Cryptocurrency’s Role in the Russia-Ukraine War
Posted On March 28, 2022
It’s been almost over a month since Russia’s invasion of Ukraine. There have been thousands of lives lost, including civilians and military, millions of people forced to flee their homes and billions of dollars worth of property damage.
It’s a sad, unfortunate time for Ukrainians. However, it hasn’t been any easier for the Russian population. The Russian economy is going down the drain, and the common people are feeling its impact.
Surprisingly enough, cryptocurrencies are playing a very interesting role in all of this. Both countries are trying to utilize cryptocurrency to their benefit, though one is more successful than the other. Here’s how:
Crypto Donations in Ukraine?
According to the latest figures by Alex Bornyakov, Ukraine’s deputy minister at the Ministry of Digital Transformation, Ukraine has received almost $67 million in crypto donations.
Most of this fund has been received by the Ukrainian crypto exchange Kuna while the rest is from other smaller campaigns.
In an interview by CoinDesk, Michael Cobanian, Kuna’s founder, said that these funds are being spent on fuel, food and bulletproof vests for the military. Not on weapons.
Ukraine has already spent about half the donation amount, converting 80% of it to their fiat currency while using the rest to pay merchants that accept payments in crypto.
So, it’s clear that crypto is being used for good causes in Ukraine. However, with anything in life, there are downsides. The number of scammers scamming people in the name of Ukraine is going up.
Some people are using this tragedy and people’s goodwill for their greed. Unfortunately, scams like these are almost inevitable.
However, the good things that have come out of this outweigh the downsides.
Crypto is proving to be a great alternative to traditional currencies, especially in times like this when the country’s banking system isn’t functioning at its maximum capacity.
Cryptocurrency allows for swift and easy transactions. Plus, it doesn’t charge any hefty fees for sending or receiving money overseas. And the most powerful thing about crypto is that it can’t be censored or regulated by any third party.
Sure, there are still limitations like its volatile nature and lack of understanding about how to use crypto by the general public. But overall, it’s proving to be a useful tool for Ukraine in this war.
Is Cryptocurrency Helping Russia Evade Sanctions?
The UK, EU and US have imposed several sanctions to isolate Russia economically and financially in an effort to stop Russia’s invasion of Ukraine.
These sanctions include a ban on imports and exports of military goods, dual-use goods, luxury goods, oil and gas.
Other than that, flights flying out and into Russia are banned. Sanctions on over 1000 high-income Russian individuals and businesses.
Russia, especially the civilians, are feeling the pressure from these sanctions. As discussed before, the Russian economy is crashing rapidly. People are facing a shortage of goods and supplies. Russian rubles have lost 20% of their value and are now valued at less than 1 US cent.
In the midst of all this, many believe that Russia could be using crypto to evade sanctions.
Since crypto is decentralized and anonymous, they believe it allows Russia to trick the system.
Recently, Kuna’s founder, Michael Chobanian, accused Binance of helping Russia and urged the EU to investigate this matter. Binance refused to comment on it, saying they don’t respond to false claims.
Recently, there has also been a rise in rubles-crypto trades. This led some people to believe that Russia is indeed evading sanctions with the help of crypto.
However, all that being said. It’s highly unlikely.
People often confuse the two, but crypto is anonymous, not untraceable. You can easily trace a transaction back to a country.
Plus, there’s not enough liquidity in cryptocurrency.
But it’s totally possible for regular citizens to use decentralized or anonymous exchanges to trade crypto in relatively small amounts.
Besides, Russia has been very public in saying that they will be accepting Bitcoin and other cryptocurrencies for oil and gas.
What Does All of this Say about Cryptocurrency and its Future?
On the surface, this entire situation exposed the limitations of fiat currencies.
For example, transferring Bitcoin from one wallet to another overseas takes up to 30 minutes, while a traditional banking system may take days. And ‘days’ can end up being too late for someone stuck in a warzone. Plus, the expensive fees that come with it.
On the other hand, Russia is starting to realize how easily external factors and influences can affect the value of its fiat currency. While with something like crypto, that’s not the case.
Even prior to the war, many countries were looking into the possibility of CBDCs. And according to the CEO of BlackRock, Larry Fink, the Russia-Ukraine war will only accelerate the development and adoption of CBDCs.
Just recently, Biden signed an executive order on responsible development of digital assets, where one of the primary focuses was on a potential digital US dollar.
It shows that most countries now realize the utility of digital currencies and the underlying blockchain technology.