Since October 7, 2023, Gaza’s formal payment rails have largely failed after branch and ATM damage, power outages, and restrictions on cash crossings, creating widespread cash shortages for households, merchants, and aid organizations. Local freelancers and traders expanded use of Bitcoin and dollar stablecoins such as USDT to receive remittances to mobile wallets, coordinate relief via token transfers, and enable purchases of food, medicine, and fuel through brokers who convert crypto into Israeli shekels or dollars. Digital transfers reduced transit theft, shortened delivery times from days to hours when connectivity and mobile power were available, and removed some logistical burdens of moving physical cash. Liquidity and conversion depend on available stablecoins, functioning local counterparties, and telecom access, and most off-chain conversions occur through brokers and informal money changers that concentrate counterparty and operational risk. After militants used crypto fundraising channels in 2023, authorities in multiple countries froze or seized wallets tied to groups such as Hamas and platforms tightened screening, prompting aid actors to require rigorous KYC on intermediaries, sanctions screening on addresses, and documented provenance for funds. Proposals for reconstruction include tokenized registries of prewar claims, tokens representing redevelopment entitlements, and smart contracts to govern priority, vesting, and transfer limits, and those proposals raise governance risks by creating potential for speculation, shifting control to external sponsors or trustees, and requiring published allocation criteria, inclusive consent processes, and enforceable recourse mechanisms. Practical priorities for humanitarian Web3 deployments include simple wallet flows resilient to intermittent connectivity and low-end devices, scalable compliant off-ramps via regulated exchanges or OTC partnerships and trusted broker networks, structured KYC and sanctions screening with transparent audit trails, and governance measures such as community consent, independent dispute resolution, and public audits before token issuance. Ongoing developments to watch include pilots that formalize on-chain aid distribution with compliance tooling, exchange and OTC partnerships seeking compliant off-ramps under border and telecom constraints, policy actions to clarify how humanitarian crypto flows fit under sanctions and AML frameworks, and scrutiny of tokenized land initiatives on governance credibility, community participation, and mechanisms to prevent speculative capture. 

Source: https://theweb3.news/crypto/gaza-crypto-banking-collapse/

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