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31 July 2021

Can Bitcoin Be Palestine’s Currency Of Freedom?

Can Bitcoin Be Palestine’s Currency Of Freedom?

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In the 25 years between 1994 and 2018, Gaza suffered a 44% decline in real GDP per capita, with Gazans going from having 96% of the average income of their West Bank counterparts, to having just 30%.

Moreover, the authorities discouraged such initiatives whenever they threatened to compete in the Israeli market with existing Israeli firms.”.

A few weeks ago the Biden Administration sent Secretary of State Antony Blinken to the West Bank to meet with Palestinian president Mahmood Abbas, andpromised $75 million in new aid to help rebuild Gaza.

“They are just investing bit by bit, gradually, but it’s working.” He even said that Gazans have been “buying the dip” recently, accelerating their purchasing as the bitcoin price went down?

“We have a saying,” Uqab said: “If the government says something is haram, that means it’s halal.”.

We spoke about a lot of things: Why Uqab prefers bitcoin to shekels (everything in Gaza is monitored, but you could have a lot of bitcoin, and your family wouldn’t even know); Can the IDF or Hamas stop people from using Bitcoin.

(“We’re too smart for this, we’ll always find a way out”); Could Satoshi have predicted that people would be using Bitcoin in Gaza.

(They may not take the risk that Gazans are willing to take); And what’s wrong with the banking system.

But today, he can do with Bitcoin what was impossible before: send and receive money to and from family abroad, quickly, directly, with barely any fees.

would have to send money through a bank account in a country like China or Thailand, with the money eventually landing in a currency office in Gaza.

“It’s so much better,” he said, proudly telling me that he feels at least on some level “peer to peer” with others in the world.

“With Bitcoin, we’re getting on with our lives,” he said.

More than 30 years after her 1987 paper on Gaza, Sarah Royreflected that “events have reduced the Palestinians to a humanitarian issue, deprived (and undeserving) of political and economic rights and dependent on the international community for sustenance, where relief not progress becomes the primary if not the only political option.” She wrote that “Palestinians see the present as better than the future.”.

He was “dealing with aristocrats and elites,” he said, and began to understand how the Palestinian Authority exploited its position and siphoned off aid and other revenue to enrich itself, while colluding with the Israeli government to leave the average Palestinian in the cold.

“It is basically hidden,” he said, “even though the dominance of the Israeli actor over the Palestinian actor is entrenched in everything from the use of the shekel to the way that the Israeli government collects our income abroad to how we have no central bank.”.

He said money is arguably the driving force behind why the Palestinians are where they are today, where occupation, corruption and war have led to de-development, civilizational stagnation and the erosion of capital stock.

Trade opened up with other Arab nations, and Palestinians were able to increasingly work in Israel for higher wages than what they could make at home.

In the ’60s, ’70s and ’80s, the Israeli government designed an occupation system that incentivized Palestinians to work in Israel, and prevented them from developing a manufacturing base, increasing dependency on Israeli imports.

In the two decades from 1968 to 1987, the industrial share of GDP in the Occupied Palestinian Territories (OPT) (The West Bank, East Jerusalem and Gaza Strip) fell from 9% to 7%?

Tartir explained that in the 1970s and 1980s, dependence on Israel became near total, as its products exceeded 90% of OPT imports, making Palestinians the second-largest buyer of Israeli goods after Americans.

As Israeli economic scholar Shir Hever wrote, “The main source of income to the Palestinians became remittances from Palestinian workers… by 1974, a third of the Palestinian workforce was already employed in Israel...

many Palestinian farmers abandoned their farmlands in order to work in Israel, and Israeli authorities took advantage of this and confiscated land that remained uncultivated for a certain period of time.” This is evidenced by how “Palestinian agricultural productivity [fell] sharply from 53% of GDP in 1967 to 13% by the late 1980s.”.

Initially, Tartir said, the Israeli government profited from the occupation.

On April 29, 1994, delegates from the Palestinian Liberation Organization (PLO) and the Israeli government met in France to sign a rarely-discussed document called the “Protocol On Economic Relations,” also known as the “Paris Protocol.”.

The document decreed that Palestinians would not have a central bank, nor their own currency.

The Israeli New Shekel would be mandatory legal tender in the West Bank and Gaza Strip.

Any change to this system would require a vote from the Joint Economic Commission — anorganization that over the years fell into dormancy and Israeli control.

Tartir said that this foreign dependence puts Palestinians in a difficult situation because it is so hard to actually get funds from abroad back home.

“If I want to transfer any amount of money from Geneva to Ramallah,” Tartir said, “it has to go through an Israeli correspondent bank.”.

If you want to receive money from abroad, you have to go pick up the cash from Western Union,” he said.

He explained that even Western Union used to be more flexible, and available at stores all over the West Bank, but due to counter-terrorism measures, these payments are now only receivable through one or two banks.

But that’s the best option if he wants to send money from Europe to the West Bank today.

A 2019 UN report estimated that the total fiscal cost of occupation for Palestinians from 2000 to 2017 was $47.7 billion, or three times the 2017 GDP of the OPT.

The report concluded that 3.7% of Palestinian GDP annually leaks to the Israeli treasury as a result of the mechanisms set up by the Paris Protocol.

According to the World Bank, between 2000 and 2003, Israeli restricted the number of West Bank Palestinians permitted to work in Israel by 53%, and Gazans by a staggering 86%.

Since 1993, more than $40 billion has been spent in the West Bank and Gaza Strip by international donors, making Palestinians one of thehighest per-capita recipients of aid in the world.

A 2010analysis by Nikki Tillekens showed that 71% of aid to Palestinians ended up in the Israeli economy.

Supporters of the status quo insist that it is just a matter of time, and that with continued gradual improvements in Palestinian standards of living, that peace will one day come.

This idea dates back to the 1970s and the Carter administration, which thought that “happy” Palestinians, “who had steady employment and a functioning administrative structure, would be willing to negotiate for a settlement while under occupation.” The result of this philosophy was to de-link economic aid from sovereignty.

Many Israeli, American and European officials and donors vehemently disagree, and say that they are doing their best to help support a vulnerable Palestinian population under the thumb of corrupt and violent leaders who pose a threat to regional stability.

As we speak, he said, it is repressing protestors because it does not want anyone to disrupt the deal it has, where its inner circle benefits from cooperating with the Israeli government in running a broken rentier state.

As we spoke on the phone, he told me that Palestinians were protesting in huge numbers against President Mahmood Abbas, who has ruled the west Bank for 16 years.

Elsalameen said that Abbas has now followed in Arafat’s footsteps, where Abbas and family have used their political power to build an empire in industries like insurance, telecommunications,construction and tobacco.

According to leakeddocuments from the Panama Papers, Abbas and his two sons “used power and influence to control the two major Palestinian economic boards (Arab Palestinian Investment Company, Palestinian Investment Fund) and built a West Bank economic empire worth more than $300 million.”.

According to Elsalameen, Abbas raised taxes so high on West Bank tobacco producers, to benefit his own import business, that they collapsed.

“I hate Hamas more than Abbas,” Elsalameen said, “but we have to target the head of the pyramid scheme here in the West Bank.”.

“His thugs,” Elsalameen said, “went at night and abducted Banat from his home and beat him to death with clubs.

Thousands marched across the West Bank and demanded an “overthrow of the regime,” Elsalameen said, in scenes that reminded some of the Arab Spring a decade ago.

Elsalameen said Abbas stays in power by telling the Israelis, Americans and the World Bank: If you do not have me in power, you’re going to have Hamas.

Elsalameen pointed to the failed protests and said that politics is proving of limited use to the Palestinian struggle.

When asked about Bitcoin, he said, “Yes, we can start fighting back peacefully with Bitcoin.

A challenge, he said, is that “we have to get people to know about it.” It’s a new, weird concept, he said.

“It’s an upgrade over today,” he said, “where people keep cash under a mattress, or where they wait a month to receive a payment from their family abroad.”.

He noted that in the young generation, many Palestinians are already buying bitcoin.

With average daily wages at 264 shekels in Israel, compared to 123 shekels in the West Bank, who could blame Palestinians for seeking a higher income elsewhere, even if by doing so they deepen their own dependence.

After the second Intifada, the Arab-Israeli author Azmi Bishara “lamented the lack of a single Palestinian bank, insurance company or printing press, and called on Palestinian investors to ‘begin to think of local economic ventures with their own structures, market, and labor.”.

But, Tartir said, they have always been reliant on the shekel and the Israeli financial rails, and “have always lacked the tool to make this happen.”.

Abuwedad said that with all the easy money — and with no Robinhood, no E-Trade and no access to the world’s top stock markets — people have piled into real estate.

He said that banks are guilty of helping Palestinians increase their reliance on Israel, and decrease their own sovereignty.

This is the reality now, Abuwedad said, for huge segments of Palestinian society that have borrowed to finance not just apartments but all kinds of personal goods.

“It’s the same policies that many decades ago forced us away from creating an industrial base and made us reliant on external powers,” Abuwedad said, “just dressed up in new clothes of “state building” and “economic empowerment.”.

Today, all Palestinians still look forward to freedom, he said, but the system “makes it much more difficult to focus on that ultimate goal and distracts them with immediate financial concerns.” People, he said, “are living paycheck to paycheck to pay back loans and enrich the bankers instead of saving and investing for their future.”.

He believes Palestinians can be competitive in eSports — even though they are not today — and that gaming can help with cooperation, team-building, increasing personal dignity and connecting with people abroad.

“When Palestinian imports arrive in Israel,” Abuwedad said, “they get taxed, then they cost money to store as they have to wait to be sent into the West Bank, as truck schedules are very restricted.

Another account said that it took on average “38 days” for Palestinian traders to import and sell goods, while their Israeli counterparts could do it in 10 days.

Shir Hever notes that by 2008, “the same product would have been 32% more expensive in a Palestinian city than in an Israeli city.”.

Abuwedad’s plans to get out of this trap through starting a company were foiled by the COVID-19 pandemic, which he said hit the West Bank particularly hard, depressing economic activity.

He said there is a whole community in the West Bank and Gaza, now getting involved.

He thinks that’s probably the percentage of Palestinians who are using Bitcoin, and said that will grow quickly in the coming years.

He told me about a loophole, where the Palestinian Monetary Authority will block transactions from local bank accounts trying to buy cryptocurrency on exchanges.

He thinks that because Tether is linked to the dollar, they have let it slide, and so purchases of tether on platforms like Binance go unblocked.

From there, he said, they may buy bitcoin as a savings instrument, or stay in tether as a “checking” account.

He said that some people also go around the banking system entirely and use Telegram or Facebook groups to coordinate to buy tether or bitcoin in a peer-to-peer way.

We took a moment to reflect on the fact that it is such a struggle for Palestinians to move money from one place to another, and discussed how game-changing Bitcoin is: from thousands of miles away, I sent him money and we did not have to deal with any customs police, delays, red flags, confiscations or VAT.

He thinks stable Lightning wallets could be huge for Palestinians: a bank account where you do not need any ID, where you control your own funds, where you can transact instantly anywhere in the world for virtually no fees, and where you can choose to peg the value to the dollar or keep your money natively in bitcoin.

Abuwedad considers Bitcoin a peaceful protest against a corrupt, exploitative and centralized financial system: one that he saw from the inside during his career as a banker.

“People have a lot of questions, but over time, they learn, and they use,” he said.

She is part of a movement that will try to map the Palestinian business ecosystem, both Palestinian-owned businesses in Israel, as well as enterprises in East Jerusalem and the West Bank, and encourage new practices.

She describes how she might take money out of her Israeli account through an ATM, deposit it in a Palestinian bank — which she could only open with her American passport — and then she can make a wire to the teacher’s account.

“With Bitcoin, you could build a company that’s totally independent, where you don’t have to use a PA bank, and where you don’t have to rely on the shekel and the Israeli economy,” she said.

But while he said connecting with Palestinians about Bitcoin use has not been a topic or priority at the meetups in Tel Aviv so far — “never,” he said — he thinks it could be successful.

Many Israeli Bitcoiners are relatively progressive, and even sympathetic with the idea of helping Palestinians with open-source money.

According to the Israeli civil rights groupB’Tselem, “More than 2.6 million Palestinian subjects live in the West Bank, in dozens of disconnected enclaves, under rigid military rule and without political rights.

Instead, Palestinians have been prevented from harvesting or investing in this land, and Israeli settlers and companies have increasingly colonized the area.

In the past 20 years, Israeli forces have, for example,uprooted more than one million productive Palestinian trees.

A World Bank report states that Palestinians could increase their GDP byalmost 10% if they were allowed to invest in this operation, too.

The Israeli military has closed off most of the West Bank to Palestinian civilian access, and has installed checkpoints and barriers to stifle human movement in the remaining Areas A and B.

In total, there are more than 280 Israeli settlements and a variety of industrial zones in the West Bank, with more than 60 outposts created in the past 10 years, all in contravention of international law.

He said he is a “religious Zionist settler.” His goal is to “reinstate the Kingdom of David and build Solomon’s Temple.” Twenty years ago, he first came to Israel, and realized that “the best way for me to fulfill my Biblical obligation is to settle on an empty hilltop in the West Bank.”.

In the past few years, Caras has given a number of lectures about “how technology can promote mixed interaction and co-existence.” He said that Bitcoin allows humans to cross borders that previously were impassable: legal, financial, and ideological.

He said that if he does business with a Palestinian, that could be a danger to their life.

Caras argued that Palestinians have actually benefited from the strong shekel, comparing their plight with that of Lebanese, Syrians, Egyptians and others in the region who have suffered from high inflation or hyperinflation.

He says Hamas and the PA are corrupt, but that the shekel has partially protected Palestinians from their misrule by providing a reliable unit of account, medium of exchange and store of value.

When I mentioned to him that Palestinians still suffer from significant price inflation, he said “a glass of water is always going to be more expensive in the desert than at Niagara Falls” and said this doesn’t have to do with the money, it has to do with control over the borders and goods and services.

“In the West Bank, Palestinians can’t just get stuff on Amazon,” he said.

He said the restrictive economic regime that holds Palestinians back is “stomached” by the Israelis and the international community because of violent threats from Palestinians.

“As long as Hamas and the PA are aiming to annihilate the Jewish state, there isn’t a hope for Palestinians to have the same prices as in Tel Aviv,” he said.

With Bitcoin, “we all know what the rules are and we know that we can participate without people changing the rules in the future,” he said.

When asked if he thinks the Israeli government will try to ban or restrict Bitcoin as a tool of terror or resistance, he said the Israeli people know that technological innovation and opportunity far outweighs the risks.

He said that if Hamas is trying to circumvent banking restrictions by collecting funds in Bitcoin (as the Israeli government has recently alleged,seizing bitcoin on exchanges that it claimed was connected to Hamas), then that is more easily regulated than Caras “paying a gardener or web developer in bitcoin.”.

“That resonates with me,” he said, which is why he always offers to pay people in bitcoin first.

“Even if they are just going to dump it,” he said, “first they’ll have to create a wallet, and begin to understand it.”.

When asked if he thought Israel might lag behind Palestine in the adoption of Bitcoin, he said he is lobbying the Israeli government to be on the cutting edge.

Caras said he does not view himself as unbiased, and knows that some Palestinians will call him a war criminal, and a “physical representation of all of their hardships.” But, he said, he’s still been able to sit down and geek out about Bitcoin with Palestinians.

Many Palestinians are trying to push back against Israeli settlements, and some view Bitcoin as a possible tool that can aid this effort.

To learn more, I spoke to Adam Albarghouthi, who works for the Palestinian Social Fund, an organization that is crowdfunding from the Palestinian diaspora to seed agricultural activities in the West Bank.

We don’t have sovereignty.” He believes that the future is in “producing our own food.” His plan is to grow cooperatives across West Bank villages, and launch a new governance paradigm, not dependent on foreign aid or the Palestinian Authority, but one “that the individuals and communities own.”.

So, he said, they are planning to raise money in bitcoin, and sidestep the whole restrictive system

“At the end of the day, any currency is an alias to resources, and we have to generate our own resources from nature and build them into valuable products that can be used in our society to further innovation and education and healthcare and food security.”

“In doing so, Palestinians should use a currency that wecontrol, not one pegged to the Israeli economy or the petrodollar or anything else,” he added

It seems certain that the IDF will begin to demonize Bitcoin as a tool of terrorists and perhaps, make it harder for Israelis and Palestinians to use

Given that the Israeli government has prioritized centralizing as many economic flows as possible under its control into and out of Gaza and the West Bank, any money moving outside “official channels” will likely be deemed suspicious

El Salvador has provided a national template of how Bitcoin can be used not just as a savings instrument to invest in the future, but also as a payment network that can allow citizens to connect with anyone in the world instantly

Bukele has beenquoted as saying that he is very proud of his Palestinian origins, saying he “would like to see a thriving Palestinian state.” It is ironic that a person of Palestinian descent would be the first world leader to adopt bitcoin as a national currency

There is no question that the Israeli government, American government, Palestinian Authority, World Bank and United Nations would all oppose such a move

Recently, the news broke that the Palestinian Monetary Authority is mulling a “central bank digital currency,” a new kind of asset meant to replace banknotes and coins with a digital central bank liability that individuals would hold on their phones

Palestinians have not been able to mint their own cash — per the Paris Protocol — but even if they could, there’s no guaranteeing that the Palestinian Authority would not abuse its power and create massive inflation

Moreover, the creation of a “Palestinian” currency (digital or otherwise) runs the risk of prolonging the power imbalances that exist today with the Palestinian economy

Even worse, transitioning the Palestinian economy to a digital one — whether it’s controlled by the PA, World Bank, Israel or anyone else — would be disastrous for the small amount of freedom that Palestinians do receive from cash and their informal economy, where they can save and transact outside of government control

For a people whose history is so filled with confiscation, Bitcoin gives Palestinians a way to take the fruits of their labor and time and lock it into an asset in cyberspace, beyond the control of Hamas, Israel, the PA or the World Bank, and secure it with math

Third, if critics on the left do not get it, and continue to attack Bitcoin from their position of privilege, then, said one, they “seem to be more interested in talking about the problem than actually fixing it.” They went on: “Where’s their solution?”

Yes, they have done admirable work to detail the suffering of the Palestinians, but why not speak up about a technology that so many of them are already using for empowerment

It is clear that Palestinians will continue to adopt Bitcoin

At the end of my call with Uqab, he told me that many people were becoming so desperate in Gaza that they were selling their homes for Bitcoin

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