong call to lose an earth-worth profit in crypto.”
While cryptocurrencies have opened the door for many Palestinians to profit from the global trade, it is not a viable avenue for Palestinian authorities, warns Mohammed Khaled, a business journalist in Gaza City.
“It is impossible to make state-level procedures with Bitcoin,” he says.
“Even with the huge adoption of crypto, Palestine doesn’t possess the political or economic force to designate Bitcoin or any other digital currency as the official medium of finance.”
However, as well as the risks of the market, traders also believe that Israeli authorities are going after their gains.
“The crypto exchange system in Palestine is centralized, meaning that Israel can pause deposits and withdrawals,” says Mr Khaled.
Crypto trader Mohammed Awni from Gaza says that while he initially earned a good return, his digital savings have disappeared.
“At the beginning of my tenure in crypto trading, everything seemed excellent and I had an opportunity to have a four-times return for my capital,” he says.
“I started planning to get married, only to find out my earnings were gone in the blink of an eye.
“I worked hard to make $6,000. It was my only hope to marry the girl I love. But my dream has been crushed.
“When I sought an explanation from others with similar experiences, it turned out the Israeli military had confiscated my digital wallet for no reason at all.”
Outgoing Israeli Defence Minister Benny Gantz has authorized the military to seize crypto wallets that they believe are being used to fund Hamas — Gaza’s hardline leadership, which is listed as a terrorist group by Israel, the US, the EU and others.
Hamas officials say the campaign of seizures is wider than targeting funding for the group, and that the Israeli military is going after ordinary citizens as well.
Mr Awni says cryptocurrencies have been good business, giving people opportunities and work that would otherwise be closed off in the blockaded strip.
But he says this will not be enough unless there is the “immediate stop of the Israeli full control of the economy, as well as the seizure and confiscation of digital wallets — our people’s only means of survival”.