Whatever the rights and wrongs of the Gaza conflict, platforms like Venmo shouldn’t decide who gets paid or not. We need open systems like BitcoinAs Israeli bombardment of Palestinians in the Gaza strip continues, some attempts to send humanitarian relief to Palestinians are being blocked or suspended for review by Venmo, the social payments app owned by PayPal. The politics of the Israel-Palestine conflict are, obviously, complex, and I’m not here today to argue one side or the other. But the incident highlights both the risks of financial censorship inherent in payment tools like Venmo or PayPal and the difficult problem of designing guardrails as digitization makes financial tools farther-reaching.The Venmo policy came to light through social media reports from users who found the app either refused to process or temporarily halted payments labeled as being for “Palestine relief” and related terms. Venmo has acknowledged the blocked payments, pointing to U.S. sanctions laws designed to stop financial support for international terrorism or other bad actors. Business Insider found that the sanctions list maintained by the U.S. government’s Office of Foreign Assets Control includes several specific groups with “Palestinian relief” or similar terms in their names.David Z. Morris is CoinDesk’s Chief Insights Columnist.The filtering is most obviously concerning because the humanitarian situation in Gaza, an area about the size of Detroit, is so dire. Israeli bombing in Gaza has killed at least 212 people, according to the New York Times, while leveling dozens of buildings and damaging electrical systems and other basic infrastructure. And thanks to decades of sanctions and isolation, both infrastructure and essential services in Gaza were already degraded even before the bombing started.
It should be morally uncontroversial to want to lend humanitarian aid to those suffering such a grim fallout from a conflict much larger than themselves. Anecdotally, there does seem to be a significant surge of financial support for Palestinians amid a larger shift in Western public sentiment.Yet individuals looking to send relief money to Palestine face obstacles for reasons that highlight broader issues that confront our digitizing and globalizing society.IN THE ABSENCE OF A TRULY EFFECTIVE MEANS OF SEPARATING THE GOOD FROM THE BAD, A NEUTRAL FINANCIAL INFRASTRUCTURE MIGHT BE PREFERABLE TO THE KIND OF SLAPDASH CONTROLS SHOWCASED BY VENMOMany reputable and long-established aid agencies, such as Islamic Relief, Oxfam and Medicins sans Frontiers, are active in Palestine and good candidates for donations if you’re so inclined. But there have also been claims, both in Palestine and elsewhere, of “relief” organizations sending donor funds to militant groups instead of medical or food aid. That would explain the presence on the OFAC sanctions a list of groups with names like “Palestinian Relief Society,” which – at least according to the U.S. government – may not be entirely what they claim.
This sort of deception is not a novel problem, and militant groups have plenty of other financing strategies. But the social media era exacerbates this and other kinds of fundraising fraud. We have more insight than ever into tragedies unfolding far away from us, and the ability, thanks to innovations in financial technology, to do something about them just by clicking a button. You can even send money directly to individuals in some parts of the world from your cellphone using mainstream consumer products. That should be a huge step forward compared to the onerous and error-prone process of writing a check and sending it in the mail to an aid agency.But these advances have turned out to be a double-edged sword. It can still be difficult or impossible to be sure of the real motivations, or even the identity, of the faraway person you’ve been moved to help. At the risk of being glib, misuse of relief funds is a more nefarious version of someone running a GoFundMe for their nonexistent cancer and then using the money to go on vacation or buy a house.
The most baffling part of the current story is that Venmo is using data input from users themselves to sift potentially problematic payments (users can change tags to circumvent the filter), rather than blocking specific recipients. That’s an extremely flawed and exploitable way to try to comply with OFAC sanctions. William Lafi Youmans, a professor at George Washington University, demonstrated that “it’s very easy to get around this prohibition” by simply using different terms when submitting the transaction. That is exactly the sort of porous filtering that genuine bad actors will circumnavigate effortlessly, while donors with truly humanitarian motivations might be more easily turned away.But no one has yet put forward a clearly good approach to the problem, for Venmo or more generally. Cryptocurrency is often maligned for enabling criminals (and with the surge in ransomware, we may have the first case where this is clearly true). But more broadly, the increasing speed, ease of use and granularity of all kinds of payments channels create new opportunities for abuse as well as for good.Keeping the good and blocking the bad at a large scale, even in the most superficial sense, requires intense and broad monitoring, including artificial-intelligence (AI) systems like the one apparently in play in the Venmo case, and constant efforts to identify users and track their activity. That, obviously, is a major hit to people’s privacy and, ultimately, to their freedom to do what they want with their own money – especially because, as the Venmo case demonstrates, such systems are prone to overreach and errors.A deeper problem is who gets to decide what “good” and “bad” is. The OFAC list, for instance, is an intensely political document used to advance U.S. political interests. Though it has been very effective at punishing some really malicious people, it’s hardly the final word on who deserves to be able to participate in the global financial system.These intractable decisions about monitoring and censorship are inevitable if a payment system is controlled by a government or by corporations, which face liability for failing to comply with government mandates like the OFAC list. Bitcoin and similar cryptocurrencies don’t face that pressure because they are not associated with any legally liable entity. At the same time, it’s technically impossible to block a cryptocurrency payment the way Venmo censored its customers.
Among other benefits, this lack of guardrails makes bitcoin (BTC, +14.66%) extremely useful for everyday residents of Gaza, who are overwhelmingly unbanked thanks to sanctions. They don’t even have a sovereign currency, primarily using the Israeli New Shekel on a day-to-day basis.But again, the sword is double-edged: Palestinian militants, whose attacks have killed about 20 Israelis in the current fighting, also use cryptocurrency to raise funds. One expert in 2019 estimated that bitcoin mining added $195,000 to Hamas’ budget. It’s certainly true that conventional media narratives overemphasize the use of crypto by criminals and terrorists, but that doesn’t mean it isn’t happening (though it should be noted that Hamas provides social services in Gaza in addition to its military activities).