Blockchain intelligence firm TRM Labs has reported that eight crypto addresses linked to the Yemen-based Houthi group have moved over $900 million in cryptocurrencies to high-risk entities. According to the firm, the funds were likely spent on weapons and other military equipment.
TRM Labs disclosed this in its recent report, which analyzed the Houthis’ crypto activity and their efforts to evade the US sanctions. Per the report, these eight addresses are the ones that the US Treasury’s Office of Foreign Assets Control (OFAC) added to its Specially Designated Nationals and Blocked Persons (SDN) List on April 2.
In its analysis of transaction flows from the addresses, TRM discovered over $900 million in outflows to various sources, including addresses associated with OFAC-sanctioned Iran-based financier Sa’id al-Jamal. The addresses also sent money to a Russian broker with ties to a Chinese manufacturer of unmanned aerial vehicles and anti-UAV equipment.
Based on these transactions and the improvement in the Houthis’ UAV and anti-UAV capabilities in recent years, the blockchain intelligence firm concluded that the group has been using crypto to buy drones and other military equipment.
Houthis are increasingly using crypto to evade sanctions
The Houthis are a political and armed group governing most of Yemen since 2014. However, the group has reached international prominence in recent years for targeting commercial ships in the Red Sea as retaliation against Israel’s actions in Gaza.
In response to the group’s actions, the US has designated it as a Foreign Terrorist Organization (FTO) while deploying economic sanctions and military warfare against the group. With its financial infrastructure now facing pressure from sanctions, the Houthis appear to have increased their reliance on crypto.
This move is not surprising given how several US-sanctioned groups have turned to crypto in the past. North Korea is a notable example, with the country sponsoring sophisticated crypto heists to fund its nuclear weapon program.
OFAC had also highlighted how Iran-backed entities, including Hamas and Hezbollah, rely on crypto to bypass sanctions. It appears the Houthis have also developed an extensive network of facilitators and brokers using crypto and decentralized technologies.
Interestingly, the group is not just using crypto to fund its operations. It has been mining crypto to generate more revenue, with available evidence showing that it has been doing so since 2017.
However, its mining activity has required limited infrastructure because it relied on crypto mining services such as the now-defunct Coinhive. This allowed it to mine crypto using Yemen’s internet service provider, YemenNet.
Crypto adoption grows in Yemen
Meanwhile, the growing sanctions against the Houthis and state-backed financial institutions such as the International Bank of Yemen have boosted crypto adoption in the country. According to TRM Labs, many Yemenis are now turning to DeFi protocols and peer-to-peer services to move funds and for cross-border remittances.
An analysis of website traffic shows that 63% of observed crypto activity among Yemen residents is from DeFi platforms, while global centralized exchanges account for only 18%.
TRM Labs said:
“The interest in DeFi services may reflect the appeal of systems that allow users to transact without intermediaries, particularly where local banking institutions are inaccessible or unreliable.”
Nevertheless, the country faces several challenges, such as poor internet infrastructure, limited knowledge about digital assets, and a lack of regulations on crypto, among others. All of which has not prevented adoption.
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Source: https://www.cryptopolitan.com/houthis-900-million-crypto-to-us-sanctions/